management control in business plan

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How To Write the Management Section of a Business Plan

Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Ownership Structure

Internal management team, external management resources, human resources, frequently asked questions (faqs).

When developing a business plan , the 'management section' describes your management team, staff, resources, and how your business ownership is structured. This section should not only describe who's on your management team but how each person's skill set will contribute to your bottom line. In this article, we will detail exactly how to compose and best highlight your management team.

Key Takeaways

• The management section of a business plan helps show how your management team and company are structured.
• The first section shows the ownership structure, which might be a sole proprietorship, partnership, or corporation.
• The internal management section shows the department heads, including sales, marketing, administration, and production.
• The external management resources help back up your internal management and include an advisory board and consultants.
• The human resources section contains staffing requirements—part-time or full-time—skills needed for employees and the costs.

This section outlines the legal structure of your business. It may only be a single sentence if your business is a sole proprietorship. If your business is a partnership or a corporation, it can be longer. You want to be sure you explain who holds what percentage of ownership in the company.

The internal management section should describe the business management categories relevant to your business, identify who will have responsibility for each category, and then include a short profile highlighting each person's skills.

The primary business categories of sales, marketing , administration, and production usually work for many small businesses. If your business has employees, you will also need a human resources section. You may also find that your company needs additional management categories to fit your unique circumstances.

It's not necessary to have a different person in charge of each category; some key management people often fill more than one role. Identify the key managers in your business and explain what functions and experience each team member will serve. You may wish to present this as an organizational chart in your business plan, although the list format is also appropriate.

Along with this section, you should include the complete resumés of each management team member (including your own). Follow this with an explanation of how each member will be compensated and their benefits package, and describe any profit-sharing plans that may apply.

If there are any contracts that relate directly to your management team members, such as work contracts or non-competition agreements, you should include them in an Appendix to your business plan.

While external management resources are often overlooked when writing a business plan , using these resources effectively can make the difference between the success or failure of your managers. Think of these external resources as your internal management team's backup. They give your business credibility and an additional pool of expertise.

Advisory Board

An Advisory Board can increase consumer and investor confidence, attract talented employees by showing a commitment to company growth and bring a diversity of contributions. If you choose to have an Advisory Board , list all the board members in this section, and include a bio and all relevant specializations. If you choose your board members carefully, the group can compensate for the niche forms of expertise that your internal managers lack.

When selecting your board members, look for people who are genuinely interested in seeing your business do well and have the patience and time to provide sound advice.

Recently retired executives or managers, other successful entrepreneurs, and/or vendors would be good choices for an Advisory Board.

Professional Services

Professional Services should also be highlighted in the external management resources section. Describe all the external professional advisors that your business will use, such as accountants, bankers, lawyers, IT consultants, business consultants, and/or business coaches. These professionals provide a web of advice and support outside your internal management team that can be invaluable in making management decisions and your new business a success .

The last point you should address in the management section of your business plan is your human resources needs. The trick to writing about human resources is to be specific. To simply write, "We'll need more people once we get up and running," isn't sufficient. Follow this list:

• Detail how many employees your business will need at each stage and what they will cost.
• Describe exactly how your business's human resources needs can be met. Will it be best to have employees, or should you operate with contract workers or freelancers ? Do you need full-time or part-time staff or a mix of both?
• Outline your staffing requirements, including a description of the specific skills that the people working for you will need to possess.
• Calculate your labor costs. Decide the number of employees you will need and how many customers each employee can serve. For example, if it takes one employee to serve 150 customers, and you forecast 1,500 customers in your first year, your business will need 10 employees.
• Determine how much each employee will receive and total the salary cost for all your employees.
• Add to this the cost of  Workers' Compensation Insurance  (mandatory for most businesses) and the cost of any other employee benefits, such as company-sponsored medical and dental plans.

After you've listed the points above, describe how you will find the staff your business needs and how you will train them. Your description of staff recruitment should explain whether or not sufficient local labor is available and how you will recruit staff.

When you're writing about staff training, you'll want to include as many specifics as possible. What specific training will your staff undergo? What ongoing training opportunities will you provide your employees?

Even if the plan for your business is to start as a sole proprietorship, you should include a section on potential human resources demands as a way to demonstrate that you've thought about the staffing your business may require as it grows.

Business plans are about the future and the hypothetical challenges and successes that await. It's worth visualizing and documenting the details of your business so that the materials and network around your dream can begin to take shape.

What is the management section of a business plan?

The 'management section' describes your management team, staff, resources, and how your business ownership is structured.

What are the 5 sections of a business plan?

A business plan provides a road map showing your company's goals and how you'll achieve them. The five sections of a business plan are as follows:

• The  market analysis  outlines the demand for your product or service.
• The  competitive analysis  section shows your competition's strengths and weaknesses and your strategy for gaining market share.
• The management plan outlines your ownership structure, the management team, and staffing requirements.
• The  operating plan  details your business location and the facilities, equipment, and supplies needed to operate.
• The  financial plan  shows the map to financial success and the sources of funding, such as bank loans or investors.

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The Control Function of Management

After strategies are set and plans are made, management’s primary task is to ensure that these plans are carried out.

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After strategies are set and plans are made, management’s primary task is to take steps to ensure that these plans are carried out, or, if conditions warrant, that the plans are modified. This is the critical control function of management. And since management involves directing the activities of others, a major part of the control function is making sure other people do what should be done.

The management literature is filled with advice on how to achieve better control. This advice usually includes a description of some type of measurement and feedback process:

• The basic control process, wherever it is found and whatever it is found and whatever it controls, involves three steps: (1) establishing standards. (2) measuring performance against these standards. and (3) correcting deviations from standards and plans. 1
• A good management control system stimulates action by spotting the significant variations from the original plan and highlighting them for the people who can set things right . 2
• Controls need to focus on results. 3

This focus on measurement and feedback, however, can be seriously misleading. In many circumstances, a control system built around measurement and feedback is not feasible. And even when feasibility is not a limitation, use of a feedback-oriented control system is often an inferior solution. Yet, good controls can be established and maintained using other techniques.

What is needed is a broader perspective on control as a management function: this article addresses such a perspective. The first part summarizes the general control problem by discussing the underlying reasons for implementing controls and by describing what can realistically be achieved. In the second part, the various types of controls available are identified. The last part discusses why the appropriate choice of controls is and should be different in different settings.

Why Are Controls Needed?

If all personnel always did what was best for the organization, control — and even management — would not be needed. But, obviously individuals are sometimes unable or unwilling to act in the organization’s best interest, and a set of controls must be implemented to guard against undesirable behavior and to encourage desirable actions.

One important class of problems against which control systems guard may be called personal limitations. People do not always understand what is expected of them nor how they can best perform their jobs, as they may lack some requisite ability, training, or information. In addition, human beings have a number of innate perceptual and cognitive biases, such as an inability to process new information optimally or to make consistent decisions, and these biases can reduce organizational effectiveness. 4 Some of these personal limitations are correctable or avoidable, but for others, controls are required to guard against their deleterious effects.

Even if employees are properly equipped to perform a job well, some choose not to do so, because individual goals and organizational goals may not coincide perfectly. In other words, there is a lack of goal congruence. Steps must often be taken either to increase goal congruence or to prevent employees from acting in their own interest where goal incongruence exists.

If nothing is done to protect the organization against the possible occurrence of undesirable behavior or the omission of desirable behavior caused by these personal limitations and motivational problems, severe repercussions may result. At a minimum, inadequate control can result in lower performance or higher risk of poor performance. At the extreme, if performance is not controlled on one or more critical performance dimensions, the outcome could be organizational failure.

What Is Good Control?

Perfect control, meaning complete assurance that actual accomplishment will proceed according to plan, is never possible because of the likely occurrence of unforeseen events. However, good control should mean that an informed person could be reasonably confident that no major unpleasant surprises will occur. A high probability of forthcoming poor performance, despite a reasonable operating plan, sometimes is given the label “out of control.”

Some important characteristics of this desirable state of good control should be highlighted. First, control is future-oriented: the goal is to have no unpleasant surprises in the future. The past is not relevant except as a guide to the future, Second, control is multidimensional, and good control cannot be established over an activity with multiple objectives unless performance on all significant dimensions has been considered. Thus, for example, control of a production department cannot be considered good unless all the major performance dimensions, including quality, efficiency, and asset management, are well controlled. Third, the assessment of whether good performance assurance has been achieved is difficult and subjective. An informed expert might judge that the control system in place is adequate because no major bad surprises are likely, but this judgment is subject to error because adequacy must be measured against a future that can be very difficult to assess. Fourth, better control is not always economically desirable. Like any other economic good, the control tools are costly and should be implemented only if the expected benefits exceed the costs.

How Can Good Control Be Achieved?

Good control can be achieved by avoiding some behavioral problems and/or by implementing one or more types of control to protect against the remaining problems. The following sections discuss the major control options.

Control-Problem Avoidance

In most situations, managers can avoid some control problems by allowing no opportunities for improper behavior. One possibility is automation . Computers and other means of automation reduce the organization’s exposure to control problems because they can be set to perform appropriately (that is, as the organization desires), and they will perform more consistently than do human beings. Consequently, control is improved.

Another avoidance possibility is centralization, such as that which takes place with very critical decisions at most organization levels. If a manager makes all the decisions in certain areas, those areas cease to be control problems in a managerial sense because no other persons are involved.

A third avoidance possibility is risk-sharing with an outside body, such as an insurance company. Many companies bond employees in sensitive positions, and in so doing, they reduce the probability that the employees’ behavior will cause significant harm to the firm.

Finally, some control problems can and should be avoided by elimination of a business or an operation entirely. Managers without the means to control certain activities, perhaps because they do not understand the processes well, can eliminate the associated control problems by turning over their potential profits and the associated risk to a third party, for example, by subcontracting or divesting.

If management cannot, or chooses not to avoid the control problems caused by relying on other individuals, they must address the problems by implementing one or more control tactics. The large number of tactics that are available to help achieve good control can be classified usefully into three main categories, according to the object of control; that is, whether control is exercised over specific actions, results , or personnel . Table 1 shows many common controls classified according to their control object; these controls are described in the following sections.

Control of Specific Actions

One type of control, specific-action control, attempts to ensure that individuals perform (or do not perform) certain actions that are known to be desirable (or undesirable). Management can limit the incidence of some types of obviously undesirable activity by using behavioral constraints that render the occurrence impossible, or at least unlikely. These constraints include physical devices, such as locks and key-personnel identification systems, and administrative constraints, such as segregation of duties, which make it very difficult for one person to carry out an improper act.

A second type of specific action control is action accountability — a type of feedback control system by which employees are held accountable for their actions. The implementation of action-accountability control systems requires: (1) defining the limits of acceptable behavior, as is done in procedures manuals; (2) tracking the behaviors that employees are actually engaged in; and (3) rewarding or punishing deviations from the defined limits. Although action-accountability systems involve the tracking and reporting of actual behaviors, their objective is to motivate employees to behave appropriately in the future. These systems are effective only if employees understand what is required of them, and they feel that their individual actions will be noticed and rewarded or punished in some significant way.

A third type of specific-action control is preaction review . This involves observing the work of others before the activity is complete, for example, through direct supervision, formal planning reviews, and approvals on proposals for expenditures. Reviews can provide effective control in several ways by: correcting potentially harmful behavior before the full damaging effects are felt; or influencing behavior just by the threat of an impending review, such as causing extra care in the preparation of an expenditure proposal. One advantage of reviews is that they can be used even when it is not possible to define exactly what is expected prior to the review.

Control of Results

Control can also be accomplished by focusing on results: this type of control comes in only one basic form, results accountability, which involves holding employees responsible for certain results. Use of results-accountability control systems requires: (1) defining the dimensions along which results are desired, such as efficiency, quality, and service; (2) measuring performance on these dimensions; and (3) providing rewards (punishments) to encourage (discourage) behavior that will lead (not lead) to those results. As with action-accountability systems, results-accountability systems are future-oriented; they attempt to motivate people to behave appropriately. But they are effective only if employees feel that their individual efforts will be noticed and rewarded in some significant way.

Control of Personnel

A third type of control can be called personnel control because it emphasizes a reliance on the personnel involved to do what is best for the organization, and it provides assistance for them as necessary. Personnel controls can be very effective by themselves in some situations, such as in a small family business or in a professional partnership, because the underlying causes of the needs for controls (personal limitations and lack of goal congruence) are minimal. However, even when control problems are present, they can be reduced to some extent by: (1) upgrading the capabilities of personnel in key positions, such as tightening hiring policies, implementing training programs, or improving job assignments; (2) improving communications to help individuals know and understand their roles better and how they can best coordinate their efforts with those of other groups in the organization; and (3) encouraging peer (or subordinate) control by establishing cohesive work groups with shared goals.

Feasibility Constraints on the Choice of Controls

The design of a control system often depends partly on the feasibility of the various types of controls: not all of these tools can be used in every situation. Personnel controls are the most adaptable to a broad range of situations. To some extent, all organizations rely on their employees to guide and motivate themselves, and this self-control can be increased with some care in hiring, screening, and training. Even in a prison, where administrators are faced with a sharp lack of goal congruence and where few control options are available other than physical constraints, inmates are screened so that dangerous ones are not assigned to high-risk positions, such as in a machine shop.

Most situations, however, require reinforcing personnel controls by placing controls over specific actions, results, or a combination of the two. This is where feasibility becomes a limiting factor.

For control over specific actions, management must have some knowledge of which actions are desirable. While it may be easy to define precisely the required behavior on a production line, the definition of preferred behavior for a research engineer cannot be as precise. Being able to keep track of specific actions is also necessary to enforce actions accountability; however, this is usually not a limiting factor, except in rare situations such as a remote outpost, because actions can be observed directly or assessed indirectly through action reports, such as hours worked, sales calls made, or procedural violations.

For control over results, the most serious constraint is the ability to measure the desired results effectively. (Management usually knows what results are desirable.) Ideally, measurements should: (1) assess the correct performance areas — the ones for which results are truly desired; (2) be precise — not determined by only crude estimations; (3) be timely and (4) be objective — not subject to manipulation. While perfect measures are rarely available, reasonable surrogates can often be found or developed. For example, “complaints received” might be a good (negative) indicator of the performance of hotel staff personnel along the customer-service dimension. Significant difficulty in achieving any of these four measurement qualities, however, can lead to failure of a results-oriented control system.

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Figure 1 shows how the two factors most limiting control feasibility — knowledge of desirable actions and the ability to measure results on the important performance dimensions — can influence the choice of controls used. 5 The most difficult control situation, shown in box 4 of Figure 1, is one in which the desirable actions are not known and the important result areas cannot be measured well. Only personnel controls (or problem avoidance) are available options. In a research laboratory, for example, success might be difficult to assess for years, yet prescription of specific actions could be counterproductive. Fortunately, in this specific setting, control is not a serious problem because research scientists tend to be professional — well trained and responsible to the standards of their profession. They tend to control themselves, and consequently, control of research laboratories tend to be dominated by controls over personnel.

In box 3 of Figure 1, where knowledge of desirable specific actions is poor but good results measurements are available, control is best accomplished by controlling results. Movie production is a good example. It is probably impossible to dictate what a movie director should do or even to observe his or her behavior and predict whether the finished product will be good. It is, however, a relatively easy task to measure the economic performance of the movie and the artistic merit, if that is a concern. In this situation, the best control system would seem to be a results-accountability system that defines to the director the results expected, holds him or her responsible for achieving them, and provides some reinforcement in the form of compensation and/or recognition.

For similar reasons, results controls tend to be dominant at most upper-management levels. It is usually not possible to prescribe and keep track of the specific actions each manager should be performing, but it is relatively easy to define the results desired, in terms similar to those desired by shareholders.

Specific-action controls should dominate where there is knowledge about which actions are desirable but where results measurement is impossible or difficult, as indicated in box 2 of Figure 1. Consider, for example, control over a real-estate development business where large capital investment decisions are made frequently. Results of these decisions are difficult to measure in a timely, accurate fashion because of their long-term nature; they tend to be inseparable from the results of other actions and are confounded by changes in the environment. However, the techniques of investment analysis are well developed (e.g., net present value analysis with tests of the sensitivity of assumptions), and control may be accomplished by formally reviewing the techniques used and the assumptions made.

How to Choose among the Feasible Options

Often managers cannot rely completely on the people involved in a given area and cannot employ one or more of the avoidance strategies mentioned earlier. When this is the case, the best situation is one in which either specific-action or results controls, or both, can be chosen, as is shown in box 1 of Figure 1. In general, the choice of one or more tools should involve consideration of: (1) the total need for control; (2) the amount of control that can be designed into each of the control devices; and (3) the costs of each, both in terms of money spent and unintended behavioral effects, if any. These decision parameters will be described more fully.

