The level of control existing in an organization is reflected in its Total Costs. Whether by default or by excess, an organization, for profit or not, is exposed to costs that can be very high. The fundamental question is to find that midpoint in terms of control that minimizes the costs directly or indirectly generated by it.
The graphical representation of the costs corresponding to the various levels of control is U-shaped, indicating that at zero or low levels of control we have high costs, and that the same occurs with high or high levels of control.
With no or low levels of control, the organization suffers the costs of lack of prevention, high levels of mistakes or poor decisions, fraud, embezzlement and high levels of waste. The lack of quality, not only of the products, but also of the processes, the numerous reprocessing activities, both of products and of inputs and internal information, the loss of customers, the commission of crimes and the lack or absence of budgetary control and management, greatly increase the costs of the organization. Among other examples we have losses generated by collection problems and bad debts, resulting from an optimal control system in credit matters.Another case is the negative results of hiring personnel without adopting sufficient prevention measures.
On the other hand, the excess of controls, manifested by the inspections of products and supplies purchased, the expenses of inspection of the processes and products, the excess of bureaucratic procedures, the slowness of decision-making in commercial matters, end up driving away good business, wasting possibilities and wasting resources due to the excess of controls, always accompanied by an excess in the centralization of decisions.
As in the human body, both the lack of certain minerals and their excess can be very harmful, in the same way, both the lack and excess of controls are manifestly harmful to organizations.
The organization cannot lack controls, but neither can it fall prey to excess. How to get to the level that allows optimum control at minimum cost? Some possible alternatives are the following:
Transfer control of inputs, both in quality and quantity, to their suppliers.
Implement computer systems that generate automatic controls and report by exception.
Installing "error-proof" systems.
Applying a policy of delegation of functions and responsibilities, granting sufficient and necessary power to employees and workers (empowerment).
By implementing management and decision-making systems by exception, taking advantage of the highest possible standardization when making decisions.
Applying the Pareto analysis when carrying out controls and analysis of activities and processes, in such a way as to concentrate resources on those points with the highest incidence on costs.
Continuously and systematically evaluating, both by internal staff, and with the opinion of clients and external consultants, about the degree of bureaucratic complexity in the company's processes.
Simplify authorization systems by applying the Budget Administration. Once these budgets have been approved, the expenses and their payments will be made by designated personnel, within the limits of the various concepts, and in accordance with the deadlines.
Evaluating the hourly cost of the different managerial activities. If a Financial Manager receives a salary of $ 10,000.- monthly and spends 20% of his time signing checks, not only is he creating a "bottleneck" when authorizing them, but also the The cost of said process is high, beyond the value of the checks. Much wiser is to give more power to the Treasurer and to a certain financial delegate of the Controller, making use of a Budgetary Control System (computerized).
It is clear after analyzing that the majority of companies have a lot to do when it comes to reducing the costs generated by excessive controls. The more controls are required, the slower decision-making and problem solving becomes, the more papers and signatures are required, the more officials assigned to an unproductive task are held, the slower the response to customer requirements, the more time It takes time to adopt innovative measures, and the greater the resources and time lost in red tape.
Debureaucratization, teleworking and outsourcing of operations are methods that help in this difficult task of reducing costs, making the organization more competitive and profitable.
