The budget establishes the standards with which actual performance may be compared

What is the Control Function of Management?

The controlling function of management generally means organizational control. That is, its a process by which an organization (through its managers) influences its sub-units and members in the process of attaining organizational goals and objectives. 

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Because organizations develop standards and goals, controlling necessarily ensures that individual, group, and organizational performance does not deviate from standards. 

Controlling should not be viewed as negative - such as manipulative of an individuals personality, values, attitudes, or emotions. Rather, managers simply make certain employee activities are consistent with achieving organizational goals and objectives. 

Monitoring and Controlling Performance

Controlling concerns monitoring and influencing several types of performance:

• Individual - Performance of individual duties - measured by efficiency and effectiveness.
• Group - Performance of group activities - measured by efficiency and effectiveness - but also to determine whether interactivity reaches the level of team function.
• Organizational - This concerns economic (financial, operational), social, and environmental (non-financial) goals and objectives.

As such, managers at all levels of the organization are involved in the controlling process. 

Controls are generally considered to be part of a system or process to make certain processes and rules are followed and results are being obtained. 

The effect of controls, when properly designed, is to improve company performance. 

What is the Process for Management Control?

Controlling consists of the following steps:

Performance Standards

The first step is to establish performance standards. These standards should be in the form of goals and objectives. These should flow from the organizations mission and vision. The standards should be capable of assessment - specific and measurable.

Measure Performance

The next step is to measure performance. The method for measuring performance will vary based on what type of performance is being measured. When measuring performance based upon types of metrics:

• Leading Indicator - This type of metric serves to predict the direction of the company in terms of performance.
• Pacing Indicator - This type of metric shows with the company is on track to meet its identified standards.
• Lagging Indicator - This type of metric demonstrates where performance has failed to meet expectations.

Compare Actual Performance Against Standards

The next step is comparing the levels of performance against expectations. A common form of comparison is an audit - the examination and verification of records and supporting documents. Two common forms of audit include:

• Budget Audit - A budget audit provides information about where the organization is with respect to what was planned or budgeted for.
• Performance Audits - A performance audit might try to determine whether the figures reported are a reflection of actual performance.

To the extent that they serve as leading, lagging, and pacing performance metrics, they enable managers to take corrective action on any deviations from goals before too much damage has been done.

Corrective Action

The next step is to take necessary corrective action when performance deviates negatively from performance objectives. Corrective action can involve motivating performance or adjusting standards. This necessarily requires a clear understanding of what gave rise to the deviations from standards

Controlling across various organizational units or functions can become extremely complex. 

What is a Management Performance System?

Organizations increasingly employ performance management systems to implement the Management Control Process. 

Some of the most commonly known Management Performance Systems include: 

• Management by Objectives, and 
• The Balanced Scorecard. 

Some other common approaches include: 

• Performance Prism, 
• Activity-Based Management, 
• Strategic Cost Management, 
• Quality Assurance, and 
• Lean Control. 

Advantages and Disadvantages of Organizational Controls 

Organizational controls provide numerous advantages:

• Tracking - Firms can track whether they are meeting goals and objectives in accordance with the organizations strategy.
• External Stakeholders - It provides assurance to third-party stakeholders that control systems are in place.

The primary disadvantages include:

• Costs - Theists of these types of control are the accounting and operational costs of implementation.
• Cultural Costs - Often, control systems can create stress, animosity, competition, and confrontation within the organization.

Which of the following focuses on whether performance meets established standards?

Is the process of comparing the actual performance with the standard and taking corrective action?

At which step of the control process does a manager establish the standards of performance?

Which of the following is true of measuring actual performance?