Need for Controls

The need for controls over any particular behavior or operation within an organization depends very simply on the impact of that area on overall organizational performance. Thus, more control should be exercised over a strategically important behavior rather than over a minor one, regardless of how easy it is to control each. For example, controlling the new-product-development activity is far more important in many companies than making sure that the production of existing products is accomplished as efficiently as possible. Consequently, more resources should be devoted to controlling the new-product activity, even though it is a far more difficult area to control.

Amount of Control Provided by Feasible Options

The amount of control provided by each of the control tools depends both on their design and on how well they fit the situation in which they are used. Personnel controls should usually provide some degree of control. But although they may be totally effective in some situations, such as in a small business, they provide little or no warning of failure. They can break down very quickly if demands, opportunities, or needs change.

Specific-action and results controls can provide widely varying amounts of control. In general, reasonably certain (or tight) control requires: (1) detailed specific-action of what is expected of each individual ; (2) prevention of undesired actions, or effective and frequent monitoring of actions or results; and (3) administration of penalties or rewards that are significant to the individuals involved.

For example, with specific-action-accountability systems, the amount of control can be affected by changing one or more of the elements of the system. First, tighter control can be effected by making the definitions of acceptability more specific. This might take the form of work rules (e.g., no smoking) or specific policies (e.g., a purchasing policy to secure three competing bids before releasing the purchase order), as opposed to general guidelines or vague codes of conduct (e.g., act professionally). Second, control can be made tighter by improving the effectiveness of the action-tracking system. Personnel who are certain that their actions will be noticed relatively quickly will be affected more strongly by an action-accountability system than will those who feel that the chance of their being observed is small. Thus, constant direct supervision should provide tighter control than would an audit sampling of a small number of action reports some time later. Third, control can be made tighter by making the rewards or punishments more significant to the individuals involved. In general, this impact should vary directly with the size of the reward (or the severity of the punishment), although different individuals may react differently to identical rewards or punishments.

Results-accountability systems can be varied along similar lines. Expected performance can be defined broadly, for instance, with a goal for annual net income. Alternatively, expected performance can be defined in more detailed form by prescribing goals for specific result areas (for example, sales growth, efficiency, quality) and by using line items with short time horizons (e.g., month or quarter). Control is tighter when the performance dimensions for which results are desired are defined explicitly and, of course, correctly: this type of control is particularly effective if well-established results standards are available, perhaps in the form of output from an engineering study, industry survey, or historical analysis. Results-accountability control can also be tightened by improving the measurement of results. This can be accomplished by making the measures more precise. more timely, and/or less subject to manipulation.

In addition, reviews can be used to provide either tight or loose assurance. Tight assurance is more likely if the reviews are detailed, comprehensive, and frequent.

Of course, managers do not have to rely exclusively on a single type of control in a control system. Use of more than one type of control — in effect. overlapping controls — will often provide reinforcement. For example, most organizations rely on selecting good people. establishing some set procedures. implementing some accountability for results, and reviewing some key decisions before they are made.

Costs: Outlay and Behavioral

The cost of a control depends on two factors: the incremental dollar cost of the tool and the cost of any unintended behavioral effects. The actual dollar cost of a control might be considerably less than it first appears because some devices that provide control may already be in place for other reasons. For example. a budgeting process for a small firm does not have to justify its’ cost on the basis of control reasons alone. Creditors probably already require pro forma financial statements. so the incremental cost might involve only additional detail (e.g.. down to the operations level) and involvement of a greater number of participants.

The costs of any unintended negative effects must also be considered. and these can be very significant. It is beyond the scope of this article to provide an exhaustive enumeration of the many negative side effects possible. Indeed, they come in many different forms, but it is nevertheless useful to mention a few examples.

A common problem with specific-action controls is that they cause operating delays. These can be relatively minor. such as delays caused by limiting access to a stockroom. but they can also be major. For example, after the executives of Harley-Davidson Motor Company bought the firm from AMF, Inc., they found that they were able to implement a rebate program in ten days. rather than the six to eight weeks it would have taken with all the reviews required in the multilayered AMF organization. 6 Obviously, where timely action is important, delays caused by control processes can be very harmful.

Another problem with specific-action controls is that they can cause rigid. bureaucratic behavior. Individuals who become accustomed to following a set routine are not as apt to sense a changing environment, nor are they likely to search for better ways of doing the tasks at hand in a stable environment.

Results controls can create severe, unintended negative effects when all the measurement criteria are not met satisfactorily. Perhaps the most serious common problem is a failure to define the results areas correctly. This causes “goal displacement,” a situation where individuals are encouraged to generate the wrong results — in response to the goals defined in the control system — rather than those results truly needed by the organization. For example, a department store introduced an incentive compensation plan to pay employees on the basis of sales volume. The immediate impact was indeed an increase in sales volume, but the increase was accomplished in ways that were inconsistent with long-term organizational goals. The employees competed among themselves for customers and neglected important but unmeasured and unrewarded activities such as stocking and merchandising. 7 Another common example of goal displacement is caused by the practice of rewarding managers on the oft criticized return-on-investment criterion. 8

Data distortion is another dangerous potential side effect of results controls. If the measurement methods are not objective, then the employees whose performances are being measured might falsify the data or change the measurement methods, and, in so doing, undermine the whole organization’s information system.

Many of the ramifications of these unintended effects of control systems are not well understood, and their costs are very difficult to quantify. However, consideration of these effects is an important control-system design factor: they cannot be ignored.

Where Does Feedback Fit In?

Because feedback does not appear prominently in the preceding discussion, it is useful for clarification purposes to consider where feedback fits in, Control is necessarily future-oriented, as past performance cannot be changed, but analysis of results and feedback of variances can often provide a particularly strong addition to a control system. A prerequisite, of course, is the ability to measure results, so feedback can only be useful in the situations presented in boxes 1 and 3 of Figure 1.

There are three reasons why feedback of past results is an important part of many control systems. First, feedback is necessary as reinforcement for a results-accountability system. Even if the feedback is not used to make input adjustments, it signals that results are being monitored. This can heighten employee awareness of what is expected of them and should help stimulate better performance.

Second, in repetitive situations, measurement of results can provide indications of failure in time to make useful interventions. This is shown in the simple feedback control model presented in Figure 2. When the results achieved are not satisfactory, the inputs, which include the specific actions and types of persons involved, can be changed to provide different results. Obviously, these input adjustments are more likely to improve results when there is a good understanding of how inputs relate to results; otherwise, the interventions are essentially experiments.

Third, analysis of how the results vary with different combinations of inputs might improve understanding of how the inputs relate to results. This process is depicted in loop A of Figure 3, a slightly more complicated feedback control model. As this input/results understanding improves, it provides the opportunity to shift the control system from a results-oriented to a specific-action-oriented focus. If managers discover that certain specific actions produce consistently superior results, then it might be beneficial to inform employees of the specific actions that are expected of them, for example, by publishing these desired actions in a procedures manual. The greater the knowledge about how actions bring about results, the greater the possibilities of using a tight, specific-action-oriented control system.

Note that these latter two reasons for analyzing feedback — for making interventions and for learning — are only useful in situations that at least partially repeat themselves. If a situation is truly a one-time occurrence, such as a major divestiture or a unique capital investment, management has little use for feedback information. In these cases, by the time the results are available, it is too late to intervene, and a greater understanding of how results are related to inputs is not immediately useful.

There are other circumstances where feedback need not, and perhaps should not, be a part of a good control system. In many cases, although feedback control systems are not really feasible, they are used anyway. This occurs because of the consistent tendency “to concentrate on matters that are concrete and quantifiable, rather than intangible concepts,” which may be equally or more important. 9 Invariably, this will lead to dysfunctional effects, as will all other failures to satisfy the measurement criteria or to define results appropriately.

Cost considerations also commonly lead to decisions not to include feedback in a control system. The design, implementation, and maintenance of results-tracking information systems can often be very expensive. Thus, it is not feasible to have feedback as part of every control system, nor is it necessarily desirable even when feasibility constraints are not present.

The Design Process

As discussed at the beginning of this article, management control is a problem of human behavior. The challenge is to have each individual acting properly as often as possible. Thus, it seems logical to start the control-system design process by considering the personnel component of the organization by itself. In some situations, well-trained, highly motivated personnel can be expected, with a high degree of certainty, to perform their jobs satisfactorily without any additional control steps being taken. A confident reliance on personnel controls is a very desirable situation because additional controls cost money and may have undesirable side effects.

If, however, management determines that personnel controls should be supplemented, the first step should be to examine the feasibility of the various control options. To do this, management must assess two factors: how much is known about which specific actions are desirable, and how well measurement can be accomplished in the important performance areas. This feasibility test might immediately determine whether the controls that can be added should be oriented toward specific actions or results. Control can be made tighter by strengthening the controls in place, along the lines discussed earlier, or by implementing overlapping controls, such as controls over results and specific actions.

In most cases, management has some, but less than complete, knowledge of which specific actions are desirable and some, but not perfect, ability to measure the important result areas. This situation usually calls for implementation of both specific-action and results controls, with feedback loops to improve understanding of the relevant processes.

An Example: Control of a Sales Force

The above observations about control can be illustrated by describing how control of a sales force might work. Generally, personnel controls are some part of every sales force control system. Consider, for example, this statement by a sales and marketing consultant:

I think I can tell a good salesman just by being around him. If the guy is experienced, confident, well-prepared, speaks well, maintains control of situations, and seems to have his time planned. I assume I have a good salesman.

If a sales manager feels confident about all of the salespeople employed, he or she might wish to allow personnel controls to dominate the control system. This is likely, for example, in a small business with a sales force comprised solely of relatives and close friends. But most sales managers are not willing to rely exclusively on hiring and training good people.

What controls should be added? The answer, of course, depends on the type of sales involved. In a single-product, high-volume operation, the volume of sales generated is probably a good simple factor on which to base a results-oriented control system. It provides a reasonable, although not perfect, surrogate for long-range profitability, and the measurements are very inexpensive because the data are already gathered as a necessary input to the financial reporting system. The results-accountability system can then be completed by providing reinforcement in the form of sales commissions. This simple solution will also work where multiple products with varying profitabilities are involved, if the commission schedules are varied so that rewards are assigned in proportion to the profitability of the sales generated.

Consider, however, a situation where salespeople sell large-scale construction equipment and where sales come in very large but infrequent chunks. A commission-type, results-accountability system is still feasible. Measurement of results is not difficult and can be accurate to the penny. The amount of control provided, however, is not high because the measurements fail on the timeliness dimension. Because sales are infrequent, zero sales is not an unusual situation in any given month. Therefore, a salesperson could be drawing advances on hypothetical future commissions for many months without performing any of the desired promotional activities.

Two solutions are possible. One is to augment the commission system with some specific-action controls, such as activity reports. Some activities are probably known to be desirable, such as the number of hours worked and the quantity of calls made. If the product mix and market environment are fairly stable, then requiring and monitoring activity reports is not as costly as it might seem, because it could provide an important side benefit — an activity-oriented data base. The patterns in this data base can be analyzed and compared with results over time to add to knowledge about which activities yield the best results.

An alternate solution is to improve the results-accountability system. It might be possible to define some factors that are strong predictors of sales success, such as customer satisfaction with the salesperson or customer familiarity with the company’s products. Measurement of these intangibles, of course, would have to be done by surveying customers. Even though these measures do not directly assess the desired result area (long-range profitability), and measurement is imprecise, they could provide a better focus for a results-oriented control system than a sales-generated measure because of the improvement in timeliness. Over time, it is likely that the choice of measures and measurement methodologies could be improved. The advantage of this results-oriented solution over an action-oriented system is that it is more flexible and less constraining to the salespeople; they can continue to use styles best suited to their personalities.

Conclusions

This article has taken a new look at the most basic organizational control problem — how to get employees to live up to the plans that have been established. In the course of discussion, the following major points were made:

1. Management control is a behavioral problem. The various control tools are only effective to the extent that they influence behavior in desirable directions.

2. Good control can often be achieved in several different ways. In some circumstances, the control problems can be avoided, for example, by centralizing or automating certain decisions. If problems cannot be avoided, one or more types of controls are usually desirable or necessary. The options can be classified according to the object of control, labeled in this article as specific actions, results, and personnel.

3. Not all types of controls are feasible in all situations. Figure 4 presents the questions to ask when assessing the feasibility of control types. If none of the controls is feasible, the probability of undesirable results occurring is high.

4. Control can be strengthened either by employing a tighter version of a single type of control or by implementing more than one type of control. However, tighter control is not always desirable because of additional system costs and the potential of undesirable side effects, such as destruction of morale, reduction of initiative, or displacement of employee focus toward measurable result areas only. Some of the qualities, benefits, and costs of each of the major control types are listed in Table 2.

5. The basic management control problems and alternatives are the same in all functional areas and at all levels in the organization, from the lowest supervisory levels to the very top levels of management. The best solutions, however, vary between situations.

An understanding of control can be an important input into many management decisions. For example, control problems should be considered in making some types of investments. An investment in an operation in which control is very difficult — such as a highly specialized and technical area where control must depend heavily on personnel controls — is, by definition, risky. Thus, investments in such areas should promise high returns to compensate for this risk.

Similarly, control considerations should affect the design of the other parts of the management system. Consider, for example, the organizational structure. If independent areas of responsibility cannot be carved out as part of the organizational structure, results-accountability control systems will not work well because employees will not feel that their individual actions have a notice able effect on results. (It should be noted that many of the prescriptions calling for “responsibility accounting” only provide the illusion of results independence because of the many allocations of the costs and/or benefits of shared resources.) If independent areas of authority are not established, specific-action-accountability control systems cannot work. This principle underlies the internal control principle of “separation of duties.” In addition, if tighter reviews of specific actions are necessary for adequate performance assurance, it is likely that the supervisory spans of control will have to be reduced, Similar observations can be made about other management functions, but they are beyond the scope of this article.

This article has attempted to provide a new look at this basic, but often overlooked, management problem. The control area is decidedly complex, and there is much that is not known about how controls work and how employees respond to different types of controls. For example, it would be worthwhile to know more about how controls can be designed to maximize the amount of control provided while minimizing the cost in the form of employee feelings of lost autonomy. However, an increased awareness of the control problem, of what can be accomplished, and of the options available should provide a new perspective that will suggest ways to improve control systems and overall organizational performance.

About the Author

Kenneth A. Merchant is Assistant Professor of Business Administration at Harvard University. Dr. Merchant holds the B.A. degree from Union College, the M.B.A. degree from Columbia University, and the Ph.D. degree from the University of California, Berkeley. His main interests lie in the areas of accounting, information systems, and planning and control. Dr. Merchant has published articles for such journals as The Accounting Review and Accounting, Organizations, and Society.

1. See H. Koontz, C. O'Donnell, and H. Weihrich. Management, 7th ed. (New York: McGraw-Hill, 1980). p. 722.

2. See W. D. Brinckloe and M. T. Coughlin, Managing Organizations (Encino, CA: Glencoe Press. 1977). p. 298.

3. See P. F. Drucker. Management: Tasks, Responsibilities, Practices (New York: Harper & Row. 1974). p. 497.

4. A recent summary of many of the findings in this area (illustrating such cognitive limitations as conservative revision of prior subjective probabilities when new information is provided. and the use of simplifying decision-making heuristics when faced with complex problems) is provided by W. F. Wright, “Cognitive Information Processing Biases: Implications for Producers and Users of Financial Information,” Decision Sciences (April 1980): 284–298.

5. A similar scheme is presented in W. G. Ouchi, “A Conceptual Framework for the Design of Organizational Control Mechanisms,” Management Science (September 1979): 833–848.

6. See H. Klein, “At Harley-Davidson, Life without AMF Is Upbeat but Full of Financial Problems,” Wall Street Journal . 13 April 1982, p. 37.

7. See N. Babchukand W. J. Goode. “Work Incentives in a Self-Determined Group,” American Sociological Review (1951): 679–687.

8. For a summary of criticisms of return-an-investment (ROI) measures of performance, see J. Dearden, “The Case against ROI Control,” Harvard Business Review , May–June 1969, pp. 124–135.

9. See D. Mitchell. Control without Bureaucracy (London: McGraw-Hill Book Company Limited, 1979), p. 6.

Acknowledgments

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1.5: Planning, Organizing, Leading, and Controlling

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Learning Objectives

• Know the dimensions of the planning-organizing-leading-controlling (P-O-L-C) framework.
• Know the general inputs into each P-O-L-C dimension.

