HEALTH SERVICE MANAGEMENT

1. Lecture 7
THE BASIC CONTROL PROCESS

2. Introduction
• Organizational control is the process of assigning,
evaluating and regulating resources on an ongoing
basis to accomplish an organisation’s goals.
• To successfully control an organisation, managers
need to not only know what the performance
standards are, but also figure out how to share that
information with employees.
• Control techniques and systems are essentially the
same for cash, office procedures, product quality, etc
and it involves three steps.

3. 1. Establishment of standards
The first step in the control process logically would be
to establish plans. However, since plans vary in detail
and complexity and since managers cannot usually
watch everything, special standards are established.
They are the selected points in an entire planning
program at which measures of performance are made
so that managers can receive signals about how things
are going and thus do not have to watch every step in
the execution of plans.

4. 2. Measurement of performance:
• The measurement of performance against standards should
ideally be done on a forward- looking basis so that deviations
may be detected in advance of their occurrence and avoided by
appropriate actions.
3. Correction of deviations:
•If performance is measured accordingly, it is easier to
control deviations. Correction of deviations is the point at
which control can be seen as a part of the whole system
of management and can be related to the other
management functions.

5. Managers may correct deviations by:
• Redrawing their plans or by modifying their goals.
• By exercising their organizational function through re-
assignment or classification of duties.
• By additional staffing.
• Better selection and training of subordinates.
• Ultimate re-staffing measure e.g firing.

6. The six major purposes of controls are as follows:-
• Controls make plans effective – Managers need to measure
progress, offer feedback, and direct their teams if they want to
succeed
• Controls make sure that organizational activities are consistent
Policies and procedures help ensure that efforts are integrated.
• Controls make organisations effective –
Organisations need controls in place if they want to achieve /
accomplish their objectives.

7. Ctn.
• Controls make organisations efficient – Efficiency
probably depends more on controls than any other
management function.
• Controls provide feedback on project/program status –
Not only do they measure progress, but controls also
provide feedback to participants as well. Feedback
influences behaviour and is an essential ingredient in
the control process.
• Controls aid in decision making – The ultimate purpose
of controls is to help managers make better decisions.
Controls make managers aware of problems and give
them information that is necessary for decision making.

8. Effective organizational control systems:
The management of any organisation must develop a
control system tailored to its organizational goals and
resources. Effective control systems share several
common characteristics as follows:-
• A focus on critical points- For example, controls are
applied where failure cannot be tolerated or where
costs cannot exceed a certain amount. The critical
points include all the areas of an organisation’s
operations that directly affect the success of its key
operations.

9. Ctn.
•Integration into established processes- Controls must
function harmoniously within these processes and should
not bottleneck operations.
•Acceptance by employees- Employee involvement in the
design of controls can increase acceptance.
•Availability of information when needed- Deadlines,
time needed to complete the project, costs associated
with the project, and priority needs are apparent in these
criteria. Costs are frequently attributed to time short
comings or failures.

10. Ctn.
• Economic feasibility- Effective control systems answer questions
such as, “How much does it cost?” “What will it Save?” or “What
are the returns on investment?” in short, comparison of the costs
to the benefits ensures that the benefits of controls outweigh the
costs.
• Accuracy- Effective control systems provide factual information
that’s useful, reliable, valid and consistent.
• Comprehensibility- Controls must be simple and easy to
understand.

11. CRITICAL POINT CONTROL:
The principle of critical-point control, one of the most
important control principles states that: “Effective control
requires attention to those factors critical to evaluating
performance against plans”.
Types of critical point standards:-
i. Physical standards- None monetary measurements common
at the operating level, where materials are used.
ii. Cost standards- Are monetary measurements and are
common at the operating level. They attach monetary values to
the costs of operations.

12. Ctn.
iv. Capital standards- There are a variety of capital standards, all
arising from the application of monetary measurements to
physical items. They have to do with the capital invested in the
firm rather than with the operating costs and therefore
primarily related to the balance sheet rather than to the income
statement.
v. Revenue standards- Revenue standards arise from attaching
monetary values to sales. E.g average sales per customer.
vi. Program standards- A manager may be assigned to install a
variable budget program, a program for formally finalizing the
development of new products, or a program for improving the
quality of sales force.

13. Ctn.
vi. Intangible standards- More difficult to set are
standards not expressed in either physical or monetary
measurements. E.g what standards can a manager use for
determining the competence of the divisional purchasing
agent?
vii. Goals as standards- Modern managers are finding
that through research and thinking it is possible to define
goals that can be used as performance.

14. BENCHMARKING
Is an approach for setting goals and productivity measures based on
best industry practices.
There are three types of benchmarking:-
• Strategic benchmarking- Compares various strategies and
identifies the key strategic elements of success.
• Operational benchmarking- Compares operational relative costs or
possibilities for product differentiation.
• Management Benchmarking- focuses on support functions such as
market planning and information systems, logistics, human
resource management etc.

