CONTROLLING

 

Yudi Yudiana and M. Maulana Hamzah

Post Graduate Program of Management and business – Bogor Agricultural University (MB – IPB), Master Sharia of Mangement – EK18

Abstraction

Management practitioners can learn the concept of controlling from divine messages. The basis for control is the same irrespective of the type of control, i.e., internal or external, business and personal control, social or non social control. In this paper an effort has been taken to show the fundamental divine views with regard to management function controlling. Distinctions have been presented between controlling through Islamic perception and it’s example from Islamic history. This paper will show the ways to think about divine views as well control model practiced by leaders of the golden era of Islam.

Keyword: Controlling, management, Islamic, business

A. Background

Management control system (MCS) is a process which assures managers that the organization is carry on its objectives and strategies efficiently and effectively. It ensures the managers or the decision makers in an organization to achieve the organizational goals and objectives. In addition, one important function of MCS is to be used as a management tool to implement the organization’s strategy.

In Islam, The qualities of people are also very important in controlling. The hierarchy of control practiced fifteen centuries ago by Muslim administrator is now recognized by contemporary researchers in organization control. To design an appraisal system based on Islamic principles, the organizational leadership and its social environment must be positively oriented toward such a system. Organizational effectiveness controlled and evaluated both subjective and objective terms and Islamic organizational values are found in the Holy Quran and traditions of Prophet (peace be upon him). The foundation of control was stated in Islam in a very simple and concise manner. 

B. Controlling in General Perspective

B.1. Definition

In Wikipedia, controlling known by a function of the system that adjusts operations as needed to achieve the plan, or to maintain variations from system objectives within allowable limits.

Robert J. Mockler said that Management control can be defined as a systematic effort by business management to compare performance to predetermined standards, plans, or objectives in order to determine whether performance is in line with these standards and presumably in order to take any remedial action required to see that human and other corporate resources are being used in the most effective and efficient way possible in achieving corporate objectives

Simons (1990) defines control systems as “the formalized procedures and systems that use information to maintain or alter patterns in organizational activity”. Hence, it covers for example planning, budgeting, environmental scanning, competitor analyses, performance reporting and evaluation, resource allocation and employee rewards. From this definition MCS focuses on how managers use information from these systems in their decision makings and controlling business strategy.  MCS  also  provides information that is useful for the managers to perform their jobs and to assist organizations in  developing and maintaining viable patterns of behavior. It is also a system that being used by an organization to evaluate the performance of the organizational resources that will eventually influence the behavior of the organization to implement organizational strategies

B.2. Discussion

Controlling always followed by two other function of management, both are performance and goal. Therefore, we can define controlling is the process of monitoring organizational performance toward the attainment of organizational goals. To get good performance organizations should decide a standard of performance, then base on this, quality controller as people in charge of controlling can correct any mistake and measure any progress of employees’ performance, such us productivity, discipline, and attitude.      

The Importance of controlling is helps in accomplishing organizational goals by facilitating coordination in action. We cab divide it importance into four.

1.      Enables management judging accuracy of standards, it may call verify function

2.      Facilitates efficient use of resources, it may call resources function

3.      Helps improving employee motivation. A good controlling system motivates employees and helps them to perform better.

4.      Creates atmosphere of order and discipline. It will be arrest dishonest behavior such as cheat, dishonorable etc.

All these four importance of controlling will lead organization to the right track to achieve their goals. The controlling function also facilities coordination an organization each department and employees in an organization is governed by predetermined standards that are well coordinate with one another to attain organizational goals. From all these explanation above, we know that controlling is very important managerial function. It is concerned by taking measures or preventive actions to ensure achievement of organizational goal.

From a video that presented by Mexus education, they said controlling is five-step process of establishing performance standards based on the organization’s objective, measuring actual performance, comparing the two, analyzing the deviation and taking corrective of preventive action as necessary. Let’s explain in detail.