A manager’s primary challenge is to solve problems creatively. While drawing from a variety of academic disciplines, and to help managers respond to the challenge of creative problem solving, principles of management have long been categorized into the four major functions of planning, organizing, leading, and controlling (the P-O-L-C framework). The four functions, summarized in the P-O-L-C figure, are actually highly integrated when carried out in the day-to-day realities of running an organization. Therefore, you should not get caught up in trying to analyze and understand a complete, clear rationale for categorizing skills and practices that compose the whole of the P-O-L-C framework.

It is important to note that this framework is not without criticism. Specifically, these criticisms stem from the observation that the P-O-L-C functions might be ideal but that they do not accurately depict the day-to-day actions of actual managers (Mintzberg, 1973; Lamond, 2004). The typical day in the life of a manager at any level can be fragmented and hectic, with the constant threat of having priorities dictated by the law of the trivial many and important few (i.e., the 80/20 rule). However, the general conclusion seems to be that the P-O-L-C functions of management still provide a very useful way of classifying the activities managers engage in as they attempt to achieve organizational goals (Lamond, 2004).

Planning is the function of management that involves setting objectives and determining a course of action for achieving those objectives. Planning requires that managers be aware of environmental conditions facing their organization and forecast future conditions. It also requires that managers be good decision makers.

Planning is a process consisting of several steps. The process begins with  environmental scanning  which simply means that planners must be aware of the critical contingencies facing their organization in terms of economic conditions, their competitors, and their customers. Planners must then attempt to forecast future conditions. These forecasts form the basis for planning.

Planners must establish objectives, which are statements of what needs to be achieved and when. Planners must then identify alternative courses of action for achieving objectives. After evaluating the various alternatives, planners must make decisions about the best courses of action for achieving objectives. They must then formulate necessary steps and ensure effective implementation of plans. Finally, planners must constantly evaluate the success of their plans and take corrective action when necessary.

There are many different types of plans and planning.

Strategic planning  involves analyzing competitive opportunities and threats, as well as the strengths and weaknesses of the organization, and then determining how to position the organization to compete effectively in their environment. Strategic planning has a long time frame, often three years or more. Strategic planning generally includes the entire organization and includes formulation of objectives. Strategic planning is often based on the organization’s mission, which is its fundamental reason for existence. An organization’s top management most often conducts strategic planning.

Tactical planning  is intermediate-range (one to three years) planning that is designed to develop relatively concrete and specific means to implement the strategic plan. Middle-level managers often engage in tactical planning.

Operational planning  generally assumes the existence of organization-wide or subunit goals and objectives and specifies ways to achieve them. Operational planning is short-range (less than a year) planning that is designed to develop specific action steps that support the strategic and tactical plans.

Organizing is the function of management that involves developing an organizational structure and allocating human resources to ensure the accomplishment of objectives. The structure of the organization is the framework within which effort is coordinated. The structure is usually represented by an organization chart, which provides a graphic representation of the chain of command within an organization. Decisions made about the structure of an organization are generally referred to as  organizational design  decisions.

Organizing also involves the design of individual jobs within the organization. Decisions must be made about the duties and responsibilities of individual jobs, as well as the manner in which the duties should be carried out. Decisions made about the nature of jobs within the organization are generally called “job design” decisions.

Organizing at the level of the organization involves deciding how best to departmentalize, or cluster, jobs into departments to coordinate effort effectively. There are many different ways to departmentalize, including organizing by function, product, geography, or customer. Many larger organizations use multiple methods of departmentalization.

Organizing at the level of a particular job involves how best to design individual jobs to most effectively use human resources. Traditionally,  job design  was based on principles of division of labor and specialization, which assumed that the more narrow the job content, the more proficient the individual performing the job could become. However, experience has shown that it is possible for jobs to become too narrow and specialized. For example, how would you like to screw lids on jars one day after another, as you might have done many decades ago if you worked in company that made and sold jellies and jams? When this happens, negative outcomes result, including decreased job satisfaction and organizational commitment, increased absenteeism, and turnover.

Recently, many organizations have attempted to strike a balance between the need for worker specialization and the need for workers to have jobs that entail variety and autonomy. Many jobs are now designed based on such principles as empowerment,  job enrichment  and  teamwork . For example, HUI Manufacturing, a custom sheet metal fabricator, has done away with traditional “departments” to focus on listening and responding to customer needs. From company-wide meetings to team huddles, HUI employees know and understand their customers and how HUI might service them best (Huimfg, 2008).

Leading involves the social and informal sources of influence that you use to inspire action taken by others. If managers are effective leaders, their subordinates will be enthusiastic about exerting effort to attain organizational objectives.

The behavioral sciences have made many contributions to understanding this function of management. Personality research and studies of job attitudes provide important information as to how managers can most effectively lead subordinates. For example, this research tells us that to become effective at leading, managers must first understand their subordinates’ personalities, values, attitudes, and emotions.

Studies of motivation and motivation theory provide important information about the ways in which workers can be energized to put forth productive effort. Studies of communication provide direction as to how managers can effectively and persuasively communicate. Studies of leadership and leadership style provide information regarding questions, such as, “What makes a manager a good leader?” and “In what situations are certain leadership styles most appropriate and effective?”

Figure \(\PageIndex{2}\):Quality control ensures that the organization delivers on its promises. International Maize and Wheat Improvement Center –  Maize seed quality control at small seed company Bidasem  – CC BY-NC-SA 2.0.

Controlling

Controlling involves ensuring that performance does not deviate from standards. Controlling consists of three steps, which include (1) establishing performance standards, (2) comparing actual performance against standards, and (3) taking corrective action when necessary. Performance standards are often stated in monetary terms such as revenue, costs, or profits but may also be stated in other terms, such as units produced, number of defective products, or levels of quality or customer service.

The measurement of performance can be done in several ways, depending on the performance standards, including financial statements, sales reports, production results, customer satisfaction, and formal performance appraisals. Managers at all levels engage in the managerial function of controlling to some degree.

The managerial function of controlling should not be confused with control in the behavioral or manipulative sense. This function does not imply that managers should attempt to control or to manipulate the personalities, values, attitudes, or emotions of their subordinates. Instead, this function of management concerns the manager’s role in taking necessary actions to ensure that the work-related activities of subordinates are consistent with and contributing toward the accomplishment of organizational and departmental objectives.

Effective controlling requires the existence of plans, since planning provides the necessary performance standards or objectives. Controlling also requires a clear understanding of where responsibility for deviations from standards lies. Two traditional control techniques are budget and performance audits. An audit involves an examination and verification of records and supporting documents. A budget audit provides information about where the organization is with respect to what was planned or budgeted for, whereas a performance audit might try to determine whether the figures reported are a reflection of actual performance. Although controlling is often thought of in terms of financial criteria, managers must also control production and operations processes, procedures for delivery of services, compliance with company policies, and many other activities within the organization.

The management functions of planning, organizing, leading, and controlling are widely considered to be the best means of describing the manager’s job, as well as the best way to classify accumulated knowledge about the study of management. Although there have been tremendous changes in the environment faced by managers and the tools used by managers to perform their roles, managers still perform these essential functions.

Key Takeaway

The principles of management can be distilled down to four critical functions. These functions are planning, organizing, leading, and controlling. This P-O-L-C framework provides useful guidance into what the ideal job of a manager should look like.

• What are the management functions that comprise the P-O-L-C framework?
• Are there any criticisms of this framework?
• What function does planning serve?
• What function does organizing serve?
• What function does leading serve?
• What function does controlling serve?

Huimfg.com,  http://www.huimfg.com/abouthui-yourteams.aspx  (accessed October 15, 2008).

Lamond, D, “A Matter of Style: Reconciling Henri and Henry,”  Management Decision  42, no. 2 (2004): 330–56.

Mintzberg, H.  The Nature of Managerial Work  (New York: Harper & Row, 1973); D. Lamond, “A Matter of Style: Reconciling Henri and Henry,”  Management Decision 42 , no. 2 (2004): 330–56.

Figure \(\PageIndex{1}\): The P-O-L-C Framework

Module 15: Control

Levels and types of control, what you’ll learn to do: describe the different levels and types of control.

In management, there are varying levels of control: strategic (highest level), operational (mid-level), and tactical (low level). Imagine the president of a company decides to build a new company headquarters. He enlists the help of the company’s officers to decide on the location, style of architecture, size, etc. (strategic control). The project manager helps develop the project schedule and budget (operational control). The general contractor directs workers, orders materials and equipment for delivery, and establishes rules to ensure site safety (tactical control).

Control can be objective or normative. Objective control involves elements of the company that can be objectively measured, such as call volume, profitability, and inventory efficiency. Normative control means employees learn the values and beliefs of a company and know what’s right from observing other employees.

Learning Outcomes

• Differentiate between strategic, operational, and tactical controls.
• Differentiate between top-down, objective, and normative control.

Strategic Control

Managers want to know if the company is headed in the right direction and if current company trends and changes are keeping them on that right path. To answer this question requires the implementation of strategic control. Strategic control involves monitoring a strategy as it is being implemented, evaluating deviations, and making necessary adjustments.

Implementing a strategy often involves a series of activities that occur over a period. Managers can effectively monitor the progress of a strategy at various milestones, or intervals, during the period. During this time, managers may be provided information that helps them determine whether the overall strategy is unfolding as planned.

Strategic control also involves monitoring internal and external events. Multiple sources of information are needed to monitor events. These sources include conversations with customers, articles in trade magazines and journals, activity at trade conferences, and observations of your own or another company’s operations. For example, Toyota gives tours of its plants and shares the “Toyota Way” even with competitors.

The errors associated with strategic control are usually major, such as failing to anticipate customers’ reaction to a competitor’s new product. BlackBerry had a strong position in the business cell phone market and did not quickly see that its business customers were switching to the iPhone. BlackBerry could not recover.

Operational Control

Unlike strategic control, operational control focuses more on internal sources of information and affects smaller units or aspects of the organization, such as production levels or the choice of equipment. Errors in operational control might mean failing to complete projects on time. For example, if salespeople are not trained on time, sales revenue may fall.

Tactical Control

A tactic is a method that meets a specific objective of an overall plan. Tactical control emphasizes the current operations of an organization. Managers determine what the various parts of the organization must do for the organization to be successful in the near future (one year or less).

For example, a marketing strategy for a wholesale bakery might be an e-commerce solution for targeted customers, such as restaurants. Tactical control may involve regularly meeting with the marketing team to review results and would involve creating the steps needed to complete agreed-upon processes. Tactics for the bakery strategy may include the following:

• building a list of local restaurants, hotels, and grocery stores
• outlining how the bakery website can be used to receive orders
• personally visiting local executive chefs for follow-up
• monitoring the response to determine whether the sales target is met

Strategic control always comes first, followed by operations, and then tactics. For example, a strategy to be environmentally responsible could lead to an operations decision to seek Leadership in Energy and Environmental Design (LEED) certification. This is a program that awards points toward certification for initiatives in energy efficiency, such as installing timed thermostats, using occupant sensors to control lighting use, and using green cleaning products. The tactical decision is deciding which energy-efficient equipment to purchase. At each level, controls ask if the decisions serve the purpose: actual energy savings, the LEED certification, and acting responsibly for the environment.

Practice Question

Top-down controls.

With top-down control, employees can spend their time performing their job duties instead of discussing the direction of the company and offering input into the development of new policies. Senior executives save time by not explaining why some ideas are used and not others. Heavily regulated businesses may find this approach to be most beneficial.

Disadvantages

The top-down approach has its drawbacks. The lower levels of a company are in touch with customers and recognize new trends or new competition earlier than senior management. A heavy-handed top-down approach may discourage employees from sharing information or ideas up the chain of command.

Objective and Normative Control

Objective control is based on facts that can be measured and tested. Rather than create a rule that may be ambiguous, objective controls measure observable behavior or output. As an example of a behavioral control, let’s say that a store wants employees to be friendly to customers. It could make that a rule as stated, but it may not be clear what that means and is not measurable. To make that goal into an objective control, it might specify, “Smile and greet anyone within 10 feet. Answer customer questions.”

Output control is another form of objective control. Some companies, such as Yahoo, have relaxed rules about work hours and focus on output. Because programmers’ output can be measured, this has worked well, whether an employee works the traditional 9 a.m. to 5 p.m. or starts at noon and works until 8 p.m.

Normative controls govern behavior through accepted patterns of action rather than written policies and procedures. Normative control uses values and beliefs called norms, which are established standards. For example, within a team, informal rules make team members aware of their responsibilities. The ways in which team members interact are developed over time. Team members come to an informal agreement as to how responsibilities will be divided, often based on the perceived strengths of each team member. These unwritten rules are normative controls and can powerfully influence behavior.

Normative control reflects the organization’s culture, the shared values among the members of the organization. Every organization has norms of behavior that workers need to learn. One company may expect employees to take the initiative to solve problems. Another may require a manager’s approval before employees discuss changes outside the department. Some topics may be off-base, while others are freely discussed. Companies will have a mix of controls—top-down, objective, and normative.

Check Your Understanding

Answer the question(s) below to see how well you understand the topics covered in the previous section. This short quiz does  not  count toward your grade in the class, and you can retake it an unlimited number of times.

Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.

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15.3 Organizational Control

Learning objectives.

• Know what is meant by organizational control.
• Recognize that controls have costs.
• Understand the benefits of controls.

Up to this point you have probably become familiar with the planning, organizing, and leading components of the P-O-L-C framework. This section addresses the controlling component, often taking the form of internal systems and process, to complete your understanding of P-O-L-C. As you know, planning comprises all the activities associated with the formulation of your strategy, including the establishment of near- and long-term goals and objectives. Organizing and leading are the choices made about the way people work together and are motivated to achieve individual and group goals and objectives.

What Is Organizational Control?

The fourth facet of P-O-L-C, organizational control , refers to the process by which an organization influences its subunits and members to behave in ways that lead to the attainment of organizational goals and objectives. When properly designed, such controls should lead to better performance because an organization is able to execute its strategy better (Kuratko, et. al., 2001). As shown in the the P-O-L-C framework figure, we typically think of or talk about control in a sequential sense, where controls (systems and processes) are put in place to make sure everything is on track and stays on track. Controls can be as simple as a checklist, such as that used by pilots, flight crews, and some doctors (The Health Care Blog, 2008). Increasingly, however, organizations manage the various levels, types, and forms of control through systems called Balanced Scorecards . We will discuss these in detail later in the chapter.

Organizational control typically involves four steps: (1) establish standards, (2) measure performance, (3) compare performance to standards, and then (4) take corrective action as needed. Corrective action can include changes made to the performance standards—setting them higher or lower or identifying new or additional standards. Sometimes we think of organizational controls only when they seem to be absent, as in the 2008 meltdown of U.S. financial markets, the crisis in the U.S. auto industry, or the much earlier demise of Enron and MCI/Worldcom due to fraud and inadequate controls. However, as shown in the figure, good controls are relevant to a large spectrum of firms beyond Wall Street and big industry.

The Need for Control in Not-for-Profit Organizations

We tend to think about controls only in the for-profit organization context. However, controls are relevant to a broad spectrum of organizations, including governments, schools, and charities. Jack Siegel, author of A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding Trouble While Doing Good , outlines this top 10 list of financial controls that every charity should put in place:

Control 1—Require two signatures for checks written on bank and investment accounts. This prevents unapproved withdrawals and payments.

Control 2—The organization’s bank statements should be reconciled on a monthly basis by someone who does not have signature authority over the accounts. This is a further check against unapproved withdrawals and payments.

Control 3—Since cash is particularly susceptible to theft, organizations should eliminate the use of cash to the extent possible.

Control 4—Organizations should only purchase goods from an approved list of vendors. This provides protection from phony invoices submitted by insiders.

Control 5—Many charities have discovered “ghost employees” on their payrolls. To minimize this risk, organizations should tightly control the payroll list by developing a system of reports between payroll/accounting and the human resources department.

Control 6—Organizations should require all otherwise reimbursable expenses to be preauthorized. Travel and entertainment expenses should be governed by a clearly articulated written policy that is provided to all employees.

Control 7—Physical inventories should be taken on a regular and periodic basis and then be reconciled against the inventories carried on the books. Besides the possible detection of theft, this control also provides a basis for an insurance claim in the case of a fire, flood, or other disaster.

Control 8—Every organization should develop an annual budgeting process. The nonprofit’s employees should prepare the budget, but the board should review and approve it.

Control 9—Organizations should use a competitive bidding process for purchases above a certain threshold. In reviewing bids, organizations should look for evidence of collusion.