15. Requirements for effective controls:-
If controls are to work, they must be specially tailored to plans and
positions, to the individual managers and their personalities and to the
needs for efficiency and effectiveness.
• Tailoring controls to plans and positions-
• All control techniques and systems should reflect the plans they are
designed to follow.
• Every plan and phase of operation has unique characteristics. E.g.
information from marketing department is different from production
department.
• Controls should be tailored to positions- What is appreciated for a VIP
incharge of manufacturing will not be suitable for a shop supervisor.
Controls for a sales department are different from those of finance
department.

16. Ctn.
• Controls should also reflect organizational structure-
Organizational structure shows who is responsible for the
execution of plans and for any deviation from them. Thus the
more carefully controls are designed to reflect the place in the
organisation where responsibility for action lies, the more they
will enable managers to correct deviations from plans.
2. Tailoring controls to the individual managers.
• Control systems and information are of course, intended to
help managers carry out their function of control. What
individuals cannot understand they will not trust and what they
do not trust they will not use. E.g statisticians and accountants-
complex tables, other charts.

17. Ctn.
• People should get the information they need in a form they will
understand and use. Even quite intelligent people may be
‘turned off’ by some of the sophisticated techniques of the
expert- sophisticated techniques of planning and control, like
variable budgeting or network planning can fail in practice solely
because the systems were not comprehensible to the people
who had to use them or appeared too complex for them.
• Experts in these matters must not try to show others how they
are, rather they should design a system at the level of ready
comprehension so that people will use it.

18. Ctn.
3. Designing controls to point up exceptions at critical points.
• Controls must be designed to make sure they point up exceptions.
Controls that concentrate on exceptions from planned
performance allow managers to benefit from the time honored
exception principle and detect those areas that require their
attention.
• Some deviations from standards have little meaning and others
have a great deal. Small deviations in certain areas may have
greater significance than larger exceptions in other areas.
• Consequently the exception principle should be accompanied in
practice by the principle of critical point control. It is not enough
just to look for exceptions; one must look for them at critical
points. The more managers concentrate their control on
exceptions, the more efficient their controls will be.

19. Ctn.
4. Seeking objectivity of controls
• Management necessarily has subjective elements, but whether a
subordinate is doing a good job should ideally not be a matter for
subjective determination.
• If controls are subjective, a manager’s or subordinate’s
personality may influence judgements of performance and makes
them less accurate, but people have difficulty in explaining a way
of control of their performance, particularly if the standards and
measurements are not kept up to date through periodic review.
• This requirement may be summarised by saying that effective
control requires objective, accurate and suitable standards.

20. Ctn.
5. Ensuring flexibility of controls
• Controls should remain workable in the face of changed plans,
unforeseen circumstances or outright failures. If controls are to
remain effective despite failure or unexpected changes of plans,
they must be flexible.
• E.g a budget system may project a certain level of expenses and
grant authority to managers to hire labour and purchase materials
and services at this level.
• As is usually the case, this budget is based on a forecast of a certain
level of sales; it may become meaningless as a system of control if
the actual sales volume is considerably low or above the forecast.
Budget systems have been brought in to ill repute among some
companies because of inflexibility in some circumstances.

21. Ctn.
6 . Fitting the control system to the organizational culture
• To be more effective, any control system or technique must fit the
organizational culture. E.g in an organisation where people have
considerable freedom and participation, a tight control system may
go so strongly against the grain that it will be doomed to failure.
• On the other hand, if subordinates have been managed by a
superior who allows little participation in decision making, a
generalized and permissive control system will hardly succeed.
• People who have little desire to participate or who have not been
accustomed to participating are likely to want clear standards,
measurements and specific directions.

22. 7. Achieving economy of controls.
• Controls must be worth their cost. Although this requirement is
simple, it is often difficult to accomplish in practice. A manager may
have difficulty in ascertaining what a particular control system is
worth or what it costs.
• Economy is relative, since the benefits vary with the importance of
the activity, the size of the operation, the expense that might be
incurred in the absence of control, and the contribution the system
can make.
• If tailored to the job and to the size of the enterprise, control will
probably be economical.

23. Ctn.
• One of the economies of large-scale enterprise is
being able to afford expensive and elaborate control
systems. Often the magnitude of the problems, the
wider area of planning, the difficulty of coordinating
plans and poor management communication in a
large organisation require such expensive controls.

24. Ctn.
8. Establishing controls that lead to corrective action
• An adequate system will disclose where failures are
occurring and who is responsible for them and it will
ensure that some corrective action is taken.
• Control is justified only if deviations from plans are
corrected through appropriate planning, organizing,
staffing and leading.