First, Performance standards is contains two kind, both are Measurable Standard known as Tangible or quantitative standards and Non-Measurable Standard known as In-Tangible or qualitative standard. Those standard which can be measured and expressed in numbers or in term of money are called as measurable (tangible of quantitative) standards. They can be in the form of cost, output, expenditure, time, profit, etc. Those standards which cannot be measured monetarily or in numbers can be termed as non-measurable (intangible or qualitative) standards. For example- performance of manager, workers’ attitude towards an organization etc. it’s important to have flexibility standards.

Second, after setting standards, the second step is to measure the actual performance of individuals, groups, or units. The measurement can be done through: personal observation, written or oral report by or about employees, automatic methods, inspections by test or sample.

The Third is comparison of actual performance with standards. The comparison of actual performance with pre-determined standards is an important step in control process. Such comparison will reveal the deviation between actual and desired results.

The fourth is analyzing deviations. After determining deviations, a manager has to find out the extent of deviation as well as the cause of deviation.  Extent deviation means that the manager has to find out whether the deviation is positive or negative or whether the actual performance is in conformity with the planned performance. As deviations from performance standards are inevitable, therefore, the managers have to exercise management by exception.  A manager needs to find out the critical and important deviations for his business. He may ignore minor deviations but should looked upon major deviations like replacement of machinery, appointment of workers, quality of raw material, rate of profits etc.

After identifying the deviation, a manager has to think about various causes behind the deviation, such as the cause may be erroneous planning, unrealistic standards, defective process, inadequacy of resources, or there are ineffective supervision and communication etc.

The fifth is taking corrective actions. Once the causes and extent of deviations are known, a manager needs to take remedial measures for them. If a manager finds that the actual performance is not in conformity with plans even after taking the corrective measures, he needs to revise the targets.  

C. Controlling in Islamic Management

C.1. Definition

From the Islamic point of view, control is made to clarify and to correct what is not properly arranged, correcting mistake, and putting something in its right place. In shariah based such control is divided into two: First, Self-control having source from the faith and belief of someone in Allah SWT. It Islam it calls as Taqwa. This definition does not correspond to space and time. It is what then called with strong control coming from inner-heart and not merely from outside. Second, a control will be more effective if its system is also done from outside. This system of control may consist of mechanism as to the control itself from leader with the condition that it is relevant with delegated task, balance between completing and planning the task given, etc.

The four functions of management encompasses the planning, organizing, leading and controlling of the various limited resources, capital, human, finances and others to maximize the effectiveness of the production of goods and services. From an Islamic perspective, the four functions of management  namely, planning, organizing, leading, and controlling, are interconnected with decision-making and  involve the use of human, financial and physical resources as well as information; these are all intimately  connected with maqasid al-shariah (objectives of shariah), by means of effective and efficient methods. The maqasid al-shariah aims to protect the religion, life, family, human mind, human characters and wealth.

Control in organizational behavior involves regulating the behaviors, adjusting and conforming to the specification of objectives. Some amount of controls unavoidable. The essence of organization is the staff or workers have to give up their independence and follow the requirements/wants of the organization so that the common goals and objectives can be achieved. Controlling from the position of Islam is more effective as it minimizes the cost of the actual controlling activity as a devoted Muslim worker will be very much aware of the concept of reward and punishment in Islam. With the belief that Allah SWT is ever watching their performance, it will inadvertently prevent them from committing or covering any mistakes.

In Islam, for a Muslim to serve Allah, one of strategic management’s important goals is to attain excellence. Strategic Islamic management stresses Islamic values and beliefs as its core which based on Tabi’ and Shar’i principles (Beekun, 2006). Tabi’ principles relate to the mundane where man applies reason and experience to run his daily business whereas Shar’i principles convey the Divine rules that man must observe simultaneously. While the Shar’iah principles describes how Islamic transactions are to be conducted in a just and equitable manner, other dimensions of market activity need not depend  on explicit divine guidance. This is the tabi’ (natural) aspect of market activities that defines efficiency  and, therefore, performance. It is nature’s way. Tabi’ values, which are universal, can be used by all people, irrespective of faith and belief.

C.2. Signs of Controlling in Quran

  

We sent down the (Qur’an) In Truth, and in Truth As it descended: and We sent Thee but to give Glad Tidings and to warn (sinners)  (Al Quran. Surah Bani Israil-17:105).

