Strategic Management: Formulation and Implementation

Control Tools And Techniques

The controlling function includes activities undertaken by managers to ensure that actual results conform to planned results. Control tools and techniques help managers pinpoint the organizational strengths and weaknesses on which useful control strategy must focus.

In order to simplify the discussion of the tools and control techniques, many authors divide them into two categories: nonfinancial and financial. Nonfinancial control techniques do not require financial data to be used, while financial control techniques require some form of financial data such as profits, costs, or revenues. Each of the control techniques is intended for a different purpose. Therefore, in order to make rational choices about which control techniques to implement, managers must understand what a given control techniques can and cannot do.

Nonfinancial control techniques. Nonfinancial control techniques include rewards and punishments, selection procedures, socialization and training, the management hierarchy, management by exception, inventory and quality control, and PERT.

Financial Control Techniques. Financial controls help managers to keep costs in line, maintain a viable relationship between assets and liabilities, sustain adequate liquidity, and achieve general operating efficiency. Some of the best-known and most commonly used financial control techniques are: budgets, ratio analysis, break-even analysis, and accounting audits.