Control 10—Organizations that regularly received grants with specific requirements should have someone who is thoroughly versed in grant administration.

Retrieved January 30, 2009, from http://www.charitygovernance.com/charity_governance/2007/10/ten-financial-c.html#more .

The Costs and Benefits of Organizational Controls

Organizational controls provide significant benefits, particularly when they help the firm stay on track with respect to its strategy. External stakeholders, too, such as government, investors, and public interest groups have an interest in seeing certain types or levels of control are in place. However, controls also come at a cost. It is useful to know that there are trade-offs between having and not having organizational controls, and even among the different forms of control. Let’s look at some of the predominant costs and benefits of organizational controls, which are summarized in the following figure.

Controls can cost the organization in several areas, including (1) financial, (2) damage to culture and reputation, (3) decreased responsiveness, and (4) botched implementation. An example of financial cost is the fact that organizations are often required to perform and report the results of a financial audit. These audits are typically undertaken by external accounting firms, which charge a substantial fee for their services; the auditor may be a large firm like Accenture or KPMG, or a smaller local accounting office. Such audits are a way for banks, investors, and other key stakeholders to understand how financially fit the organization is. Thus, if an organization needs to borrow money from banks or has investors, it can only obtain these benefits if it incurs the monetary and staffing costs of the financial audit.

Controls also can have costs in terms of organization culture and reputation. While you can imagine that organizations might want to keep track of employee behavior, or otherwise put forms of strict monitoring in place, these efforts can have undesirable cultural consequences in the form of reduced employee loyalty, greater turnover, or damage to the organization’s external reputation. Management researchers such as the late London Business School professor Sumantra Ghoshal have criticized theory that focuses on the economic aspects of man (i.e., assumes that individuals are always opportunistic). According to Ghoshal, “A theory that assumes that managers cannot be relied upon by shareholders can make managers less reliable (Ghoshal & Moral, 1996).” Such theory, he warned, would become a self-fulfilling prophecy.

Less theoretical are practical examples such as Hewlett-Packard’s (HP) indictment on charges of spying on its own board of directors. In a letter to HP’s board, director Tom Perkins said his accounts were “hacked” and attached a letter from AT&T explaining how the breach occurred. Records of calls made from Perkins’s home phone were obtained simply with his home phone number and the last four digits of his Social Security number. His long-distance account records were obtained when someone called AT&T and pretended to be Perkins, according to the letter from AT&T (IN, 2009).

The third potential cost of having controls is that they can afford less organizational flexibility and responsiveness. Typically, controls are put in place to prevent problems, but controls can also create problems. For instance, the Federal Emergency Management Agency (FEMA) is responsible for helping people and business cope with the consequences of natural disasters, such as hurricanes. After Hurricane Katrina devastated communities along the U.S. Gulf Coast in 2005, FEMA found that it could not provide prompt relief to the hurricane victims because of the many levels of financial controls that it had in place (US Government Printing Office, 2006).

The fourth area of cost, botched implementation, may seem obvious, but it is more common than you might think (or than managers might hope). Sometimes the controls are just poorly understood, so that their launch creates significant unintended, negative consequences. For example, when Hershey Foods put a new computer-based control system in place in 1999, there were so many problems with its installation that it was not able to fulfill a large percentage of its Halloween season chocolate sales that year. It did finally get the controls in working order, but the downtime created huge costs for the company in terms of inefficiencies and lost sales (Greenspun, 2009). Some added controls may also interfere with others. For instance, a new quality control system may improve product performance but also delay product deliveries to customers.

Although organizational controls come at some cost, most controls are valid and valuable management tools. When they are well designed and implemented, they provide at least five possible areas of benefits, including (1) improved cost and productivity control, (2) improved quality control, (3) opportunity recognition, (4) better ability to manage uncertainty and complexity, and (5) better ability to decentralize decision making. Let’s look at each one of these benefits in turn.

Summary of Control Costs and Benefits

• Financial costs—direct (i.e., paying for an accountant for an audit) and indirect (i.e., people such as internal quality control the organization employs whose primary function is related to control).
• Culture and reputation costs—the intangible costs associated with any form of control. Examples include damaged relationships with employees, or tarnished reputation with investors or government.
• Responsiveness costs—downtime between a decision and the actions required to implement it due to compliance with controls.
• Poorly implemented controls—implementation is botched or the implementation of a new control conflicts with other controls.

Key Benefits

• Cost and productivity control—ensures that the firm functions effectively and efficiently.
• Quality control—contributes to cost control (i.e., fewer defects, less waste), customer satisfaction (i.e., fewer returns), and greater sales (i.e., repeat customers and new customers).
• Opportunity recognition—helps managers identify and isolate the source of positive surprises, such as a new growth market. Though opportunities can also be found in internal comparisons of cost control and productivity across units.
• Manage uncertainty and complexity—keeps the organization focused on its strategy, and helps managers anticipate and detect negative surprises and respond opportunistically to positive surprises.
• Decentralized decision making—allows the organization to be more responsive by moving decision making to those closest to customers and areas of uncertainty.

First, good controls help the organization to be efficient and effective by helping managers to control costs and productivity levels. Cost can be controlled using budgets, where managers compare actual expenses to forecasted ones. Similarly, productivity can be controlled by comparing how much each person can produce, in terms of service or products. For instance, you can imagine that the productivity of a fast-food restaurant like McDonald’s depends on the speed of its order takers and meal preparers. McDonald’s can look across all its restaurants to identify the target speed for taking an order or wrapping a burger, then measure each store’s performance on these dimensions.

Quality control is a second benefit of controls. Increasingly, quality can be quantified in terms of response time (i.e., How long did it take you to get that burger?) or accuracy (Did the burger weigh one-quarter pound?). Similarly, Toyota tracks the quality of its cars according to hundreds of quantified dimensions, including the number of defects per car. Some measures of quality are qualitative, however. For instance, Toyota also tries to gauge how “delighted” each customer is with its vehicles and dealer service. You also may be familiar with quality control through the Malcolm Baldrige National Quality Program Award. The Baldrige award is given by the president of the United States to businesses—manufacturing and service, small and large—and to education, health care, and nonprofit organizations that apply and are judged to be outstanding in seven areas: leadership; strategic planning; customer and market focus; measurement, analysis, and knowledge management; human resource focus; process management; and results (National Institute of Standards and Technology, 2009). Controlling—how well the organization measures and analyzes its processes—is a key criterion for winning the award. The Baldrige award is given to organizations in a wide range of categories and industries, from education to ethics to manufacturing.

The third area by which organizations can benefit from controls is opportunity recognition. Opportunities can come from outside of the organization and typically are the result of a surprise. For instance, when Nestlé purchased the Carnation Company for its ice cream business, it had also planned to sell off Carnation’s pet food line of products. However, through its financial controls, Nestlé found that the pet food business was even more profitable than the ice cream, and kept both. Opportunities can come from inside the organization too, as would be the case if McDonald’s finds that one of its restaurants is exceptionally good at managing costs or productivity. It can then take this learned ability and transfer it to other restaurants through training and other means.

Controls also help organizations manage uncertainty and complexity. This is a fourth area of benefit from well-designed and implemented controls. Perhaps the most easily understood example of this type of benefit is how financial controls help an organization navigate economic downturns. Without budgets and productivity controls in place, the organization might not know it has lost sales or expenses are out of control until it is too late.

Control Criteria for the Baldrige National Quality Award

Measurement, Analysis, and Improvement of Organizational Performance: How Do You Measure, Analyze, and then Improve Organizational Performance? (45 points)

Describe how your organization measures, analyzes, aligns, reviews, and improves its performance using data and information at all levels and in all parts of your organization. Describe how you systematically use the results of reviews to evaluate and improve processes.

Within your response, include answers to the following questions:

Performance Measurement

• How do you select, collect, align, and integrate data and information for tracking daily operations and for tracking overall organizational performance, including progress relative to strategic objectives and action plans? What are your key organizational performance measures, including key short-term and longer-term financial measures? How do you use these data and information to support organizational decision making and innovation?
• How do you select and ensure the effective use of key comparative data and information to support operational and strategic decision making and innovation?
• How do you keep your performance measurement system current with business needs and directions? How do you ensure that your performance measurement system is sensitive to rapid or unexpected organizational or external changes?

Performance Analysis, Review, and Improvement

• How do you review organizational performance and capabilities? What analyses do you perform to support these reviews and to ensure that the conclusions are valid? How do you use these reviews to assess organizational success, competitive performance, and progress relative to strategic objectives and action plans? How do you use these reviews to assess your organization’s ability to respond rapidly to changing organizational needs and challenges in your operating environment?
• How do you translate organizational performance review findings into priorities for continuous and breakthrough improvement and into opportunities for innovation? How are these priorities and opportunities deployed to work group and functional-level operations throughout your organization to enable effective support for their decision making? When appropriate, how are the priorities and opportunities deployed to your suppliers, partners, and collaborators to ensure organizational alignment?
• How do you incorporate the results of organizational performance reviews into the systematic evaluation and improvement of key processes?

Retrieved January 30, 2009, from http://www.quality.nist.gov .

The fifth area of benefit in organizational control is related to decentralized decision making. Organization researchers have long argued that performance is best when those people and areas of the organization that are closest to customers and pockets of uncertainty also have the ability (i.e., the information and authority) to respond to them (Galbraith, 1974). Going back to our McDonald’s example, you can imagine that it would be hard to give a store manager information about her store’s performance and possible choices if information about performance were only compiled at the city, region, or corporate level. With store-level performance tracking (or, even better, tracking of performance by the hour within a store), McDonald’s gives store managers the information they need to respond to changes in local demand. Similarly, it equips McDonald’s to give those managers the authority to make local decisions, track that decision-making performance, and feed it back into the control and reward systems.

Key Takeaway

This chapter introduced the basics of controls, the process by which an organization influences its subunits and members to behave in ways that lead to attaining organizational goals and objectives. When properly designed, controls lead to better performance by enabling the organization to execute its strategy better. Managers must weigh the costs and benefits of control, but some minimum level of control is essential for organizational survival and success.

• What do properly conceived and implemented controls allow an organization to do?
• What are three common steps in organizational control?
• What are some of the costs of organizational controls?
• What are some of the benefits of organizational controls?
• How do managers determine when benefits outweigh costs?

Galbraith, J. R. (1974). Organization design: An information processing view. Interfaces, 4 , 28–36. Galbraith believes that “the greater the uncertainty of the task, the greater the amount of information that must be processed between decision makers during the execution of the task to get a given level of performance.” Firms can reduce uncertainty through better planning and coordination, often by rules, hierarchy, or goals. Galbraith states that “the critical limiting factor of an organizational form is the ability to handle the non-routine events that cannot be anticipated or planned for.”

Ghoshal S., & Moran, P. (1996). Bad for practice: A critique of the transaction cost theory. Academy of Management Review. 21 (1), 13–47.

Greenspun, retrieved January 30, 2009, from Hershey profits for 4Q 1999 down 11% due to SAP implementation problem. http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=002SUM .

IN, retrieved January 30, 2009, from http://i.n.com.com/pdf/ne/2006/perkins_letter.pdf HP Chairman Patricia Dunn defended this rather extreme form of control as legal, but the amount of damage to the firm’s reputation from these charges led the firm to discontinue the practice. It also prompted the resignation of several directors and corporate officers. Retrieved January 30, 2009, from http://news.zdnet.com/2100-9595_22-149452.html .

Kuratko, D. F., Ireland, R. D., & Hornsby. J. S. (2001). Improving firm performance through entrepreneurial actions: Acordia’s corporate entrepreneurship strategy. Academy of Management Executive, 15 (4), 60–71.

National Institute of Standards and Technology, retrieved January 30, 2009, from http://www.nist.gov/public_affairs/factsheet/baldfaqs.htm .

The Health Care Blog, Retrieved December 9, 2008, from http://www.thehealthcareblog.com/the_health_care_blog/2007/12/pilots-use-chec.html .

U.S. Government Printing Office. (2006, February 15). Executive summary. Select Bipartisan Committee to Investigate the Preparation for and Response to Hurricane Katrina.

Principles of Management Copyright © 2015 by University of Minnesota is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License , except where otherwise noted.

Organizational Control

Up to this point you should have become familiar with the planning, organizing, and leading components of the P-O-L-C framework. This section addresses the controlling component, often taking the form of internal systems and process, to complete your understanding of P-O-L-C. As you know, planning comprises all the activities associated with the formulation of your strategy, including the establishment of near- and long-term goals and objectives. Organizing and leading are the choices made about the way people work together and are motivated to achieve individual and group goals and objectives.

What Is Organizational Control?

The fourth facet of P-O-L-C, organizational control, refers to the process by which an organization influences its subunits and members to behave in ways that lead to the attainment of organizational goals and objectives. When properly designed, such controls should lead to better performance because an organization is able to execute its strategy better. [1] As shown in the P-O-L-C framework figure (Unit 1), we typically think of or talk about control in a sequential sense, where controls (systems and processes) are put in place to make sure everything is on track and stays on track. Controls can be as simple as a checklist, such as that used by pilots, flight crews, and some doctors. Increasingly, however, organizations manage the various levels, types, and forms of control through systems called Balanced Scorecards. We will discuss these in detail later in the unit.

Example 4.10 Balanced Scorecard

Earn credit, add your own example !

Organizational control typically involves four steps: (1) establish standards, (2) measure performance, (3) compare performance to standards, and then (4) take corrective action as needed. Corrective action can include changes made to the performance standards—setting them higher or lower or identifying new or additional standards. Sometimes we think of organizational controls only when they seem to be absent, as in the 2008 meltdown of U.S. financial markets, the crisis in the U.S. auto industry, or the much earlier demise of Enron and MCI/WorldCom due to fraud and inadequate controls. However, as shown in the P-O-L-C Framework in Unit 1 , good controls are relevant to a large spectrum of firms beyond Wall Street and big industry.

The Costs and Benefits of Organizational Controls

Organizational controls provide significant benefits, particularly when they help the firm stay on track with respect to its strategy. External stakeholders, too, such as government, investors, and public interest groups have an interest in seeing certain types or levels of control are in place. However, controls also come at a cost. It is useful to know that there are trade-offs between having and not having organizational controls, and even among the different forms of control. Let’s look at some of the predominant costs and benefits of organizational controls, which are summarized in the following figure.

Example 4.11 Costs of Organizational Controls

Controls can cost the organization in several areas, including (1) financial, (2) damage to culture and reputation, (3) decreased responsiveness, and (4) botched implementation. An example of financial cost is the fact that organizations are often required to perform and report the results of a financial audit. These audits are typically undertaken by external accounting firms, which charge a substantial fee for their services; the auditor may be a large firm like Accenture or KPMG, or a smaller local accounting office. Such audits are a way for banks, investors, and other key stakeholders to understand how financially fit the organization is. Thus, if an organization needs to borrow money from banks or has investors, it can only obtain these benefits if it incurs the monetary and staffing costs of the financial audit.

Example 4.12 Organizational Control Gone Wrong

Less theoretical are practical examples such as Hewlett-Packard’s (HP) indictment on charges of spying on its own board of directors. In a letter to HP’s board, director Tom Perkins said his accounts were “hacked” and attached a letter from AT&T explaining how the breach occurred. Records of calls made from Perkins’s home phone were obtained simply with his home phone number and the last four digits of his Social Security number. His long-distance account records were obtained when someone called AT&T and pretended to be Perkins, according to the letter from AT&T. HP Chairman Patricia Dunn defended this rather extreme form of control as legal, but the amount of damage to the firm’s reputation from these charges led the firm to discontinue the practice. It also prompted the resignation of several directors and corporate officers.

Controls also can have costs in terms of organization culture and reputation. While you can imagine that organizations might want to keep track of employee behavior, or otherwise put forms of strict monitoring in place, these efforts can have undesirable cultural consequences in the form of reduced employee loyalty, greater turnover, or damage to the organization’s external reputation. Management researchers such as the late London Business School professor Sumantra Ghoshal have criticized theories that focus on the economic aspects of man (i.e., assumes that individuals are always opportunistic). According to Ghoshal, “A theory that assumes that managers cannot be relied upon by shareholders can make managers less reliable.” [2] Such theory, he warned, would become a self-fulfilling prophecy.

