BASICS OF BUSINESS MANAGEMENT
LESSON 6
CONTROLLING
AS USUAL IN THESE LESSONS, WE START WITH THE DEFINITION OF CONTROLLING IN BUSINESS MANAGEMENT:
Control is a primary goal-oriented function of management in an organisation. It is a process of comparing the actual performance with the set standards of the company to ensure that activities are performed according to the plans and if not then taking corrective action.
WE SEE THAT CONTROLLING IS A PROCESS, WHICH MEANS TWO DIFFERENT THINGS:
- YOU PERFORM A PROCESS IF YOU COMPARE THE PERFORMANCE AT A CERTAIN POINT IN TIME WITH THE STANDARDS OF THE COMPANY, WHICH MEANS THE RESULTS THAT YOU WANT TO ACHIEVE;
- THE JUST MENTIONED COMPARISON IS AN ONGOING PROCESS UNTIL THE PERFORMANCE REALLY ACHIEVES THE INTENDED TARGET IS FINALLY ACHIEVED.
LET’S TAKE AN EXAMPLE: WE ASSUME THAT YOU HAVE THE STANDARD TO BE THE BEST-SELLING GROCERY SHOP IN TOWN. WHAT YOU WILL DO FIRST IS TO INVESTIGATE WHICH THE BEST-SELLING GROCERY SHOPS ARE AT THE MOMENT. YOU COMPARE
THEIR SELLING PERFORMANCE WITH YOURS. THIS IN ITSELF IS A PROCESS, AS IT TAKES YOU TWO DIFFERENT ACTIONS WHICH YOU COMBINE: THE INVESTIGATION ABOUT THE PERFORMANCE F OTHE GRCERY SHOPS, AND THE COMPARISON WITH YOUR PERFORMANCE.
AS YOU SURELY HAVEN’T REACHED YOUR GIVEN STANDARD, YOU WILL REPEAT THIS PROCEDURE OVER AND OVER AGAIN UNTIL THE STANDARD YU WANT TO HAVE IS REACHED.
HERE IS ANOTHER EXAMPLE FROM A DIFFERENT INDUSTRY: A CAR MANUFACTURER DOES NOT PRODUCE ENGINES BY IT SELF, BUT ORDERS THEM FROM A SUPPLIER. FOR THESE ENGINES, THE CAR MANUFACTURER DEMANDS A CERTAIN STANDARD. WHENEVER A DELIVERY OF ENGINES ARRIVES, THE CONTROLLER CHECKS WHETHER THE ENGINES FULFIL THE STANDARD THE COMPANY DEMANDS. AS THIS PROCEDURE IS REPEATED OVER AND OVER AGAIN, WE HAVE THE OTHER – THIS TIME GENERAL – PROCESS.
GOING BACK TO YOUR EXAMPLE, WE CAN SEE THE NECESSITY OF A WELL-ELABORATED BUSINESS PLAN, AS IT WAS MENTIONED IN THE “PLANNING” LESSON. THE BUSINESS PLAN SETS THE STANDARDS YOU WANT TO ACHIEVE IN YOUR BUSINESS. HERE YOU ALSO HAVE THE STEP-BY-STEP GOALS WITH WHICH YOU CAN COMPARE YUR CURRENT PERFORMANCE UNTIL YOU REACH THE STANDARDS SET BY YOUR BUSINESS PLAN.
ON THE OTHER HAND YOU MUST REVIEW YOUR BUSINESS PLAN REGULARLY TO FIND OUT WHETHER THE STANDARDS YOU HAVE SET ORIGINALLY ARE STILL VALID. IN THIS WAY, YOU WILL FIND OUT WHETHER THESE STANDARDS MUST RE-ORGANISED BACKWARDS, BECAUSE YOU WILL NOT BE ABLE TO REACH THEM, OR IF YU CAN SET IMPROVED STANDARDS, BECAUSE EITHER YOU HAVE ALREADY ACHIEVED THEM OR YOU ARE ON THE BEST WAY TO DO SO. IN THIS CASE, YOU MUST SET NEW STANDARDS TO REFLECT YOUR AMBITIONS.
HERE WE SEE HOW IMPORTANT IT IS TO HAVE A VALID BUSINESS PLAN, FOR THE CONTROLLING ASPECT OF THE BUSINESS MANAGEMENT AS WELL AS FOR THE OTHER COMPONENTS.
QUESTIONS:
- WHAT DO YOU COMPARE WHEN PERFORMING THE CONTROLLING COMPONENT OF BUSINESS MANAGEMENT?
- WHAT IS THE IMPORTANCE OF SETTING STANDARDS FOR YOUR BUSINESS?
- GIVE TWO EXAMPLES FOR COMPARING PERFORMANCE OF A BUSINESS WITH ITS STANDARDS!
- WHAT IS THE IMPORTANCE OF A BUSINESS PLAN FOR CONTROLLING?
- WHY IS IT IMPORTANT FOR CONTROLLING TO REVIEW YUR BUSINESS PLAN REGULARLY?
