ADMINISTRATIVE CONTROL TECHNIQUES: CHARACTERISTICS AND EXAMPLES - DUDAS - 2025

The techniques of administrative control are methodologies to collect and use information to evaluate the performance of different organizational resources such as human, physical, financial and also the organization as a whole, in the light of organizational strategies pursued.

Management is both an art and a science. The administration and its functions continue to evolve to keep up with the times. The administrative control function also advances with the passage of time, so new techniques continue to emerge.

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Control is a fundamental administrative function. It serves to regulate organizational activities, and compares actual performance with expected organizational standards and objectives.

Control techniques provide the type and amount of information necessary to measure and monitor performance. Information from various controls must be tailored to a specific management level, department, unit, or operation.

To ensure complete and consistent information, companies often use standardized reports, such as financial, status, and project reports. However, each area within an organization uses its own specific control techniques.

List of techniques (with examples)

-Traditional techniques

They are techniques that have been used in the field of business organization for a long period of time and are still in use.

Personal observation

This is the most traditional control technique. It allows a manager to collect first-hand information on the performance of employees.

It also creates psychological pressure on employees to perform better and thus achieve their goals well, as they are aware that they are being personally observed at work.

However, it is a time-consuming exercise and cannot be used effectively for all kinds of jobs.

Statistical reports

It is the general analysis of reports and data, which are used in the form of averages, percentages, indicators, correlations, etc. In different aspects. They present information on the performance of the organization in the various areas.

This type of information is useful when it is presented in different forms, such as charts, graphs, tables, etc. It allows managers to read them more easily and facilitates performance comparisons with established standards and with that of previous periods.

Break-even analysis

It is used to study the relationship between costs, volume and profits. Determine the general framework of probable gains and losses for different levels of activity by analyzing the general position.

The volume of sales in which there are no gains or losses is known as the breakeven point. This can be calculated with the help of the following formula:

Break-even point = Fixed costs / (Sales price per unit - variable costs per unit).

Through this analysis, a company can control its variable cost and can also determine the level of activity at which it can achieve its profit target.

Budget Control

Under this technique, different budgets are prepared for the different operations that must be carried out in an organization.

These budgets act as standards to compare them with the actual results and thus take the necessary actions to achieve the organization's objectives.

Therefore, the budget can be defined as a quantitative statement of the expected result, prepared for a defined period of future time, in order to obtain a certain objective. It is also a statement reflecting the policy for that particular period.

Helps establish coordination and interdependence between various departments. For example, the purchase budget cannot be prepared without knowing the quantity of materials required. That information comes from the production budget. The latter in turn is based on the sales budget.

The budget should be flexible so that the necessary changes to it can be easily made later, according to the requirements of the prevailing environment.

Types of budgets

- Sales budget: it is a statement of what an organization expects to sell in terms of quantity and value.

- Production budget: it is a statement of what an organization plans to produce in the budgeted period. It is made from the sales budget.

- Materials budget: is a statement of the estimated quantity and cost of the materials needed for production.

- Cash budget: these are the forecasted cash inflows and outflows for the budgeted period. Corresponds to projected cash flow.

- Capital budget: It is the estimated expenditure on the main long-term assets, such as a new factory or major equipment.

- Research and development budget: these are the estimated expenses for the development or refinement of products and processes.

-Modern techniques

These techniques provide a new way of thinking and give new ways of being able to control the various aspects of an organization.

Return on investment (ROI)

It provides the basics to determine whether or not the capital invested in the business has been used effectively to generate a reasonable return.

ROI acts as an effective monitoring device to measure the overall performance of an organization, or its individual departments or divisions. It also helps departmental managers discover issues that negatively affect ROI.

The formula used for its calculation is: Return on investment = (Net income / Total investment) x 100.

Net income before or after taxes can be used to calculate ROI. Total investment includes investment in fixed assets as well as working capital invested in the business.

Indicator analysis

It is a technique used to analyze the financial statements of a commercial company by calculating different indicators.

