Management control

Management control refers to the monitoring and checking of results to see that they agree with the targets set out in the plan.
Enterprise Risk Management: From Incentives to Controls
Control is important to managers because:

  • Correction: A good control system allows management detect and correct problems before they get out of control. If Barings Bank had better control systems; Nick Leeson would not have been able to bankrupt the company.
  • Quality: The control system will ensure service to the customer’s remains at the highest level. This may be achieved by creating a total quality management system in the organisation and by the introduction of quality awards.
  • Efficiency: Waste is reduced in all areas of the organisation when corrective action is prompt.
  • Profits: Profits should increase due to a reduction in costs associated with waste and defective products. Sales revenue may increase due to the ability to charge a premium price for a high quality product.

The principles of control include

    Strategic Management and Organisational Dynamics (5th Edition)
  • Setting targets
  • Measuring performance against the targets
  • Investigating any variance
  • Correcting problems
  • Preventing deviations by anticipating problems

The following types of control exist in a business

Technical control

Controlling production levels. E.g. if 10 dresses were meant to be produced then that’s how many should be made
Administrative control
The monitoring of resources such as telephones, computers and faxes throughout a business
Staff control
Having right qty of staff with the necessary qualifications. Making sure that all staff have equal right to training, bonus, promotion etc
Social control
Making sure that the firm does not damage society or its surrounding environment
Stock control
This is necessary to ensure that a firm has the right amount of raw materials to meet production requirements. If a business is low on stock it will lose sales, however it is also important not to be overstocked as a firm will have excess raw materials will result in loss of money