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Control over all the aspects, operations and functions of the organization are very essential. It is to keep a check and balance that everything is moving smoothly and in the right direction. For this purpose, the organizations adopt various business control systems. These systems may be complex in nature but are very effective in producing positive results. This is very well known that the resources are always limited; therefore, no chance can be taken to waste them even a little. Various control systems are designed and implemented in order to monitor and control the resources and to ensure that the best is derived from the employees. For this purpose, we will take an example of a restaurant, which is a chain of outlets and is well reputed for its outstanding food and a wide range of beers. In order to maintain its functioning effectively the restaurant implements control functions over its budgets, finance, market and employees.
Budgets are made by every organization where the funds available are allocated to different departments or area of the organization in accordance to its requirements and importance. A specific amount of budget is allocated to every area and it is highly required that all the operations and activities should be conducted within the limits of this budget. To ensure this a budgetary control is implemented. “Budgetary control is the process of finding out what’s being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences. Budgetary control commonly is called budgeting (Thomas S. Bateman, 2009).” The restaurant has also the limited budget and it is required that it performs all its operations within the restraints of these budgets. First, it is required to make a budget with all the considerations and various aspects in mind; this will help in tracking the progress and measure financial health. Usually, a sales expense budget sheet is made which provides expected sales, estimated expenses, and a profit estimate.
Financial controls are very much like budget control as they are also concerned with the financial health of the organization. The restaurant uses financial control balance sheets and profit and loss statements in order to be well aquatinted and measure organizational performance.
When a mechanical viewpoint is involved then the control systems become a part of the Bureaucratic control mechanisms. “Although formal bureaucratic control systems are perhaps the most pervasive in organizations (and the most talked about in management textbooks), they are not always the most effective. Market controls and clan controls may both represent more flexible, though no less potent, approaches to regulating performance (Thomas S. Bateman, 2009).”
“Market controls involve the use of economic forces—and the pricing mechanisms that accompany them—to regulate performance. The system works like this: in cases where output from an individual, department, or business unit has value to other people, a price can be negotiated for its exchange (Thomas S. Bateman, 2009).” Thus, the restaurant utilizes market control, look at the price of a good, employee compensation, and company performance, all measured by the analysis of the economy.
Clan control is providing empowerment to the employees to make their decisions without the supervision of the management. It no doubt motivates the employees but if too much space is given may also result in negative manner. The employees may make such a decision, which is incorrect, and not beneficial for the organization, therefore a monitoring is required by the management. “Clan control involves creating relationships built on mutual respect and encouraging each individual to take responsibility for his or her actions. Employees work within a guiding framework of values, and they are expected to use good judgment (Thomas S. Bateman, 2009).”
The basic purpose of the control mechanisms is to bring effectiveness to the organization. Hence, budgetary and financial controls have positive effectiveness on the everyday running of the restaurant. Budget allows knowing the actual position that how much to invest. So even before starting a business the budget control start. It assists in setting the goals, which are achievable and attainable. Furthermore, the effectiveness of these budgets is evaluated. A problem in budgets may arise due to an unforeseen expense or situation but it is the responsibility of the budgetary control to anticipate such situation and tackle it technically without hindering the progress.
The forecasting of the budgets is done based on the previous performances. The restaurant can always look back on its performance during last few years and forecast keeping in view the external and internal factors that how the new budget should be. Budget control helps the restaurant to plan for the future. The coordination and communication within the restaurant is also promoted by this. The actual performance can be measured with the help of budgetary control and the reasons for the differences can be evaluated.
The financial reports determine the financial condition of the restaurant. A balance sheet is used to see financial position on a particular time. The financial statement of the restaurant shows the total assets and total liabilities whereas the income profit and loss statement shows the restaurant’s revenue minus the costs of goods sold, minus operating expenses, and the net income loss before taxes. In addition to a cash flow statement shows the details of the receipt and expenses for each month of the year, it also determines if the company has a positive cash flow or not.
Furthermore, the effectiveness of market control determines such things as wage/salary for managers and employees. Usually, market controls like profitability and outcomes in financial terms can help in determining the performance of the restaurant. The more the profits the better restaurant can pay to its employees. The quality of the food and its ingredients used also depends on this market control. To set a price for its products in order to compete with the rivals the restaurant uses market control in order to evaluate the output of the restaurant. Moreover, the profits and prices are then compared to verify the efficiency of the restaurant.
The restaurant believes in efficient and comfortable atmosphere for the employees so that they give their best to the customers thus increasing the productivity and profitability. For this purpose, restaurant uses clan control in the restaurant to regulate their employee’s behavior and facilitate reaching their organizational goals. It develops a trust in the employees regarding the restaurant and the employees require minimal direction and standards.
The restaurant believes and implements the four important control mechanisms: budgeting, financial, market, and clan. With the help of these mechanisms, they decide, plan, organize, lead and control all the activities, functions and operations of the restaurant. The budgets help in determining the actual position of the restaurant. The resources and their allocation is determined and managed through the budgetary control mechanism. The planning and management of these budgets is very essential. For this restaurant business, each location is allocated a budget based on the size of the restaurant. Proper planning and management of these budgets will enhance the productivity, performance, cost reductions and savings of the restaurant.
Organization and management of the financial statements and ratios will help in determining the profits and losses; it will also assist in planning to increase the profits. Management can use this information in the goal planning process.
The wage rates given to each individual employee of the restaurant is determined with the market control. It helps in evaluating managers and selecting best employees.
All the branches of the restaurant differ in size therefore the resources are allocated in accordance to it. The goals are determined for each restaurant. Here the decision-making becomes much easier because of the clan control. Because of the friendly and cozy environment, the restaurant has the loyal team of members who own the restaurant and work with devotion and dedication. They are given incentives and appreciations in the form of rewards time to time. All this results in high profits, customers’ satisfaction and a good reputation.
Thus, no matter what the size of the organization by implementing the four-control mechanism it can flourish and boom in the market. It will have a team of dedicated and sincere employees who will put in their efforts to bring customer satisfaction, generate profits, eliminating wastes and cutting down the costs but all this need managerial wisdom. The managers will need to plan, organize, lead and control efficiently and the last aspect can be the most tasking.
Retrieved February 21, 2010. Retrieved from http://www-uwc.9c29
Thomas S. Bateman, S. A. (2009). Management: Leading & Collaborating in a CompetitiveWorld, Eighth Edition. McGraw-Hill, a business unit of the McGraw-Hill Companies,Inc.
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