In terms of management controls the rules must be pre-established by the top authority of the organization. i.e. The Board of Directors, the President of the company, or other managers.

  

Do had come unto you An Apostle from amongst yourselves: it grieves him That ye should perish:  Ardently anxious is he Over you: to the Believers Is he most kind and merciful (Al Quran. Surah Taobah-9:128).

By the same token the company rules should clearly and adequately describe what the managers do expectfrom the performers.  A new lesson could be learned from Islam. That is in writing the company policy and procedures (rules  in general terms) the ruler must emphasize first and strongly the benefits driven from adhering to the pre-established.

A similar (favor Have ye already received?) In that We have sent Among you an Apostle Of your own, rehearsing to you Our Signs and sanctifying You and instructing you In Scripture and Wisdom, And in new Knowledge (Al Quran. Surah Baqarah-2:151). 

In today’s business language, the business rules must be communicated to all levels of performers in their own terms and language. The rules must be in writing for future reference purposes, and to enable the performers to understand top management expectations. It should be noted that expected performance is the basis for performance evaluation (Abu H.A.M., 1995).

C.3. Good Control in Islam

Before we explain about how islam defines the good control is. We should know understand the foundation of correction as standard basis of controlling in islam.  

C.3.1. Foundation of Correction in Islam.

A correction on mistake in Islam is based on three things; those are:

1.      Tawa saubil haqqi (exchange of advices on the basis of righteousness and clear form) based on Quran, chapter al-Ashr verse 3

2.      Tawa saubis shabri (exchanges of advices on the basis of patient) based on Quran, chapter al-Ashr verse 3

3.      Tawa saubil marhamah (exchange of advice on the basis of mercy) based on Quran, chapter al-al-Balad verse 17

In conveying the message of truth, patience will be tested, as well as other things such as resoluteness etc. it must also carried rightly, as according to good pattern. Its preaching must be good and with wisdom and mercy. Eventually, if all this has been done, the organization will be free from dishonor behavior.

C.3.2. Good Control

Good control is that one that was already built in a program planned. In arranging program, there must be element of control in it. Its object is to make sense as regard to someone doing a work that his superior pays attention to him. Therefore, the better control is that one which is built from inner-control and monitored by its good system itself.

System of good control cannot be separated from the imposition of punishment and reward. But one thing a manager must understand is that a control will be effective only if each of manager gives best example to the subordinates. Because subordinate can also carry mechanism control , but its disadvantages lies on moral only and not strength. Talking about confidence, both confidence and control are not to be separated. A leader can put his confidence in his subordinate, but he should remain in control of them.

In mechanism of control can be executed in to ways; direct control for new staff or consumer and elegant control for old one. The practice of direct control may be seen in Islamic bank. The main objection is to create mechanism of control by which positive outcome is expected. And when Islamic bank puts its personnel into corporation, it will lead to the growth and increase in such corporation. Its permissible as long as its aim is the betterment.

But there were always an obstacle in controlling costumers, the frequently reason is collusion between bank’s employee and entrepreneur. Therefore, honest and good character should be remained in banker’s mindset. So what if the customers from different religion? One thing that must be kept intact that is the values of goodness is universal. Muamalah activity does not distinguish different religions. It means that it is permissible in Islam that controlling can be made by non muslim. 

C.3.3. Case Study

A. Control in the Era of Prophet Muhammad (Peace Be Upon Him)

Tracing back the history life, the Prophet Muhammad SAW had exercised control in each sphere of life. If someone does a mistake, the Prophet called on him directly so that no mistake was let behind. The prophet SAW had ever seen someone did improper ablution (wudhu), he corrected that person directly. When there was a companion who offered prayer improperly, the prophet Muhammad SAW ordered to pray once more. This became the best example as to how a mistake was directly corrected with no delay and the issue was solved.

Other example is about mechanism of proving corruption. It started with the record of property and well being of someone before he was appointed as official and after he held such. The record on such matter must not only be made against state officials only., but also against manager or director in any corporation.   

