FREE MBA SEMESTER 1 SOLVED ASSIGNMENTS FOR - MB0038 –Q. Discuss the pre-requisites of an Effective Control system.

Solutions: The pre-requisites of an Effective Control system are as follows:

· Tailoring controls to plans and positions – A control is exercised on an activity or a group of activities. It follows that what control is good for a position may not be relevant for another e.g., the Vice President of marketing and the Vice President of operations cannot have the same controls though both maybe based on a financial control system. E.g., the outlet manager of Sambhavi can have a control based on ROI, but the snack counter manager needs to have it based on per customer revenue rather than ROI.

· Tailoring controls to individual manager – Controls have to be adjusted to the individual manager’s capability also. If someone does not understand a control, he/she will not trust it or use it as a result of which it will become dysfunctional.

· Designing ‘point to the exceptions at critical point’ – If a control has to be effective, it must control the exception and that too at the critical point. For example, the critical point in home delivery of a birthday cake is the time and accuracy of writing the name. The exception can be wrong name due to spelling variations and the time of delivery due to wrong address. Therefore, control should exist so that the delivery order phone number (we usually experience it when we order a pizza) and the spelling of the name is rechecked. If the Assistant Manager can call the customer just before the delivery and recheck the delivery address and the spelling of the name, an appropriate control can be designed.

· Objectivity of controls – Many management actions are subjective, but when controls are created, they must be objective, accurate, and must suit a standard. While this may be relatively easy in machine related systems and financial related indicator, we have to be careful when we have to relate it to the intangible areas. For example, how would you have controls for the kid care manager in Sambhavi outlets?

· Flexibility – Controls must be flexible to include the changed plans, unforeseen circumstances, or outright failure. For example, Sambhavi may use budget control to say the inventory level but if the sales are significantly higher or lower, there should be flexibility in the control.

Suppose we define the inventory per rupee of cost of production or per kilogram of production. It would be flexible to control it using an annual budgetary control or average inventory based on earlier data.

· Fitting to the organisational culture – Imagine putting tight control over Sambhavi whose culture is family-like and open with the freedom to experiment. The control will most certainly affect the culture which to begin with is the competitive advantage of Sambhavi. Therefore, it must fit the culture. If you have a tight and bureaucratic system, a lose control will also not work.

· Economy of controls – Controls must be worth their costs. Creating controls which are excessively expensive is counter-productive. For example, we cannot have the same controls in an aircraft and a car.

· Ability to lead to corrective action – The control should lead to corrective action. Only then it closes the loop and leads to better performance. For example, if the ROI of an outlet is below the standards specified, there should be a review system, which detects the sections that have not contributed their part and have exceeded it so that the performance can be corrected or rewarded.