Various Methods used in Organizational Controls are described below:
1. Policies:
To ensure the preliminary level of control, policies, which provide guidelines for routine decisions, are considered more effective. Setting up of policies and implementation of policies are different.
Policy setting is included in the planning function of management, whereas, policy implementation is a part of the control function of management.
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2. Job Descriptions:
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Job descriptions are a part of the control function since they predetermine the activities, responsibilities and authority of the job-holder.
3. Quality Control of Materials:
The materials to be used in the production process must conform to the quality standards. Let us suppose, management takes decision on the acceptance of materials on ± 5 per cent deviations. To ensure the same, it may then enforce control over the quality of supplied materials through random sample checking, i.e., decisions on acceptance or rejection of supplied materials based on sample observations.
This preliminary control system for acceptance or rejection of supplied materials is construed as policy guidelines to take routine decisions. Such policy guidelines or predetermined standards are easily understood by the concerned people who can automatically take decisions, without referring the same to their seniors. A sample of documented instructions to draw random samples from the supplied materials, detailing the methods of sample selection, can simplify the task of the quality control inspector.
4. Budgets:
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Budgeting controls the availability and the interest costs of financial resources. A budget can facilitate the availability of funds to meet the financial obligations in anticipation of the flow of activities in a production or operation cycle. Thus, budget is an effective checklist for the managers. This ensures that all necessary items have been considered.
To take an example, an organization may include recommended ratios or percentages for each and every item and restrict the manpower cost of a given project to a maximum of 30 per cent of total cost. In this case, it can be said that the budget for the manpower cost of the project is 30 per cent of the total cost.
5. Audit:
Periodic audit becomes the primary source of collecting information to evaluate the activities of a programme. Audits are of different types. Management audit focuses on efficiency of doing a project. A financial audit, on the other hand, evaluates the financial aspects of the project.
This can be enforced by the manager through periodic summarizations and classification of financial statements, considering the four primary components of financial structure of any organization, i.e., income, expenses, assets and liabilities. Also, a financial audit helps the managers to take stock of organizational financial planning and budgeting.
6. Standard Cost Analysis:
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Information on standard cost system helps the manager to compare the actual costs with the standard costs and to understand the possible reasons for the variation, if any. Also, it helps in determining the appropriate corrective action, to avoid future variation (more in the form of upward change) in the costs, which otherwise could be detrimental to financial health of the organization.
7. Employee Performance Evaluation:
This is again another type of most significant and difficult feedback control techniques. For any organization, their ultimate source of competitive strength lies with its people. Hence, effective performance of people can make one organization better than the other. Employee performance evaluation is important for this reason.
Again it is difficult to measure because objective performance standards are difficult to develop. One of the important methods of the performance evaluation is the period performance appraisal of employees. The scientific structuring of the performance appraisal form makes the task easier.
The most effective way is to develop individual Key Performance Areas (KPAs) and Key Result Areas (KRAs) in qualitative and quantitative terms (which are targets given to employees) in line with the overall organizational objectives (Management by Objectives). This approach makes the task of employee performance evaluation little easier.
However, care should be taken to ensure that KRAs and KPAs are made or developed for the employees following a participative approach, i.e., developed upon mutual consensus. We must not, however, forget that this can only reduce the problem of evaluation and not eliminate the problem altogether.
Another approach is by comparing with labour productivity ratios. Standard productivity ratios can be developed either internally or benchmarking or comparing with other organizations.
8. Impact Assessment:
Many organizations, through the analysis of the impact of their decisions, try to measure the implications of their plans and how far the planned objectives are met. Control is enforced through alteration of plans accordingly. To illustrate and to provide better customer services, a new generation private sector bank may decide to introduce online banking. However, online banking services may create problem due to the lack of adequacy of technological support at the customers’ end. The bank may find it better to improve customer services through more ATMs and through the introduction of Credit Cards or Debit Cards. Hence, the impact assessment helps in effective control of customers’ services.
9. Graphic Charts and Diagrams:
Network diagrams, graphs and charts help to plot the organizational activities. All these can help the employees to visualize the interrelationships between the activities and to determine the operation-wise time requirement. Control is enforced when the time requirement exceeds or likely to exceed the standards displayed in the charts and diagrams.
From the above discussions, we can summarize different types of control, keeping in view the current organizational practices, as below:
i. Controls used to standardize performance for increasing efficiency and reducing costs by way of time and motion studies, inspections, written procedures or work schedules
ii. Controls used to conserve company assets through allocation of responsibilities, separation of operational, custodial and accounting activities and adoption of proper authorization and record keeping
iii. Controls used to standardize quality by way of inspection, statistical quality control and product specifications
iv. Controls used for providing free limits to the use of delegated authority without further approval of the top management. Instruments for these controls include organizational and procedural manuals, policy directives and internal audits
v. Controls used to measure the job performance by way of special reports, internal audits, budgets, standard costs and output per hour or per employee
vi. Controls used for planning future operations through sales and production forecasts, budgets, cost standards and other standards for the measurement
vii. Controls used to permit the top management for keeping various plans and programmes in balance through master budget, policy manual, organizational manual and the use of coordinating committees and management consultants
viii. Controls designed to motivate personnel through promotions, rewards for suggestions, profits sharing and other methods of recognizing achievements.