The third potential cost of having controls is that they can afford less organizational flexibility and responsiveness. Typically, controls are put in place to prevent problems, but controls can also create problems. For instance, the Federal Emergency Management Agency (FEMA) is responsible for helping people and business cope with the consequences of natural disasters, such as hurricanes. After Hurricane Katrina devastated communities along the U.S. Gulf Coast in 2005, FEMA found that it could not provide prompt relief to the hurricane victims because of the many levels of financial controls that it had in place. [3]

The fourth area of cost, botched implementation, may seem obvious, but it is more common than you might think (or than managers might hope). Sometimes the controls are just poorly understood, so that their launch creates significant unintended, negative consequences. For example, when Hershey Foods put a new computer-based control system in place in 1999, there were so many problems with its installation that it was not able to fulfill a large percentage of its Halloween season chocolate sales that year. It did finally get the controls in working order, but the downtime created huge costs for the company in terms of inefficiencies and lost sales. [4] Some added controls may also interfere with others. For instance, a new quality control system may improve product performance but also delay product deliveries to customers.

Although organizational controls come at some cost, most controls are valid and valuable management tools. When they are well designed and implemented, they provide at least five possible areas of benefits, including (1) improved cost and productivity control, (2) improved quality control, (3) opportunity recognition, (4) better ability to manage uncertainty and complexity, and (5) better ability to decentralize decision making. Let’s look at each one of these benefits in turn.

First, good controls help the organization to be efficient and effective by helping managers to control costs and productivity levels. Cost can be controlled using budgets, where managers compare actual expenses to forecasted ones. Similarly, productivity can be controlled by comparing how much each person can produce, in terms of service or products. For instance, you can imagine that the productivity of a fast-food restaurant like McDonald’s depends on the speed of its order takers and meal preparers. McDonald’s can look across all its restaurants to identify the target speed for taking an order or wrapping a burger, then measure each store’s performance on these dimensions.

Quality control is a second benefit of controls. Increasingly, quality can be quantified in terms of response time (i.e., How long did it take you to get that burger?) or accuracy (Did the burger weigh one-quarter pound?). Similarly, Toyota tracks the quality of its cars according to hundreds of quantified dimensions, including the number of defects per car. Some measures of quality are qualitative, however. For instance, Toyota also tries to gauge how “delighted” each customer is with its vehicles and dealer service. You also may be familiar with quality control through the Malcolm Baldrige National Quality Program Award. The Baldrige award is given by the president of the United States to businesses—manufacturing and service, small and large—and to education, healthcare, and nonprofit organizations that apply and are judged to be outstanding in seven areas: leadership; strategic planning; customer and market focus; measurement, analysis, and knowledge management; human resource focus; process management; and results. Controlling—how well the organization measures and analyzes its processes—is a key criterion for winning the award. The Baldrige award is given to organizations in a wide range of categories and industries, from education to ethics to manufacturing.

The third area by which organizations can benefit from controls is opportunity recognition. Opportunities can come from outside of the organization and typically are the result of a surprise. For instance, when Nestlé purchased the Carnation Company for its ice cream business, it had also planned to sell off Carnation’s pet food line of products. However, through its financial controls, Nestlé found that the pet food business was even more profitable than the ice cream, and kept both. Opportunities can come from inside the organization too, as would be the case if McDonald’s finds that one of its restaurants is exceptionally good at managing costs or productivity. It can then take this learned ability and transfer it to other restaurants through training and other means.

Example 4.13 Effective Organizational Controls

Controls also help organizations manage uncertainty and complexity. This is a fourth area of benefit from well-designed and implemented controls. Perhaps the most easily understood example of this type of benefit is how financial controls help an organization navigate economic downturns. Without budgets and productivity controls in place, the organization might not know it has lost sales, or if expenses are out of control until it is too late.

The fifth area of benefit in organizational control is related to decentralized decision making. Organization researchers have long argued that performance is best when those people and areas of the organization that are closest to customers and pockets of uncertainty also have the ability (i.e., the information and authority) to respond to them. [5] Going back to our McDonald’s example, you can imagine that it would be hard to give a store manager information about her store’s performance and possible choices if information about performance were only compiled at the city, region, or corporate level. With store-level performance tracking (or, even better, tracking of performance by the hour within a store), McDonald’s gives store managers the information they need to respond to changes in local demand. Similarly, it equips McDonald’s to give those managers the authority to make local decisions, track that decision-making performance, and feed it back into the control and reward systems.

• Kuratko, D. F., Ireland, R. D., & Hornsby. J. S. (2001). Improving firm performance through entrepreneurial actions: Acordia’s corporate entrepreneurship strategy. Academy of Management Executive, 15(4), 60–71. ↵
• Ghoshal S., & Moran, P. (1996). Bad for practice: A critique of the transaction cost theory. Academy of Management Review. 21(1), 13–47. ↵
• U.S. Government Printing Office. (2006, February 15). Executive summary. Select Bipartisan Committee to Investigate the Preparation for and Response to Hurricane Katrina. ↵
• Retrieved January 30, 2009, from Hershey profits for 4Q 1999 down 11% due to SAP implementation problem. http://www.greenspun.com/bboard/q-and-a-fetch-msg.tcl?msg_id=002SUM ↵
• Galbraith, J. R. (1974). Organization design: An information processing view. Interfaces, 4, 28–36. Galbraith believes that “the greater the uncertainty of the task, the greater the amount of information that must be processed between decision makers during the execution of the task to get a given level of performance.” Firms can reduce uncertainty through better planning and coordination, often by rules, hierarchy, or goals. Galbraith states that “the critical limiting factor of an organizational form is the ability to handle the non-routine events that cannot be anticipated or planned for.” ↵

Strategic Management Copyright © 2020 by John Morris is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License , except where otherwise noted.

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• Encyclopedia of Management
• Management Control

MANAGEMENT CONTROL

Management control describes the means by which the actions of individuals or groups within an organization are constrained to perform certain actions while avoiding other actions in an effort to achieve organizational goals. Management control falls into two broad categories—regulative and normative controls—but within these categories are several types.

The following section addresses regulative controls including bureaucratic controls, financial controls, and quality controls. The second section addresses normative controls including team norms and organization cultural norms.

REGULATIVE CONTROLS

Regulative controls stem from standing policies and standard operating procedures, leading some to criticize regulative controls as outdated and counter-productive. As organizations have become more flexible in recent years by flattening organizational hierarchies, expanding organizational boundaries to include suppliers in inventory management and customers in new product development, forging cooperative alliances with competitors, and developing virtual organizations in which employees are geographically dispersed and may meet only a few time each year, critics point out that regulative controls may prevent rather promote goal attainment.

There is some truth to this. Customer service representatives at Holiday Inn are limited in the extent to which they can correct mistakes involving guests. They can move guests to a different room if there is excessive noise in the room next to the guest's room. In some instances, guests may get a gift certificate for an additional night at another Holiday Inn if they have had a particularly bad experience. In contrast, customer service representatives at Tokyo's Marriott Inn have the latitude to take up to $500 off a customer's bill to solve complaints.

The actions of customer service representatives at both Holiday Inn and Marriott Inn must follow policies and procedures, yet those at Marriott are likely to feel less constrained and more empowered by Marriott's policies and procedures compared to Holiday Inn customer service representatives. The key in terms of management control is matching regulative controls such as policies and procedures with organizational goals such as customer satisfaction. Each of the three types of regulative controls discussed in the next few paragraphs has the potential to align or misalign organizational goals with regulative controls. The challenge for managers is striking the right balance between too much control and too little.

BUREAUCRATIC CONTROLS

Bureaucratic controls stem from lines of authority and this authority comes with one's position in the organizational hierarchy. The higher up the chain of command, the more an individual will have authority to dictate policies and procedures. Bureaucratic controls have gotten a bad name and often rightfully so. Organizations placing too much reliance on chain of command authority relationships inhibit flexibility to deal with unexpected events. However, there are ways managers can build flexibility into policies and procedures that make bureaucracies as flexible and able to quickly respond to customer problems as any other form of organizational control.

of Directors is at the top, followed by the CEO and then the Medical Director. Below these top executives are vice presidents with responsibility for overseeing various hospital functions such as human resources, medical records, surgery, and intensive care units. The chain of command in hospitals is clear; a nurse, for example, would not dare increase the dosage of a heart medication to a patient in an intensive care unit without a physician's order. Clearly, this has the potential to slow reaction times—physicians sometimes spread their time across hospital rounds for two or three hospitals and also their individual office practice. Yet, it is the nurses and other direct care providers who have the most contact with patients and are in the best position to rapidly respond to changes in a patient's condition.

The question bureaucratic controls must address is: How can the chain of command be preserved while also building flexibility and quick response times into the system? One way is through standard operating procedures that delegate responsibility downward. Some hospital respiratory therapy departments, for example, have developed standard operating procedures (in health care terms, therapist-driven protocols or TDPs) with input from physicians.

TDPs usually have branching logic structures requiring therapists to perform specific tests prior to certain patient interventions to build safety into the protocol. Once physicians approve a set of TDPs, therapists have the autonomy to make decisions concerning patient care without further physicians' orders as long as these decisions stay within the boundaries of the TDP. Patients need not wait for a physician to make the next set of rounds or patient visits, write a new set of orders, enter the orders on the hospitals intranet, and wait for the manager of respiratory therapy to schedule a therapist to perform the intervention. Instead, therapists can respond immediately because protocols are established that build in flexibility and fast response along with safety checks to limit mistakes.

Bureaucratic control is thus not synonymous with rigidity. Unfortunately, organizations have built rigidity into many bureaucratic systems, but this need not be the case. It is entirely possible for creative managers to develop flexible, quick-response bureaucracies.

FINANCIAL CONTROLS

Financial controls include key financial targets for which managers are held accountable. These types of controls are common among firms that are organized as multiple strategic business units (SBUs). SBUs are product, service, or geographic lines having managers who are responsible for the SBU's profits and losses. These managers are held responsible to upper management to achieve financial targets that contribute to the overall profitability of the corporation.

Managers who are not SBU executives often have financial responsibility as well. Individual department heads are typically responsible for keeping expenses within budgeted guidelines. These managers, however, tend to have less overall responsibility for financial profitability targets than SBU managers.

In either case, financial controls place constraints on spending. For SBU managers, increased spending must be justified by increased revenues. For departmental managers, staying within budget is typically one key measure of periodic performance reviews. The role of financial controls, then, is to increase overall profitability as well as to keep costs in line. To determine which costs are reasonable, some firms will benchmark other firms in the same industry. Such benchmarking, while not always an "apples-to-apples" comparison, provides at least some evidence to determine whether costs are in line with industry averages.

QUALITY CONTROLS

Quality controls describe the extent of variation in processes or products that is considered acceptable. For some companies, zero defects—no variation at all—is the standard. In other companies, statistically insignificant variation is allowable.

may pose a problem when customers have nonstandard situations for which a one-size-fits-all solution is inappropriate. Wealth managers, for example, may create investment portfolios tailored to a single client, but the process used to implement that portfolio such as stock market transactions will be standardized. Thus, there is room within quality control for both creativity; e.g., wealth portfolio solutions, and standardization; e.g., stock market transactions.

NORMATIVE CONTROLS

Rather than relying on written policies and procedures as in regulative controls, normative controls govern employee and managerial behavior through generally accepted patterns of action. One way to think of normative controls is in terms how certain behaviors are appropriate and others are less appropriate. For instance, a tuxedo might be the appropriate attire for an American business awards ceremony, but totally out of place at a Scottish awards ceremony, where a formal kilt may be more in line with local customs. However, there would generally be no written policy regarding disciplinary action for failure to wear the appropriate attire, thus separating formal regulative controls for the more informal normative controls.

Teams have become commonplace in many organizations. Team norms are the informal rules that make team members aware of their responsibilities to the team. Although the task of the team may be formally documented and communicated, the ways in which team members interact are typically developed over time as the team goes through phases of growth. Even team leadership be informally agreed upon; at times, an appointed leader may have less influence than an informal leader. If, for example, an informal leader has greater expertise than a formal team leader, team members may look to the informal leader for guidance requiring specific skills or knowledge. Team norms tend to develop gradually, but once formed, can be powerful influences over behavior.

ORGANIZATIONAL CULTURE NORMS

In addition to team norms, norms based on organizational culture are another type of normative control. Organizational culture involves the shared values, beliefs, and rituals of a particular organization. The Internet search firm, Google, Inc. has a culture in which innovation is valued, beliefs are shared among employees that the work of the organization is important, and teamwork and collaboration are common. In contrast, the retirement specialty firm, VALIC, focuses on individual production for its sales agents, de-emphasizing teamwork and collaboration in favor of personal effort and rewards. Both of these example are equally effective in matching norms with organizational goals; the key is thus in properly aligning norms and goals.

The broad categories of regulative and normative controls are present in nearly all organizations, but the relative emphasis of each type of control varies. Within the regulative category are bureaucratic, financial, and quality controls. Within the normative category are team norms and organization cultural norms. Both categories of norms can be effective and one is not inherently superior to the other. The managerial challenge is to encourage norms that align employee behavior with organizational goals.

SEE ALSO: Organizational Culture ; Quality and Total Quality Management ; Teams and Teamwork

Scott B. Droege

FURTHER READING:

Barry, L.L. "The Collaborative Organization: Leadership Lessons from Mayo Clinic." Organizational Dynamics 33, no. 3 (2004): 228–242.

Lalich, J. "Watch Your Culture." Harvard Business Review 82, no. 1 (2004): 34–39.

Rollag, K., S. Parise, and R. Cross. "Getting New Hires Up to Speed Quickly". MIT Sloan Management Review 46, no. 2 (2005): 35–41.

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5 Critical Steps in the Change Management Process

• 19 Mar 2020

Businesses must constantly evolve and adapt to meet a variety of challenges—from changes in technology, to the rise of new competitors, to a shift in laws, regulations, or underlying economic trends. Failure to do so could lead to stagnation or, worse, failure.

Approximately 50 percent of all organizational change initiatives are unsuccessful, highlighting why knowing how to plan for, coordinate, and carry out change is a valuable skill for managers and business leaders alike.

Have you been tasked with managing a significant change initiative for your organization? Would you like to demonstrate that you’re capable of spearheading such an initiative the next time one arises? Here’s an overview of what change management is, the key steps in the process, and actions you can take to develop your managerial skills and become more effective in your role.

Access your free e-book today.

What is Change Management?

Organizational change refers broadly to the actions a business takes to change or adjust a significant component of its organization. This may include company culture, internal processes, underlying technology or infrastructure, corporate hierarchy, or another critical aspect.

Organizational change can be either adaptive or transformational:

• Adaptive changes are small, gradual, iterative changes that an organization undertakes to evolve its products, processes, workflows, and strategies over time. Hiring a new team member to address increased demand or implementing a new work-from-home policy to attract more qualified job applicants are both examples of adaptive changes.
• Transformational changes are larger in scale and scope and often signify a dramatic and, occasionally sudden, departure from the status quo. Launching a new product or business division, or deciding to expand internationally, are examples of transformational change.

Change management is the process of guiding organizational change to fruition, from the earliest stages of conception and preparation, through implementation and, finally, to resolution.

As a leader, it’s essential to understand the change management process to ensure your entire organization can navigate transitions smoothly. Doing so can determine the potential impact of any organizational changes and prepare your teams accordingly. When your team is prepared, you can ensure everyone is on the same page, create a safe environment, and engage the entire team toward a common goal.

Change processes have a set of starting conditions (point A) and a functional endpoint (point B). The process in between is dynamic and unfolds in stages. Here’s a summary of the key steps in the change management process.

Check out our video on the change management process below, and subscribe to our YouTube channel for more explainer content!

5 Steps in the Change Management Process

1. prepare the organization for change.

For an organization to successfully pursue and implement change, it must be prepared both logistically and culturally. Before delving into logistics, cultural preparation must first take place to achieve the best business outcome.

In the preparation phase, the manager is focused on helping employees recognize and understand the need for change. They raise awareness of the various challenges or problems facing the organization that are acting as forces of change and generating dissatisfaction with the status quo. Gaining this initial buy-in from employees who will help implement the change can remove friction and resistance later on.

2. Craft a Vision and Plan for Change

Once the organization is ready to embrace change, managers must develop a thorough, realistic, and strategic plan for bringing it about.

The plan should detail:

• Strategic goals: What goals does this change help the organization work toward?
• Key performance indicators: How will success be measured? What metrics need to be moved? What’s the baseline for how things currently stand?
• Project stakeholders and team: Who will oversee the task of implementing change? Who needs to sign off at each critical stage? Who will be responsible for implementation?
• Project scope: What discrete steps and actions will the project include? What falls outside of the project scope?

While it’s important to have a structured approach, the plan should also account for any unknowns or roadblocks that could arise during the implementation process and would require agility and flexibility to overcome.