The indicators most used by organizations can be classified into the following categories:

Liquidity indicators

They are calculated to understand the short-term financial position of the business and its ability to pay short-term liabilities. It includes the current indicator and the quick indicator:

- Current indicator = Current assets / Current liabilities.

- Quick indicator = Cash + Invoices receivable / Current liabilities.

Solvency indicators

They are calculated to determine the long-term solvency of the business and its ability to pay off long-term debts. It includes the debt indicator, the property indicator, the interest coverage indicator, etc.

- Debt indicator = Debt to creditors / Shareholders' fund.

- Ownership indicator = Shareholders' fund / Total assets.

Profitability indicators

They help to analyze the profitability position of a business. For example, gross profit indicator, net profit indicator, trade indicator, etc.

- Gross profit indicator = Gross profit / Net sales × 100.

- Net profit indicator = Net profit / Net sales x 100.

Turnover indicators

They help to know if resources are used effectively to increase the efficiency of business operations. For example, inventory turnover indicator, debtor turnover indicator, fixed asset turnover indicator, etc. Higher turnover indicates better use of resources.

- Inventory turnover indicator = Cost of merchandise sold / Average inventory.

- Debtor turnover indicator = Net credit sales / Average accounts receivable.

Liability accounting

It is an accounting system in which the general participation of the different sections, divisions and departments of an organization is configured as "centers of responsibility".

The head of each center is responsible for achieving the goal set for his center. Responsibility centers can be of the following types.

Cost center

Refers to the department of an organization whose manager is responsible for the cost incurred at the center, but not for the revenue.

For example, the production department of an organization can be classified as a cost center.

Revenue center

Refers to a department that is responsible for generating revenue. For example, the marketing department.

Profit center

Refers to a department whose manager is responsible for both costs and revenues. For example, the repair and maintenance department.

Investment center

You are responsible for the profits as well as the investments made in the form of assets. To judge the performance of the investment center, the return on investment is calculated and compared with similar data from previous years for the center itself and for other similar companies.

Management audit

It refers to a systematic evaluation of the general performance of the management of an organization. The objective is to review the efficiency and effectiveness of the administration and improve its performance in future periods.

Judge the overall performance of managing an organization. Its basic purpose is to identify deficiencies in the performance of management functions. It also guarantees the updating of existing management policies.

Ensures the required modification in existing management policies and techniques, according to changes in the environment.

Continuous monitoring of management performance helps improve the control system.

Pert and CPM

PERT (Scheduled Review and Evaluation Technique) and CPM (Critical Path Method) are important network techniques, useful for planning and control.

These techniques help perform a variety of management functions such as planning, scheduling, and implementing time-bound projects that involve a variety of complex, diverse, and interrelated activities.

They are used to calculate the total expected time required to complete a project, and can identify bottleneck activities that have a critical effect on the project completion date.

Consequently, these techniques are quite interrelated and address factors such as time scheduling and resource allocation for these activities.

Management information system

Provides accurate, timely and up-to-date information to make various management decisions. Therefore, it is an important communication tool, as well as a very useful control technique.

This tool provides information to managers so that they can take appropriate corrective action in the event of deviations from the standards.

References

1. Toppr (2019). Techniques of Managerial Control. Taken from: toppr.com.
2. Kalpana (2019). Techniques of Managerial Control: Traditional and Modern Techniques. Business Management Ideas. Taken from: businessmanagementideas.com.
3. Wikipedia, the free encyclopedia (2019). Management control system. Taken from: en.wikipedia.org.
4. Priyali Sharma (2019). Top 14 Techniques of Control -Business Management. Your Article Library. Taken from: yourarticlelibrary.com.
5. Gaurav Akrani (2011). Control Techniques - 10 Types of Techniques of Controlling. Kalyan City Life. Taken from: kalyan-city.blogspot.com.
6. Cliffs Notes (2019). Organizational Control Techniques. Taken from: cliffsnotes.com.