Management control refers to the monitoring and checking of results to see that they agree with the targets set out in the plan.
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
- 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
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Administrative control
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The monitoring of resources such as telephones, computers and faxes throughout a business
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Staff control
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Having right qty of staff with the necessary qualifications. Making sure that all staff have equal right to training, bonus, promotion etc
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Social control
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Making sure that the firm does not damage society or its surrounding environment
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Stock control
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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
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