3. Implement the Changes

After the plan has been created, all that remains is to follow the steps outlined within it to implement the required change. Whether that involves changes to the company’s structure, strategy, systems, processes, employee behaviors, or other aspects will depend on the specifics of the initiative.

During the implementation process, change managers must be focused on empowering their employees to take the necessary steps to achieve the goals of the initiative and celebrate any short-term wins. They should also do their best to anticipate roadblocks and prevent, remove, or mitigate them once identified. Repeated communication of the organization’s vision is critical throughout the implementation process to remind team members why change is being pursued.

4. Embed Changes Within Company Culture and Practices

Once the change initiative has been completed, change managers must prevent a reversion to the prior state or status quo. This is particularly important for organizational change related to business processes such as workflows, culture, and strategy formulation. Without an adequate plan, employees may backslide into the “old way” of doing things, particularly during the transitory period.

By embedding changes within the company’s culture and practices, it becomes more difficult for backsliding to occur. New organizational structures, controls, and reward systems should all be considered as tools to help change stick.

5. Review Progress and Analyze Results

Just because a change initiative is complete doesn’t mean it was successful. Conducting analysis and review, or a “project post mortem,” can help business leaders understand whether a change initiative was a success, failure, or mixed result. It can also offer valuable insights and lessons that can be leveraged in future change efforts.

Ask yourself questions like: Were project goals met? If yes, can this success be replicated elsewhere? If not, what went wrong?

The Key to Successful Change for Managers

While no two change initiatives are the same, they typically follow a similar process. To effectively manage change, managers and business leaders must thoroughly understand the steps involved.

Some other tips for managing organizational change include asking yourself questions like:

• Do you understand the forces making change necessary? Without this understanding, it can be difficult to effectively address the underlying causes that have necessitated change, hampering your ability to succeed.
• Do you have a plan? Without a detailed plan and defined strategy, it can be difficult to usher a change initiative through to completion.
• How will you communicate? Successful change management requires effective communication with both your team members and key stakeholders. Designing a communication strategy that acknowledges this reality is critical.
• Have you identified potential roadblocks? While it’s impossible to predict everything that might potentially go wrong with a project, taking the time to anticipate potential barriers and devise mitigation strategies before you get started is generally a good idea.

How to Lead Change Management Successfully

If you’ve been asked to lead a change initiative within your organization, or you’d like to position yourself to oversee such projects in the future, it’s critical to begin laying the groundwork for success by developing the skills that can equip you to do the job.

Completing an online management course can be an effective way of developing those skills and lead to several other benefits . When evaluating your options for training, seek a program that aligns with your personal and professional goals; for example, one that emphasizes organizational change.

Do you want to become a more effective leader and manager? Explore Leadership Principles , Management Essentials , and Organizational Leadership —three of our online leadership and management courses —to learn how you can take charge of your professional development and accelerate your career. Not sure which course is the right fit? Download our free flowchart .

This post was updated on August 8, 2023. It was originally published on March 19, 2020.

About the Author

Control plan (Six Sigma) — definition and example

Project managers and business executives are always looking to optimize organizational processes. If you’re in a leadership role, you probably already know about Six Sigma, a continuous improvement framework that’s part of the Lean methodology. You may even be familiar with the five stages of Six Sigma — Define, Measure, Analyze, Improve, and Control (DMAIC).

A control plan is a crucial element of that last stage and is designed to standardize processes established in the four previous stages. Understanding control plans can help you make lasting process changes that improve your organization.

In this article, you’ll learn what a control plan is, including an example, so you can continue your educational journey into Six Sigma. This post will cover:

• What a control plan is

Control plan example

• How to get started with Six Sigma

What is a control plan?

A control plan is a document that provides guidance on how to monitor a process. Control plans are part of the fifth and final phase of the Six Sigma process improvement framework. They help businesses standardize newly adopted processes to increase their uptake and longevity.

Control plans should contain:

• An outline of what the process should look like
• Key variables or metrics to measure the process
• Information on how frequently to measure these variables
• What to do if the results stray from the desired outcomes

The goal of the control plan is to provide guidance so that a process can be successfully replicated over time by different individuals. Originally created for manufacturing, Six Sigma and the Lean methodology are now used in a range of industries including healthcare, education, and the service sector.

There are a variety of control plan formats, but some of the basic information would typically include the industry that the plan is for, the company’s goal, and how the sections of the plan help the company track its progress.

For example, a control plan for a manufacturing product might contain:

• The name of the product
• Its key characteristics, such as size, color, and material
• How to measure those characteristics, including the tool needed
• The acceptable range — also called the tolerance range — for each characteristic
• The testing frequency, possibly as a time period or amount
• How to visualize and evaluate the measurements, perhaps in a chart
• A specific person who will oversee quality control
• Contingencies for particular or unexpected situations

While this example is for a manufacturing product, the same structure and approach could be applied to any business process. Remember, maintaining hard-won gains is as important as making them in the first place. Project teams need to put guidelines in place to ensure processes stay efficient, for instance by creating monitoring and response plans. Process owners should then make sure process changes are maintained and kept current with best practices.

Get started with Six Sigma

Control is one of the critical steps in the Six Sigma framework because it ensures that the processes you’ve refined will be maintained into the future. Without a control plan, processes could revert back to the way they were before, resulting in a loss of essential progress.

If Six Sigma and Lean management sound like they might be right for your business, and you’re interested in learning more, check out one of the additional resources below:

• Learn about Six Sigma to Improve Workplace Processes
• Lean Project Management
• A Guide to Lean Management

Adobe can help

Adobe Workfront is enterprise work management software that can help you adopt or expand Lean Six Sigma, optimizing your workflow and bringing organization to your teams.

Take a product tour or watch the overview video to learn more about Workfront.

https://business.adobe.com/blog/basics/what-is-six-sigma

https://business.adobe.com/blog/basics/lean

https://business.adobe.com/blog/basics/lean-management

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Business • Management • Technology

Home » Strategic Management » What is Management Control?

What is Management Control?

Management control is the process of evaluating, monitoring and controlling the various sub-units of the organization so that there is effective and efficient allocation and utilization of resources in achieving the predetermine goals. Thus, the focus of management control is on the managers of organizational sub-units and hence its focus is on line managers responsible for the performance of their departments.

In 1916, Henri Fayol formulated one of the first definitions of control as it pertains to management: “Control consists of verifying whether everything occurs in conformity with the  plan  adopted, the instructions issued, and principles established. It[‘s] object [is] to point out weaknesses and errors in order to rectify [them] and prevent recurrence. “

Control can also be defined as “that function of the system that adjusts operations as needed to achieve the plan, or to maintain variations from system objectives within allowable limits. “ (adsbygoogle = window.adsbygoogle || []).push({});

Management control therefore, is the control exercised by the management over the managers. Who controls the managers and what is the process involved in controlling them? Management control is exercised by evaluating the performance of cache responsibility center, against planned performance. Planned performance is decided in consultation with the managers of responsibility centers, taking into consideration the activities being managed by them and the resources available them in terms of men, materials money etc. Planned performance is usually translated into monetary terms, although physical achievements are also planned for. Manager are not only responsible for the achievement of physical tarsus, but also for the corresponding monetary values. Thus, management control is generally built around a financial structure. Actual and planned performance are compared regular intervals so as to identify resource gaps and, if need be, provide managers with more resources or transfer resources from on organizational un ­to another. The end-of-the-year review may be too late to take corrective action

The whole purpose of management control is to decide on connective action if there are substantial deviations from the planned performances. The management control system also provides mechanisms for proper coordination and integration of various organizational sub-units by interrelating the tasks being performed and deciding on the resource allocation. In the process of management control conflicts are inherent between managers for resource mobilization, allocation arid snatching. Thus, there is intense interaction among managers.

• Management Control Process
• Types of Management Control
• Principles of Management Control
• Objectives of Management Control Systems
• Importance of Management Control in an Organization
• Differences between Management Control and Operational Control
• Difference Between Strategic Planning and Management Control
• Organization Structure and Management Control

External Links:

• The Control Function of Management  (MIT Sloan)

Related Posts:

• Strategic Planning Process - Five Stages of Strategic Planning Process
• Strategic Management Process - Stages of the Strategic Management Process
• Multidivisional Organizational Structure
• Relationship between Strategic Management and Leadership
• Strategy Implementation
• Strategic Control and Operational Control
• Greiner's Model of Organizational Growth - Phases of Organizational Growth and Crisis
• Charactristics of an effective strategic control system
• Organization Design
• Business Excellence Implementation in Organizations

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• Guide: Control Plan

Daniel Croft

Daniel Croft is an experienced continuous improvement manager with a Lean Six Sigma Black Belt and a Bachelor's degree in Business Management. With more than ten years of experience applying his skills across various industries, Daniel specializes in optimizing processes and improving efficiency. His approach combines practical experience with a deep understanding of business fundamentals to drive meaningful change.

• Last Updated: June 11, 2023
• Learn Lean Sigma

In business it is not uncommon for processes and outputs from processes to be out of control and need action to be taken to address them. This is where Control Plans become extremely useful. Control plans have been developed to support lean Six Sigma process and quality management systems in measuring critical-to-quality (CTQ) measures of processes and their outputs to ensure they remain in control with regular data collection and clear actions to be taken to address issues if they arise. 

Control plans are mostly popularized and used within the manufacturing sector. However, they can be useful for a range of processes that output variables that can be measured and controlled.

Table of Contents

What is a control plan.

A Control Plan in its basic form is a document that outlines the process, steps and actions needed to manage, control, and ensure the quality of a process or product. Developed from the principles of Lean Six Sigma, the tool is used to many industries, such as manufacturing, logistics, automotive, and aerospace.

Control plans may vary slightly from business to business as teams and management tweak them to suit local business needs. However, the Control Plan typically consists of elements such as process input variables, output variables, control points (limits), what measurements are to be taken, and actions to be taken if a deviation occurs. 

Below you can see a good example of how a control plan may look. You can also download this control plan from our template section.

A control plan is usually a tool you will use towards the end of an improvement project, such as in the Control phase of the DMAIC methodology, and continues to serve as a “living document,” which means it is continually reviewed and updated as the process evolves or new data becomes available.

How to Create a Control Plan

Creating a Control Plan is an important process that involves several steps. The guide below will clearly explain each step to guide you through creating a robust and effective Control Plan.

Step 1: Identify the Process

The first step in creating a control plan is to identify a process that you are looking to control. This should be a process that is critical to the quality of your product or service and would have a significant impact on customer satisfaction or operational efficiency if it were to go wrong. Therefore, lend them to a key candidate of a process to control 

It is important to have a clear understanding of the flow of the process, including the inputs and outputs and all the steps involved. It can be useful to use a tool such as a flowchart to map out the process to ensure you fully understand all the elements and variables of the process. 

Step 2: List CTQs (Critical to Quality Characteristics)

Once the process has been identified, the next step in the process is to identify the CTQ characteristics. These are the key attributes or features of the product or service that need to be controlled to ensure quality. The best way to identify what the CTQs are is to understand the customer requirements, such as product specifications.

For example, let’s say a business manufactures brake pads, and the CTQ is the thickness tolerance of the brake pads; this might be ±0.5mm.

Step 3: Select Measurement Methods

Once you have listed all the CTQs that you want to control, decide how you will measure these characteristics. The method that you decide on should be accurate, reliable, and repeatable and follow the principles of Attribute Agreement Analysis (AAA). The measurement method should consider what tools, instruments, or techniques will be used. Additionally, it is important to define the frequency with which the measurement is taken and what the acceptable limits or tolerances are for each CTQ.

Step 4: Determine Control Methods

Now that you know what CTQs you want to control and the methods used to measure them you need to determine the methods of control. Control methods are the strategies, tools or techniques used to ensure that the process stays within the defined limits or customer spec limits.  Popular tools and techniques used to control processes and variables include Statistical Process Control (SPC) charts, Mistake Proofing (Poka Yoke) or Standard Operating Procedures (SOP) / Standard Work Instructions (SWI), which control method you use will depend on the type of process and CTQ identified.

Step 5: Develop Action Plans

If in the event a process or variable goes out of control it is important to take action to address and correct the process and bring it back under control. To do this action plans should be developed as part of the control plan. These action plans define what steps need to be taken to bring the process back within its acceptable limits. 

Like any good action plan it needs make it clear what action needs to be taken and who is responsible for taking that action. 

Step 6: Train the Team

Now that you have developed a control plan its important to ensure that in the event it is needed, it is used. Therefore, you should clearly communicate what the CTQs are, what the operators need to do to measure the process and clarify what actions need to be taken by whom if a process goes out of control. 

Training is key to the success of the control plan being followed.

Step 7: Implement and Monitor

Now that you have developed and trained out the plan, the next step is to officially implement it. This involves putting all the required measures and controls into place. If special tools like calipers or software’s are needed to take measurements, ensure they have what they need. The process then needs to be continuously monitored to ensure the process remains within the stated control limits. Data should then be analyzed at regular intervals to detect and trends or deviations in the process outputs.

Step 8: Review and Update

Finally Step 8, it is important to remember that the control plan is a living document that should be reviewed and updated regularly as the process or CTQs change. Regular reviews will ensure the Control Plan remains effective and relevant. 

By following this process you should be able to develop a robust Control Plan that will help you control your process and ensure quality and drive continuous improvement of the process.

Implementing a Control Plan is beneficial for controlling the quality and performance of processes and preventing defects or quality issues. From identifying the process to training your team, each step is geared towards ensuring that your business operations are as seamless as possible. The goal is not just to maintain current performance levels but to set the stage for continuous improvement.

As we’ve outlined in this guide, creating and implementing a Control Plan is a detailed process involving multiple steps, each is important and builds on the previous step. You should also remember, a Control Plan is a living document must be regularly monitored and updated to its sustain success.

• Westgard, J.O., 2003. Internal quality control: planning and implementation strategies.   Annals of clinical biochemistry ,  40 (6), pp.593-611.
• Mehrasa, M., Pouresmaeil, E., Jørgensen, B.N. and Catalão, J.P., 2015. A control plan for the stable operation of microgrids during grid-connected and islanded modes.   Electric Power Systems Research ,  129 , pp.10-22.

Q: What is a control plan?

A: A control plan is a documented framework that outlines the methods, procedures, and actions necessary to maintain process control and ensure consistent and acceptable outcomes. It helps identify critical control points, measurement methods, control limits, and corrective actions to monitor and manage process performance effectively.

Q: Why is a control plan important?

A: A control plan is important because it helps organizations maintain process stability, minimize process variations, and ensure consistent product or service quality. It provides a systematic approach to monitor, control, and improve processes, leading to reduced defects, improved customer satisfaction, and increased operational efficiency.

Q: How does a control plan fit into the DMAIC methodology?

A: A control plan is a key component of the Control phase in the DMAIC (Define, Measure, Analyze, Improve, Control) methodology. In this phase, the control plan is developed to sustain the improvements made during the earlier phases. It helps ensure that the process remains in control, deviations are promptly addressed, and continuous improvement efforts are sustained.

Q: What are critical control points?

A: Critical control points are specific stages or activities within a process where variations can significantly impact the quality or outcome. These points need to be closely monitored and controlled to prevent defects or deviations from the desired target. Examples include temperature control, pressure control, or specific steps in a manufacturing process.

Q: How are control limits determined?

A: Control limits are determined based on historical data, customer specifications, or statistical analysis. Historical data provides insights into the process performance, while customer specifications define the acceptable range for product quality. Statistical techniques, such as process capability analysis, can help determine control limits based on the process’s inherent variation and the desired level of performance.

Q: What is the role of corrective actions in a control plan?

A: Corrective actions are specified in a control plan to address deviations from control limits or target values. These actions provide a systematic approach to identify and resolve the root causes of variations, ensuring that the process is brought back into control. Corrective actions may involve adjusting process parameters, modifying procedures, retraining employees, or conducting equipment maintenance, among other steps.

Q: Who is responsible for implementing a control plan?

A: Responsibility for implementing a control plan typically falls on the process owner or a designated team responsible for process management and improvement. These individuals or teams are accountable for monitoring the process, collecting data, analyzing it for deviations, and implementing corrective actions when necessary.

Q: How often should a control plan be reviewed and updated?

A: A control plan should be reviewed and updated regularly to ensure its effectiveness and alignment with changing process requirements. It is recommended to review the control plan during regular process performance reviews or when significant changes occur in the process or customer requirements. This helps to adapt the control plan to evolving conditions and continuously improve its efficacy.

