How does controlling benefit a small business?
In terms of business management, after you’ve planned your activities, organised your processes, staffed your enterprise and directed your actions, controlling comes into play. Simplistically, controlling is the framework that dictates the setting of performance standards, measures actual performance, compares the standards with the performance, analyses deviations, and informs corrective activities. Controlling can be applied to all areas of your business and helps you to apply your resources in a way that allows you to effectively achieve your goals in a set time frame.
What is a control function?
A control function is the framework within which a business can operate at optimum efficiency and is considered a goal-orientated behaviour. So that all stakeholders and employees can contribute towards the achievement of specific goals, according to plan, and with the ability to rectify non-compliant or sub-standard performances, controlling should be considered as an inherent part of the management process, and be treated with as much importance as any other organisational tool. Facilitating the management processes, controlling defines acceptable behaviour and dictates actions and reactions to all activities.
Why is controlling important in business?
Bluntly, controlling is the framework that acts as the instruction manual to help you run your business. A predefined process should be applied to any and all aspects of an enterprise – from purchasing to invoicing, staffing to payroll. This framework literally documents every work-related activity and lists the expected objective and actions associated with any related topics. Just like an instruction manual, a control framework should give you an A to Z, ‘how-to’ on efficient performance.
How does controlling impact business performance?
With a documented controlling framework, every action can be assessed to a given standard. If no-one knows exactly what is expected of them, there can be no consistency, and the business will suffer.
Achieving objectives
In layman’s terms, the boss makes the plans and the control framework takes care of them. By identifying a specific goal, mapping a path to achieve it, and then assessing the activities that are undertaken in pursuit of the goal, you can see where the actual result differs from the intended result. With this understanding, your organisation will be in a position to take corrective action in order to minimise future deviations.
Judging accuracy
By clearly identifying a minimum expectation in performance, a manager can judge whether an actual work performance meets, misses, or exceeds the objective. If the accepted standard is not achieved, there is then the opportunity to rectify the issue through active control. Going forward, it might be necessary to adjust training parameters or even the expectations themselves.
Ensuring order
By documenting every stage of a process, as well as a timescale within which each stage should be completed, it will be easier to see exactly where your business stands at any given time. Whether it’s invoices outstanding for the accounting department, or how near you are to reaching a long-term goal, a predefined control framework offers easy management oversight.
Efficient resource application
Initially, controlling requires some flexibility in both time and funding. But when the optimum performance standards have been identified, it will be clear what the most efficient application of physical and financial resources should be. This could mean hiring more staff if one area is struggling to hit targets, or reassigning roles if another department has an excessive amount of downtime.
Improving motivation
Within a control framework, each employee can be motivated to perform to the best of their ability. By ensuring that positive effort is recognised, an organisation can encourage loyalty and discourage undesirable activities like theft, corruption, or a lack of cooperative behaviours. Having a set of standards to be measured against allows for accurate assessments and appropriate rewards.
Effective co-ordination of activities
Controlling allows your various departments to be coordinated as every activity will be interdependent. In other words, each action impacts another, and a failure in one area will inevitably cause a domino effect throughout the organisation. For example, if a sales department’s orders are not processed properly, a purchasing team cannot source enough materials to allow a manufacturing team to build the required volume, which means that the order cannot be fulfilled.
How do you implement more effective control in an existing business?
No matter how long your company has been trading, there is always room for operational improvement. In order to regulate behaviours and enable a more efficient application of resources, management control is vital. So the objective of any control framework is to offer a recognised structure within which management can exert their influence to optimise work performances. To revitalise an existing control framework, or build a new control framework from scratch, you should take the following steps:
- Assess your daily activities: Starting at the beginning of the week and finishing with the last day of trade, write down everything that needs to be done to operate your enterprise. Separate each set of tasks into a specific department and include deadlines for each task.
- Identify your vital needs: Some activities will be less important than others. Once you have a comprehensive list of requirements, prioritise their order – most important first etc. Also note their time frequency – hourly, daily, monthly etc.
- Create a framework: The easiest way to design a control system starts with Activity Diagrams. Per department, use arrows to visually connect each activity so you can see exactly who needs to do what, when, and how each department’s action impacts another’s processes. This also allows you to identify any gaps in your activity assessment and judge who would be best placed to undertake specific management responsibilities.
- Document your processes: For every activity there will be a required process. In order to make training more effective and coordination more efficient, having a written guide for reference will be invaluable. These processes may be very simple or incredibly complicated, but you should make sure that each one is clearly explained.
- Build your instruction manual: Once you have all the information to hand, it is time to organise it into a comprehensive reference tool that can be used by every employee. Divide it into department-specific sections, include all the relevant information that you have gathered, and make it freely available either in printed format, or as an online resource.