Controls management is a key part of a company's success. It requires all employees within the company to understand the constraints and policies implemented. Controls are set by regulating agencies, local governments, and the company. Controls management takes place in the planning stage of a company's development. These components can help your company avoid costly mistakes and lawsuits.
Your company's goals need to be set to put in place controls management. Setting company goals is the first step in controls management. Once you have these goals, financial, production, and error guidelines can be set.
For example, a sales manager's goal is ten million dollars in sales in the current fiscal year. He then assigns each of his ten salespeople a goal of one million dollars in sales. The sales manager watches these goals regularly throughout the fiscal year to ensure all parties are on track to meet the ten-million-dollar goal.
This article will explore controls management, types of controls, and common pitfalls.
Controls management is your foundation
Controls management is your business's foundation. Understanding the types of controls will help you set your company up for success.
Without controls management, your company may face data breaches, financial issues, or lawsuits. Controls management gives you the ability to be proactive instead of reactive.
Preventing an emergency is much less stressful and less costly than reacting to one. Controls management ensures your company is addressing and preparing for all possible eventualities, and also knows what it needs to accomplish.
Controls management is a part of your operations strategy. Having a solid operations strategy is important. It allows for responsible and continuous company growth.
Types of controls
The four types of controls that comprise controls management are security, financial, regulatory, and quality. While you will use all four, one or more of these controls is probably more important to your business.
For example, let's look at a small business that makes body care products such as lotions. This business will need to use security and financial controls. But, quality and regulatory controls will need the most attention. In this industry, lotions and soaps must be all produced to a standard that meets federal and state guidelines. Customers also expect consistency and safety with every sale.
Security controls management ensures customers' personal and private information stays secure. It also guarantees that the company's financial and confidential data remains secure.
Even a minor data breach or leak could cost a company hundreds of thousands of dollars to compensate victims. The company could face lawsuits. A company with a data leak may also lose customers' trust and, consequently, their business.
IBM reported in 2023 that the average cost of a global data breach reached an all-time high of $4.45 million. This figure represents a 2.3% increase from the previous year and a 15.3% rise from 2020. Hackers are getting more sophisticated, and digital technologies are more advanced. Protecting yourself from a data breach is more important than it's ever been before. Many small businesses outsource security controls to protect their customers and themselves.
In 2019, Facebook faced a security breach where 533 million users' information was leaked. This included comments, likes, reactions, account names, Facebook IDs, and more. A data breach for a small business may have a smaller impact than a larger company. Yet, the cost of rectifying the breach could be catastrophic for the business.
Financial controls are the predetermined targets a business sets for growth and profitability. Managers track spending and set limits for employees to ensure that they meet these goals. Establishing financial controls helps safeguard assets and detect accounting errors. Financial controls are essential to avoid accounting mistakes. They also ensure that actions are consistent with the goals outlined in your business plan.
Some examples of financial controls are:
- Segregation of responsibilities of different people in different departments and the rules for approving financial transactions
- Internal audits-Regularly checking, using a third party, the balance sheets
- Establishing a formal system of checks and balances to submit payments
Financial controls can take many forms. Small businesses don't have many staff members to segregate duties. Determining what resources your business can devote to financial controls is essential.
It's vital to assign financial control duties so they are exercised frequently. Assignment of tasks goes to one person or spread throughout the company.
Some examples of these duties are:
- Analyzing balance sheets and income statements
- Reconciling accounts payable and receivable records
- Monitoring cash flow projections
- Checking inventory
- Updating the balance sheet
- Preparing the income statement
- Preparing the cash flow statement
Quality controls are the limits and guidelines set by a company about the caliber of its offerings. These controls ensure that their products or services meet the standards set by management. Quality controls can encompass streamlining production processes, the use of resources, and the products a company produces.
Implementing quality controls means setting standards by which all products and services are measured. For a tangible good, such as a vehicle, this is quantifiable. It may be more difficult for a company that offers services to quantify these standards. Mystery shoppers and focus groups are utilized to gauge the level of service provided in a store or service industry.
Quality control can impact all areas of a company:
- Employee morale: Employees producing high-quality service and products may feel happier in their roles.
- Goodwill: A company that sets quality controls for the environment can get positive media coverage and goodwill from consumers.
- Reduced costs: Quality-controlled production methods can reduce waste, save time, and lower production costs.
Companies often make a quality control commitment and publish it on their website. For example, Coca-Cola's quality commitment protects its employees, the environment, and consumers. Coca-Cola wants its products to be consistent so consumers can rely upon them without worrying.
Regulatory controls are the ones that you are most familiar with. Set by federal and local government agencies, these controls dictate the health, safety, financial, quality, and environmental standards.
There are three main types of regulatory controls: command and control, performance-based, and management-based. Command and control is technical. An example of command and control that we have all benefited from is the control of air space by Air Traffic Control. The Federal Aviation Administration regulates air space and traffic to ensure safe air travel.