Daniel Croft is a seasoned continuous improvement manager with a Black Belt in Lean Six Sigma. With over 10 years of real-world application experience across diverse sectors, Daniel has a passion for optimizing processes and fostering a culture of efficiency. He's not just a practitioner but also an avid learner, constantly seeking to expand his knowledge. Outside of his professional life, Daniel has a keen Investing, statistics and knowledge-sharing, which led him to create the website learnleansigma.com, a platform dedicated to Lean Six Sigma and process improvement insights.

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Everything You Need to Know About Implementing Project Controls

By Kate Eby | September 27, 2021

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One way to increase the likelihood of a project’s success is to implement project controls, which should be informed by real-time data analysis. Controlling performance is the key to completing a project on time and within budget. 

Included on this page, you’ll find a discussion of project control methods and components , along with expert-tested best practices . Plus, we’ll walk you through creating a project control plan .

What Are Project Controls?

Project controls are processes that minimize the performance gap between planning and execution. While project controls often refer specifically to the monitoring and controlling stage of the project lifecycle, they are important from initiation to closure. Project control specialists use project controls to mitigate risk and solve problems in order to keep a project on time and budget.

What Are Project Control Processes?

Project control processes help ensure that performance meets standards. Control processes are data-driven, efficient, and highly visible. Project managers must first identify a performance problem, and then determine what caused it and how to fix it. 

Instituting project controls involves a four-stage process:

• Establish performance standards to create a baseline.
• Measure performance through data collection.
• Compare performance to the baseline to identify deviations and determine their causes through data analysis.
• Correct the performance deviation to keep the project on time and on budget.

Project Management Guide

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Ready to get more out of your project management efforts? Visit our comprehensive project management guide for tips, best practices, and free resources to manage your work more effectively.

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Importance of Project Controls

Project controls are vital to a project’s success. They help maintain scope, schedule, cost, and quality to minimize the waste of resources such as time and money. Project controls help the team make the best decisions to complete a project successfully.

Project Control Cycle

The project control cycle puts project controls into action. Follow each step and repeat the cycle in order to anticipate and fix deviations from the plan.

• Create a baseline plan for project performance and progress.
• Collect and measure progress data against the baseline.
• Analyze and compare actual progress and performance to the baseline.
• Identify and determine the causes of variations in performance from the baseline.
• Correct the deviation and repeat steps 2 through 5.

Project Control Methods

Project control methods should be precise and data-driven. A project manager needs to understand the problem, what caused it, and how to fix it to save time and money. Specific project controls perform particular functions. 

• Project Charter: Successful projects begin with an all-encompassing overview, which you can provide by creating a project charter. A detailed project charter should list the critical components with precision and clarity.
• Responsible, Accountable, Consulted, Informed (RACI) Matrix: A RACI matrix defines project team members’ association according to their task assignments. Read our RACI guide to learn more about each association role and the value of a RACI matrix.
• Work Breakdown Structure (WBS): A WBS begins with a project outcome. Then, the structure breaks down the outcome into smaller deliverables and identifies the tasks necessary to deliver them.
• Critical Path Method: The critical path method helps you identify essential tasks of a project in terms of time. This six-step method divides a project into work tasks and calculates the time it will take to complete each task.
• Project Milestones: A project milestone is a specific point in the project lifecycle that marks important dates, such as the start, end, and review, and deliverable due dates. Find the best milestone template for your project in its working format in order to help your team achieve those milestones.

Components of Project Controls

Project control components inform project managers and teams to make better decisions and stay on task. Controlling these components puts an organization’s resources to best use in achieving project outcomes.

• Scheduling: Project control components begin with a project schedule that lists tasks and assignments, as well as the time required to complete them. A Gantt chart illustrates tasks and important dates along a project’s timeline and schedule.
• Costs: A cost management plan optimizes project resources in financial terms, which makes it a vital project control component. In this component, you estimate costs and anticipate financial risk in order to keep a project on budget.
• Risk: Project controls identify and mitigate risk for a project. Risk threatens projects and organizations, so it’s critical to have a risk management plan that identifies risks and predicts outcomes .
• Performance: Project controls work best during the monitoring performance phase, as they serve to identify baseline deviations, and then correct them. When you consider the primary function of project controls, this component immediately comes to mind.
• Communication: Project controls evaluate and report project status throughout the project lifecycle, so it’s vital to maintain clear and consistent communication with the project manager. Status reporting keeps the project team on task and provides stakeholders with valuable information.

How to Create a Project Control Plan

An effective project control plan establishes a baseline for the project controller to follow, and provides the clarity, consistency, and flexibility needed for successful project execution. Project controllers follow these steps to create a project control plan:

• Strategize a Plan with a Specific Project Controls Approach in Mind: Not all projects are alike, so create controls that are particular to the project. A project change control plan template documents everything needed in a change request. 
• Create an Editable Project Control Plan: Flexibility and adaptability are essential qualities for resolving issues and keeping a project on track. You can use a change control template to identify the change, explain why it is necessary, and estimate the time and money required to complete it.
• Customize Task Schedules and Workflows to Ensure the Controls Cover Everything During the Project Lifecycle: It costs time and money when you miss and fail to fix a problem. A change control plan identifies the controller requesting the change and catalogs it with an identification number.
• List Specific Guidelines for Project Control Duties and Tasks: Controls must be consistent from project initiation through closure. The control form lists change evaluation, approval, and execution dates for consistency throughout the project lifecycle.

Download Project Change Report Template

Microsoft Word  | Adobe PDF

Use this customizable template as a guide for creating a project change control document to detail the what, why, and who of a change request. This template also provides space to add brief summaries of evaluation, approval, and implementation. Add the impact and work required, along with approval status and signatures. 

See more of our project templates in “ The Ultimate Guide to Project Cost Management with Templates .”

How to Implement Project Controls

You should implement project controls at the project’s start, and they should be in place before forecasting begins. At this point, performance standards are already in place, so project controllers and control specialists implement controls when actual performance deviates from the baseline.

To do so, follow the below steps: 

• Identify the issue. 
• Draft an issue log. 
• Assess the issue’s impact on cost and schedule.
• Determine how to resolve the issue.
• Correct the issue by implementing the solution.
• Monitor the solution to determine its effectiveness. 

Project Control Department Functions

Project control departments advise project managers and keep project stakeholders informed to help them make the best decisions. Control departments operate externally and remotely to perform the following basic functions:

• Meet and assign control tasks to department members who specialize in them.
• Monitor project performance to identify problems.
• Create solutions to fix the problems and minimize risk.
• Report to and advise the project manager.

Best Practices for Project Controls

Skillfully administered project controls increase the likelihood of project success. Use the following project control best practices to optimize project team performance and project outcome:

• Tailor and contextualize project controls to the specific industry, project management style, or situation to save time and money. There is no one-size-fits-all approach when it comes to project controls.
• Be proactive. Project controls are more effective sooner than later. Reworking grows exponentially in terms of time and expense the further along a project is.
• Use key performance indicators (KPIs) to optimize team performance for specific tasks. Designing or finding the right KPI dashboard makes the difference.
• Implement project controls that promote accountability and empowerment in the project team.

Benefits of Project Controls

Project controls collect and analyze data, and help keep projects on task and schedule. Because controlled projects achieve their outcomes on time and within budget, project controls have many benefits, including these noted by two experts:

Elizabeth Harrin , an experienced project manager, author, and mentor, describes the benefits of project controls: “Project control data is essential for communication, forming the basis of standard and exception reporting to help stakeholders feel confident that the project team is performing well. Controls help the team recognize trends that may cause issues and keep the project moving forward in the right way, meeting agreed-upon commitments.”

Alan Zucker is the founder of Project Management Essentials, LLC and has more than 25 years of project leadership and management experience. He lists the benefits of project controls at specific parts of the project lifecycle: “Project controls at the front end of a project promote sticking to the objectives, avoiding redundancy or conflicting controls. During the lifecycle, controls identify problems, allowing for course corrections to determine feasibility. Back-end controls ensure the final project meets expectations, quality standards, and the specific needs of customers.”

Project controls deliver real-time status reporting for accuracy and transparency, and they boost confidence in the organization. Controls improve job satisfaction in the project team and provide benchmarks for future projects.

Challenges of Project Controls

With excellent implementation, monitoring, and analysis, project controls deliver. That said, it’s important to have an awareness of some common pitfalls in order to avoid them. 

Elizabeth Harrin shares her expertise and experience with project control challenges: “The main challenge of project controls is that it’s not an exciting part of project work. Stakeholders may not value gathering data and producing project reports.” Additional challenges occur when “project teams do not have the tools or internal support to do the best possible job controlling the project. Team members aren’t always able to interpret the data effectively. Transparent and straightforward is what’s needed, but projects are complicated, and often it’s not as easy as saying, ‘We’re 72 percent complete’. “

Alan Zucker offers this significant project controls challenge: “Highly controlled projects can hinder the process. Adequate project controls must meet the moment, and a good controls framework requires the proper project controls.”

Project control challenges can turn a project upside down, causing delays and cost overruns. Scope creep occurs when project deliverables and size increase due to unexpected problems. Identifying and understanding the causes of scope creep can help you get a project back on track and avoid the issue in future projects. 

A change management plan and a risk register can help project teams tackle control challenges head-on. Projects with a change management structure in place control and adapt to change more successfully. A risk register evaluates risks and prioritizes the most problematic ones in need of mitigation.

What Is the Difference Between Project Control and Project Planning?

Project planning directs the project team’s work to complete the project and achieve the desired outcome, whereas project controls use data analysis to monitor performance and keep project teamwork on task, as guided by the project plan.

For more information, read our comprehensive guide to project planning .

Project Control vs. Project Management

Project management oversees the processes, resources, and teamwork needed to complete a project successfully. Project control helps to inform project management by reporting on project status and performance.

To learn more, visit our comprehensive guide to project management .

The Difference Between a Project Controller and a Project Manager

A project controller monitors a project’s status by collecting and analyzing data to solve problems or anticipate them. Project controllers use data science to advise project managers and help them make informed decisions. 

Project managers meet with stakeholders and plan the whole project. They direct the project team’s work, and they are ultimately responsible for seeing the project through on time and budget.

Sometimes, a project manager may assume the duties of a project controller. Project control specialists and departments often take on project controller duties because the time and money dedicated to projects demand it.

Discover how to demystify the five phases of project management .

Project Control Software

Project control software is essential to project success because they require you to continually gather and analyze data. A vital tool, control software provides constant attention to projects, performing real-time automated tasks and using algorithms for forecasting.

Strong project control software features planning, budgeting, and forecasting tools that minimize risk and improve performance. Control software tracks progress and forecasts outcomes with greater accuracy, saving time and money.

Get the Most Out of Project Controls with Smartsheet for Project Management

From simple task management and project planning to complex resource and portfolio management, Smartsheet helps you improve collaboration and increase work velocity -- empowering you to get more done. 

The Smartsheet platform makes it easy to plan, capture, manage, and report on work from anywhere, helping your team be more effective and get more done. Report on key metrics and get real-time visibility into work as it happens with roll-up reports, dashboards, and automated workflows built to keep your team connected and informed.

When teams have clarity into the work getting done, there’s no telling how much more they can accomplish in the same amount of time. Try Smartsheet for free, today.

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Management Control in B-BBEE : 7 Ways to Apply it to Your Business

Management Control in B-BBEE : Seven Ways to Apply it to Your Business

In today’s highly competitive business landscape, it is essential for companies to stay ahead of the game. One effective way to achieve this is through the implementation of Management Control in Broad-Based Black Economic Empowerment (B-BBEE). B-BBEE Management Control refers to the strategic management of a company’s empowerment initiatives to ensure compliance with the requirements of the B-BBEE Act and Codes of Good Practice. In this article, we will explore the benefits of applying B-BBEE Management Control to your business and provide practical strategies for its implementation.

The Benefits of Applying B-BBEE Management Control to Your Business

Implementing B-BBEE Management Control can bring several advantages to your business. Firstly, it enhances your company’s standing in the market by demonstrating your commitment to broad-based economic empowerment. Customers, suppliers, and stakeholders are more likely to engage with businesses that have a solid B-BBEE Management Control plan in place.

Furthermore, B-BBEE Management Control goes beyond just meeting compliance requirements. It is a strategic approach that can transform your business from within. By implementing effective management control measures, you create a culture of transparency, accountability, and fairness. This not only strengthens your company’s reputation but also builds trust among your stakeholders.

Secondly, B-BBEE Management Control can help improve your company’s competitiveness. By promoting diversity and inclusivity within your organization, you create an environment that fosters innovation, creativity, and enhanced decision-making. Employees from different backgrounds bring unique perspectives and ideas to the table, leading to more robust problem-solving and strategic planning.

Moreover, embracing diversity through B-BBEE Management Control can also improve employee morale and satisfaction. When employees feel valued and included, they are more likely to be motivated and engaged in their work. This, in turn, can lead to higher productivity levels and a positive work culture.

Thirdly, implementing B-BBEE Management Control can open doors to new business opportunities. Many government contracts and tenders now require a certain B-BBEE level to be eligible for consideration. By complying with B-BBEE regulations, you can position your business to access these lucrative opportunities and secure long-term growth.

Additionally, having a robust B-BBEE Management Control plan can also attract potential investors and partners. Investors are increasingly looking for businesses that prioritize social responsibility and demonstrate a commitment to sustainable development. By showcasing your B-BBEE initiatives, you can differentiate your business from competitors and attract investment that aligns with your values.

In conclusion, implementing B-BBEE Management Control in your business offers numerous benefits. It not only enhances your company’s reputation and competitiveness but also opens doors to new business opportunities. By embracing diversity and inclusivity, you create a dynamic and innovative work environment that drives success. So, take the necessary steps to integrate B-BBEE Management Control into your business strategy and unlock its full potential.

Understanding the Impact of B-BBEE Management Control on Your Business

The implementation of B-BBEE Management Control can have a significant impact on various aspects of your business. One of the key areas that are affected is your workforce. B-BBEE Management Control promotes the recruitment, retention, and development of black individuals within your organization. By diversifying your workforce, you create a more representative and inclusive workplace culture.

When you prioritize the recruitment of black individuals, you not only contribute to the economic empowerment of historically disadvantaged groups but also tap into a pool of diverse talent. This diversity brings different perspectives, experiences, and skills to your organization, fostering innovation and creativity. By embracing this diversity, your business can better understand and cater to the needs of a broader customer base, leading to increased customer satisfaction and loyalty.

Furthermore, B-BBEE Management Control encourages collaboration and partnerships with black-owned businesses. This not only fosters economic empowerment but also expands your network of suppliers and service providers. By prioritizing these partnerships, your business can benefit from increased access to resources, expertise, and market insights.

When you engage with black-owned businesses, you contribute to the growth and sustainability of the local economy. By supporting these businesses, you help create jobs and stimulate economic development in historically disadvantaged communities. This, in turn, can lead to increased consumer spending power and a more vibrant marketplace.

Additionally, B-BBEE Management Control requires companies to invest in skills development initiatives. By enhancing the skills and capabilities of your workforce, you can improve productivity, efficiency, and overall organizational performance. This investment in human capital can also contribute to long-term sustainability and growth.

When you provide training and development opportunities for your employees, you empower them to reach their full potential. This not only benefits your business by having a highly skilled and motivated workforce but also contributes to the personal and professional growth of your employees. As they acquire new skills and knowledge, they become more valuable assets to your organization, capable of taking on greater responsibilities and driving innovation.

Furthermore, investing in skills development can help address skills gaps and shortages in the labor market. By equipping individuals with the necessary skills, you contribute to the overall development of the country’s workforce, creating a more competitive and prosperous economy.

In conclusion, the implementation of B-BBEE Management Control has far-reaching effects on your business. It not only promotes diversity and inclusion within your workforce but also fosters collaboration with black-owned businesses and drives skills development. By embracing these principles, your business can not only achieve compliance but also unlock new opportunities for growth, innovation, and social impact.

Simplifying the Process of Implementing B-BBEE Management Control

Implementing B-BBEE Management Control may seem like a daunting task, but with proper planning and execution, it can be simplified. Firstly, it is crucial to familiarize yourself with the B-BBEE Act and Codes of Good Practice. These documents provide guidelines on the requirements and principles of B-BBEE Management Control.

Understanding the B-BBEE Act and Codes of Good Practice is essential for ensuring compliance with the legislation. The B-BBEE Act was enacted to promote economic transformation and empower historically disadvantaged individuals in South Africa. It sets out the legal framework for B-BBEE initiatives, including Management Control.

The Codes of Good Practice, on the other hand, provide detailed guidelines on how to implement B-BBEE initiatives effectively. They outline the specific requirements for each element of B-BBEE, including Management Control. Familiarizing yourself with these codes will help you understand the expectations and standards set by the government.

Next, conduct a thorough assessment of your current empowerment initiatives and identify areas that require improvement. This evaluation will help you determine the gaps between your current state and the desired B-BBEE compliance level. It will also provide insights into the specific focus areas for your B-BBEE Management Control plan.

During the assessment process, it is important to consider various factors that may impact your B-BBEE compliance. These factors include your company’s size, industry, and existing empowerment initiatives. By taking a holistic approach to the assessment, you can identify the areas that need the most attention and prioritize your efforts accordingly.

Once you have identified the areas for improvement, develop a comprehensive B-BBEE Management Control plan. This plan should outline clear objectives, targets, and timelines for each empowerment initiative. It should also include strategies for monitoring and evaluating the effectiveness of your initiatives and making necessary adjustments along the way.

Creating a well-defined plan is crucial for ensuring the successful implementation of B-BBEE Management Control. The plan should not only focus on meeting the minimum requirements for compliance but also aim to drive meaningful transformation within your organization. By setting ambitious yet achievable objectives and targets, you can push your company to go beyond mere compliance and make a real impact in advancing economic empowerment.

Remember that implementing B-BBEE Management Control is an ongoing process. Regularly review and update your plan to ensure its alignment with the changing business environment and regulatory requirements. As the business landscape evolves, new challenges and opportunities may arise, requiring you to adapt your approach to B-BBEE Management Control.

Furthermore, it is essential to engage all relevant stakeholders throughout the implementation process. This includes employees, management, suppliers, and other business partners. By involving them in the decision-making and execution of your B-BBEE initiatives, you can foster a sense of ownership and commitment, increasing the chances of success.

By approaching B-BBEE Management Control systematically and with a long-term perspective, you can maximize its impact on your business. Remember, B-BBEE compliance is not just about ticking boxes; it is about creating a more inclusive and equitable society. Embrace the opportunity to make a difference and contribute to the transformation of South Africa’s economy.

Seven Practical Strategies for Implementing B-BBEE Management Control

• Establish Clear Leadership and Accountability:  Assign dedicated individuals or teams to oversee the implementation of your B-BBEE Management Control plan. Clearly define their roles, responsibilities, and targets to ensure effective execution.
• Develop a Skills Development Program:  Create training and development initiatives that are aligned with your business objectives and the needs of your employees. Encourage continuous learning and provide opportunities for skills transfer.
• Promote Supplier Development:  Identify black-owned businesses that can become your strategic partners. Provide them with the necessary support and resources to enhance their capabilities and competitiveness.
• Implement Diversity and Inclusion Policies:  Foster a culture of diversity and inclusion within your organization. Promote equal opportunities, fair treatment, and respect for individuals from all backgrounds.
• Establish Mentorship and Coaching Programs:  Pair senior leaders within your organization with emerging black talent. This mentorship and coaching support can help develop the next generation of leaders and promote succession planning.
• Monitor and Report Progress:  Implement robust monitoring and reporting mechanisms to track the progress of your B-BBEE initiatives. Regularly assess whether you are meeting your targets and take corrective actions if necessary.
• Engage with Stakeholders:  Communicate and collaborate with employees, customers, suppliers, and other relevant stakeholders regarding your B-BBEE Management Control efforts. Seek their input and feedback to continuously improve your strategies.

Cost-Effective Ways to Implement B-BBEE Management Control

Implementing B-BBEE Management Control does not always have to come with a hefty price tag. There are cost-effective strategies that you can adopt to ensure compliance without compromising your bottom line.

One such strategy is to leverage existing internal resources and capabilities. Identify areas within your organization where you can develop skills, enhance diversity, or promote supplier development without significant additional expenses. This could include cross-training employees, promoting internal talent, or establishing partnerships with local and smaller black-owned businesses.

Another cost-effective approach is to seek external support and collaborations. Engage with industry associations, government agencies, and B-BBEE experts who can provide guidance and share best practices. They can help you navigate the complexities of B-BBEE Management Control and identify potential cost-saving opportunities.

Additionally, consider leveraging technology to streamline and automate your B-BBEE Management Control processes. Implementing digital tools and platforms can help you efficiently manage and track your empowerment initiatives, reducing administrative burdens and costs.

Creating an Effective B-BBEE Management Control Plan

An effective B-BBEE Management Control plan lays the groundwork for successful implementation and long-term compliance. Here are some key considerations when creating your plan:

• Clearly Define Objectives:  Identify the specific objectives you want to achieve through your B-BBEE Management Control initiatives. These objectives should be aligned with your overall business strategy and vision.
• Set Measurable Targets:  Develop quantifiable targets and timelines for each empowerment initiative. These targets will enable you to track your progress and measure the impact of your initiatives.
• Allocate Resources:  Determine the necessary resources, including financial, human, and technological, to support the implementation of your plan. Ensure that these resources are allocated effectively and efficiently.
• Establish Performance Metrics:  Identify key performance indicators (KPIs) that will help you assess the effectiveness of your B-BBEE Management Control initiatives. Regularly monitor and evaluate these metrics to ensure continuous improvement.
• Engage Stakeholders:  Involve relevant stakeholders in the development and implementation of your plan. Seek their input, address their concerns, and keep them informed of your progress to foster buy-in and support.
• Monitor Legal and Regulatory Changes:  Stay informed about any updates or changes to B-BBEE legislation and regulations. Ensure that your plan remains aligned with the latest requirements and make adjustments as necessary.
• Communicate Internally and Externally:  Develop a comprehensive communication strategy to inform and educate employees, customers, suppliers, and other stakeholders about your B-BBEE Management Control plan. Clearly articulate the benefits and objectives of your initiatives and address any misconceptions or concerns.

Common Mistakes to Avoid with B-BBEE Management Control

While implementing B-BBEE Management Control can be highly beneficial, it is essential to avoid common pitfalls that may hinder your success. Here are some mistakes to watch out for:

• Overlooking Company-Specific Challenges:  A one-size-fits-all approach may not work for every company. Consider your organization’s unique challenges, capabilities, and culture when developing your B-BBEE Management Control plan.
• Focusing Only on Compliance:  B-BBEE Management Control should not be viewed solely as a compliance exercise. Instead, it should be integrated into your overall strategic objectives and used as a tool for business development and growth.
• Failure to Engage Stakeholders:  Failure to involve key stakeholders, both internally and externally, can lead to lack of support, resistance, or misalignment of interests. Regularly communicate and engage with stakeholders throughout the B-BBEE Management Control process.
• Lack of Monitoring and Evaluation:  Without proper monitoring and evaluation, it is challenging to assess the effectiveness of your B-BBEE initiatives and make necessary adjustments. Develop a robust system to track progress and measure impact.
• Inadequate Training and Education:  Ensure that your employees understand the purposes and principles of B-BBEE Management Control. Provide training and education programs to build awareness, knowledge, and skills related to empowerment and diversity.

How to Achieve Maximum Results with B-BBEE Management Control

To achieve maximum results with B-BBEE Management Control, it is crucial to approach it as a long-term commitment rather than a short-term obligation. Here are some strategies to enhance the effectiveness of your initiatives:

• Embed B-BBEE in your Organizational Culture:  Integrate B-BBEE principles and practices into your company’s values, mission, and day-to-day operations. Make it a core part of your organizational culture.
• Continuously Educate and Train Employees:  Provide ongoing training and education programs to ensure that employees at all levels understand the importance and benefits of B-BBEE Management Control. Foster a culture of inclusivity and empowerment.
• Regularly Review and Update your Plan:  Monitor the progress of your initiatives and regularly assess their effectiveness. Make any necessary adjustments or enhancements to ensure continuous improvement.
• Collaborate and Share Best Practices:  Engage with other businesses and industry experts to share knowledge, experiences, and best practices. Learn from each other and leverage collective wisdom.
• Measure and Communicate Impact:  Assess the impact of your B-BBEE Management Control initiatives not only internally but also externally. Share success stories and lessons learned to inspire and motivate others.
• Embrace Innovation and Technology:  Explore innovative approaches and leverage technology to enhance the effectiveness and efficiency of your B-BBEE initiatives. Embrace digital transformation to streamline processes and improve data management and analysis.

Implementing B-BBEE Management Control can bring significant benefits to your business, from enhanced market reputation and increased competitiveness to access to new business opportunities. By applying the seven practical strategies discussed in this article, you can navigate the complexities of B-BBEE Management Control and ensure successful implementation. Remember to avoid common mistakes, create a comprehensive plan, and continuously strive for maximum results. B-BBEE Management Control is not only a regulatory requirement but also an opportunity to empower and transform your business for long-term success.

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• What Is a Project Quality Plan & How to Make One in 4 Easy Steps for 2024

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A project quality plan is the backbone of any project. In addition to guiding teams, it sets standards and expectations and ensures teams know what they’re doing. It’s not set in stone, either; a good project manager will adapt the plan depending on how the project is going.

Last Updated: 26 Apr'24 2024-04-26T21:35:37+00:00

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• Define the Project’s Quality Standards
• Determine the Quality Expectations & Objectives for Your Team
• Define the Quality Control Plan for Project Deliverables
• Write Your Project Quality Plan & Monitor Project Success

Facts & Expert Analysis About Project Quality Planning

• Key to success: A project quality plan is essential if you want to maintain the highest standards throughout your project. Although you will create a plan before the project, you will likely need to update and adapt it at different stages of the project.
• Planning essentials: Essential parts of the plan will pertain to budgets, resources and risk management. Most of what goes into a plan is common sense; so take it one step at a time and don’t let the idea of the plan’s totality overwhelm you.
• Automations and software: Setting up automations and using project management tools are the best ways to ensure everyone’s on the same page. The best tools for your project quality management plan include monday.com , ClickUp and Zoho Projects. These have built-in automation tools and integrate with no-code solutions.

Quality assurance is a critical part of effective project management. You achieve this by developing a robust project quality plan before getting started with the core of the project. The best project management software provides tools to help you plan effectively, but what is a project quality plan and how do you make a good one? Let’s take a look.

In this guide, we’ll explain what a quality plan is, provide some examples, show you how to create a robust quality plan and share our favorite project management software solutions to help you plan and track projects from start to finish.

What Is a Quality Plan in Project Management?

Creating a quality plan means agreeing on the best course of action to complete your project. It includes a range of process quality standards for approaching tasks, managing deadlines, managing client expectations, identifying the best use of resources and much more. 

The plan should also include several KPIs (key performance indicators) and defined acceptance criteria so the project manager can monitor the success of the quality standards throughout the project.

Project Quality Plan Examples

Here, we will cover what you can expect to see in a project quality plan. There’s no right or wrong approach; how you frame your plan depends on your project objectives, the client you work with and your company ethos. 

You can separate your quality assurance activities into checklists. This is the most simple method of sorting the details of your quality management, and you can tick them off as the project progresses. Top project management tools allow you to easily create lists that can be shared with other team members.

A Good Task Manager

Part of your planning process will involve defining tasks for your project. To help you do this, you’ll need a good task management tool to create and assign tasks. You can use a kanban board , a Gantt chart or even a simple calendar to visualize your tasks and deadlines. 

Your quality plan should include your approach and the software you’ll use. If you’re on a tight budget, we recommend checking out our selection of the best cheap project management software . 

Risk Assessment

Seldom does a project flow perfectly, and there’s always the possibility of roadblocks appearing. A good project manager will define and document possible risks that may occur and then outline how the team should respond. Risk assessment should be a continuous part of any team’s quality management plan.

Resource Management

To ensure you hit your project deliverables, a project quality plan must include effective resource management. This means planning which team members are best suited to certain tasks, ensuring nobody’s workload is too large or too small and being adaptable throughout the process. You can use RACI charts to help you plan who will be doing what.

If you have team members working simultaneously on different projects, we recommend looking at our selection of the best project management software for multiple projects to help manage the workload effectively. 

Budget Management

The strength of your budget plays a big part in the quality of your execution. It will determine the experience level you can hire for your project, the software tools you can use and often the amount of time you can spend completing the project. A solid plan ensures you maximize your budget and that you have the best resources and tools the budget will allow.

Reporting tools are useful if you want to measure quality. They help you keep track of your quality deliverables and assess whether any changes need to be made to your quality plan. Almost all project management software offers reporting features, ranging from basic to advanced. They’re a great way to give feedback to your team and highlight quality problems.

Site Assessment

Even in the digital age, we still carry out projects in real-world settings with real-world tools. A full site assessment is necessary to help you plan your quality processes. This includes a health and safety assessment and planning which tasks will be completed on site, as well as when and where.

How to Create a Project Quality Management Plan

Now that you know what goes into project quality planning, we’ll take you through some steps to design your own quality management process. These steps are meant to serve as a guide — you’re free to pick and choose which steps best suit your project goal and in-house quality standards.

1. Define the Project’s Quality Standards

Before starting any quality assurance activity, the project manager should determine the following:

• What are the company’s in-house quality standards? This will relate to the project team’s experience level, as well as how to define goals, meet deadlines and produce the highest quality of work.
• What are the stakeholders’ quality standards? The stakeholder will have their own quality expectations. It’s important to include them in your quality management plan.

2. Determine the Quality Expectations & Objectives for Your Team

The next step involves ensuring the project team has total clarity on the expectations related to quality assurance. You can achieve this by:

• Clearly outlining each team member’s role.
• Defining at what stage of the project each team member is required to complete their work.
• Defining any potential risks that may prevent the work from moving forward.
• Planning how you intend to negate or respond to said risks.
• Creating a plan should a team member not be able to fulfill their responsibilities, i.e., having someone else on the team on standby to cover the absent team member’s role.

3. Define the Quality Control Plan for Project Deliverables

Quality assurance doesn’t happen only at the start or end of a project; it is an ongoing process. Defining how you will manage quality objectives throughout the project is essential. You can do this by:

• Highlighting who is responsible for monitoring the health of the project (often the project manager).
• Creating a set of quality metrics and key performance indicators (KPIs) that you can monitor throughout the project.
• Ensuring you have a defined point of content for the stakeholder so you can discuss quality goals and determine the level of customer satisfaction. 

4. Write Your Project Quality Plan & Monitor Project Success

Now that the project is up and running, it’s important to monitor the quality management plan throughout the project. You should:

• Create a document and write out the full project quality plan.
• Ensure all team members and stakeholders can access the quality management plan.
• Notify all users of any updates made to the quality management plan during the project (automations are great for this).
• Use project quality management software to help track tasks, project progress and product quality.
• Use the best work management tools to track resources in real time, helping you adapt if you need to adjust team members’ workloads.

Which Project Management Software Has Quality Planning Tools?

The best project management software for quality planning and control are monday.com, ClickUp, Zoho Projects, Jira and Notion.

• monday.com — This software solution comes with plenty of task management tools and a space to upload your project quality plan document. Check out our monday.com review to learn more.
• ClickUp — This software has plenty of templates available to support quality, resource, task and budget planning. Check out our ClickUp review .
• Zoho Projects — In addition to the native document tool to create your plan, Zoho Projects is also great for communication so you can continuously discuss quality standards. Read our Zoho Projects review for more details.
• Jira — This is an excellent tool for software developers and ideal for risk assessment. You can combine it with Confluence to create and store your plan. Our Jira review has more details. 
• Notion — Notion’s no-nonsense design and wide range of documentation tools make it the ideal space to create your quality plan. For more information, read our Notion review . 

Final Thoughts

As daunting as creating a quality management plan may seem, it’s not all that complicated. Most of it involves common sense and a strong understanding of the project goals. Hiring an experienced project manager with a good track record will certainly help, as will having a solid product owner if you work in software development. 

Use the guide above to shape your quality plan and ensure you use one of the recommended project management tools. monday.com and ClickUp are our top recommendations. If you’re stuck on which one to choose, check out our monday.com vs ClickUp comparison guide . If you go with ClickUp, you may also find our ClickUp pricing guide useful.

Did you find this guide useful? Which tools do you use to create a project management plan? Is there a project management software you would like us to add? Let us know in the comments. Thanks for reading.

FAQ: Quality Management Planning

A project quality plan includes a set of criteria the project team adheres to in order to deliver products of the highest possible standards. The plan should include deadlines, defined roles, potential risks and responses, and stakeholder expectations.

The four stages are defining the quality standards, determining the expectations and objectives, planning the quality control, and writing and monitoring the plan.

The four types are total quality management (TQM), six sigma, quality management system (QMS) and quality function deployment (QFD).

According to the Project Management Institute (PMI), the seven quality planning techniques are cause-and-effect diagrams, flowcharts, check sheets, Pareto diagrams, histograms, control charts and scatter diagrams.

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