Performance-based regulation focuses on the product or service produced rather than the creation process. Management-based regulation is the set of limits and guidelines an organization sets to regulate itself.
Regulatory controls reach into our everyday lives. All the products and food we buy are subject to regulation in some manner. If you visit a fast-food restaurant, all the food there has passed inspection as it was grown, transported, and cooked. The restaurant is regulated for cleanliness, food safety, and labor standards.
Safe and secure
Many of the imposed regulatory controls on businesses are for the safety and security of consumers. Hospitals must adhere to HIPAA (Health Insurance Portability and Accountability Act) regulations. These ensure that patients' health records stay private. Each healthcare provider handles secure patient information to meet regulatory controls.
Safety controls can help protect the consumer and the worker who makes a product in a plant. Parent companies may also issue standards to franchisees. For example, the Occupational Safety and Health Administration (OSHA) was created to protect work health and safety.
In-person inspections are performed for safety and security guidelines. The company must make adjustments or improvements if an inspection is not passed. These are minimum requirements to continue manufacturing or carry on with business. If a restaurant fails a safety inspection, they may need to demonstrate they are cooking foods to a specific temperature to pass a second inspection.
Getting started with controls management
Starting controls management requires staff, software, and measurement systems. A written action plan is the other key component to success in this area. This will ensure that everyone involved understands why these steps are being implemented.
To put in place controls management, you need staff. Management can either take the measurement process on themselves or assign it to an employee. Every employee must understand the controls in place and adhere to them.
The cycle is circular as it returns to management to ensure the controls are followed. Employees not adhering to the plan can receive mentoring or be re-educated. Then, after a predetermined period, they are reevaluated by management. All levels of employees should be meeting controls and management standards.
There are lots of software and hardware options available for controls management. The tools needed will vary by the type of business. For example, an accounting firm will have to use financial tracking software. A large firm with many employees will use HR software to ensure compliance with necessary training.
Motion's project management software is perfect for getting started with controls management. Motion helps you create tasks, assign duties, and automate the project. Motion's software does a lot of the heavy lifting so your employees can focus on the business at hand.
Measurement systems provide the metrics and processes a company uses to evaluate how well its controls management is working. These systems can measure money, number of products produced and sold, or even accidents in the workplace. The measurement system you use depends on your company's goals and industry.
Pro tips for utilizing controls management
Identify the cause
When a variation from the set goal or metric occurs, the next step is to take a moment and examine why this occurred. Using root cause analysis can help prevent the same variation from happening again in the future. Addressing the underlying cause or problem can positively impact the company on a long-term basis.
Let's look at a small internet provider, AmericaClicks. This company offers internet and phone services to rural areas. During the summer months, their customer satisfaction ratings plummet.
To get information about the cause of this decrease, AmericaClicks’ marketing staff performed focus groups. They distributed surveys to existing customers. The information gathered shows that power outages during the summer months are causing this dramatic decrease in customer satisfaction. The installation of a few strategically placed generators solves this issue. Customer satisfaction remains steady throughout the year going forward.
Once variations have been examined, it may be necessary to determine a new plan of action. If a salesperson could not meet their sales goal of $500,000 due to a production delay, it would be necessary to address production issues. Until those production issues have been addressed, the salesperson's goal may need to be adjusted.
Avoid common pitfalls
Implementing controls management is not an easy process. Avoiding common pitfalls can mean the difference between controls having a positive impact on a business and having a negative impact.
Failure to assign control monitoring to a department or an employee can negate any positive impact the control would impose. The task of monitoring controls will ensure that individual employees and the company itself are being held accountable. A large company like a fast-food chain may offer employees the required training to ensure controls are followed. A small business might send out a company-wide memo and require employees to take a comprehension quiz after reading through it.
Find the right software
It's not enough to establish a control system. Without the necessary monitoring software, it's impossible to track statistics. The goal for any business is constant improvement. A wide variety of Control Management Maintenance Systems (CMMS) are available. The software you choose will vary. It depends upon your number of employees, business size, and service or goods provided.
Controls management requires consistency and predetermined frequency. Setting specific dates to track progress, finances, or output levels means that all controls will be followed. Scheduled and administered employee performance reviews can help management identify problem areas. Managers can also advance high-achieving employees.
Make controls management work for you
Controls management is critical for every business. Understanding and implementing accurate and effective controls can prevent costly lawsuits. The process of controls management involves every employee within a company. Getting everyone involved increases engagement and ownership of the process.
The controls management cycle is circular. It starts with upper management setting guidelines and expectations. Then, all employees follow through on those guidelines. The task then circles back to management to ensure compliance. Every member of an organization plays a role in the success of controls management. Because of this, education for every employee is critical.
To make this process easy and seamless, get this started with Motion. Motion software can help your business communicate more. It can also be your intelligent assistant on all your projects, including implementing controls management. Motion's software manages your and your team’s schedules based on priorities, dependencies, deadlines an available work time. Using software helps you and your company stay consistent and strive for constant improvement.