B. Control Process Practiced by Umar (RA):

Umar (RadiAllahuAnhu) did not go to any management school for training, but his education, wisdom, and especially his company of the prophet allowed him to master the art of management. Umar (RA) used to clearly define a set of criteria for appointing leaders. Umar(RA) used to extensively define the roles of his commanders and his governors,  and he made sure that they followed his general direction while allowing them their operational freedom.

Umar (RA) once asked his companions, what they would think if he appointed one whom he believed to be the best man among them and ordered him to do justice. Would Umar (RA) have done his share? They replied saying “Yes”. Umar (RA) retorted “No”, not unless he saw whether the appointee did what he ordered him to do. Umar (RA) would know the control process. Umar (RA) indicated that he would not have done his share had he not checked whether his appointee did what he ordered him to do. This signifies that Umar’s(RA) first task is to explain to the appointee what he is expected to do. Then, he has to check whether the appointee is doing what he was ordered to do. The checking of Umar (RA) over the performance of his appointees was carried out through certain programs such as the annual Hajj conference, Umar’s (RA) personal visits, intelligence agents, and the agency of complaints which received the public complaints about the various rulers. It was also carried out informally through the culture of the people which was based on forbidding what is evil and enjoining what is good.

In cases where the appointees did not carry out their duties appropriately, Umar (RA) did not hesitate to change them. As a matter of fact, Umar( RA) did not take such actions just to correct some wrong, rather he was very decisive in making any decision that could improve an already good performance. Umar (RA) was committed to continuous improvement as pointed out. The process of improvements was facilitated by the culture or advice as prophet Muhammad (SAW) said “religion is advice”, which is practiced by Umar (RA) through participative management programs.

Basing on the above discussion, we can summarize the control process practiced by Umar (RA) as follows:

1)  The standards have to be well clarified.

2)  The necessary input should be provided. This input  should include the necessary resources and skills as well as the needed authority.

3)  A continuous search for new ways of improving the performance and its standards should be established. This search is carried out through a favorable culture and some specially designed programs. The culture should be that of: Commitment to quality, participation, and involvement. The programs in modern organizations can include quality circles, regular invitations of outside consultants, training, research and development, and customer’s surveys.

4)  Both the performance and the output are closely checked against the standards through the existing culture of commitment and involvement, and some specially designed activities such as regular measurement, statistical quality control, and customer’s surveys

5)  If the performance and/or the output do not conform to the standards then corrective actions must be taken.

6)  If the performance conforms to the standards, then the possibility of improving the performance is checked.

7)  If there is a way of improving the process, then the necessary corrective actions to implement it should be taken. These corrections should encompass the ongoing performance, the input, and the standards themselves.

The above control model is presented in Figure: Control Process Practiced by Umar (RA):

D. Conclusion

Both conventional and islam agreed that there are two ways for controlling they are person and system. But in Islam, person define as internal controlling base on taqwa (feeling fear to Allah as the Lord of control), it just be built by understanding and implementing the rules of islam correctly. Different from Islam, in general perspective it base on universal values of goodness. It may be different in every country or organization. The focus of controlling is all about performance and goals. But in Islam there is additional focus, it is aim that performances and goal must be get ridho from Allah SWT.

As the final conclusion, we got three key of controlling, those are: firstly the control comes from self-control. In Islam base on belief the good is absolutely comes from Allah. In conventional, it defines absolutely base on good performance and achieving goal. Secondly, control will go normal if its leader is clean and credible person. Thirdly, in the matter of mechanism, system must built properly, therefore common awareness will arise that if someone does a mistake, he must be corrected directly wit no delay as Prophet Muhammad SAW did.  

References

Al-Quranul Kariem and Translation

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Humayon A. Dar and John R. Presley. 2000. Lack Of Profit Loss Sharing In Islamic Banking: Management And Control Imbalances. International Journal of Islamic Financial Services Vol. 2 No.2 July- Sept. 2000. ISSN 0972-138X.

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Simons, R. (1990). The Role of Management Control Systems In Creating Competitive Advantage: New Perspectives *, 15(112), 127–143

Robert J. Mockler (1970). Readings in Management Control. New York: Appleton-Century-Crofts. pp. 14–17. ISBN 978-0-390-64439-8. OCLC 115076

http://www.gowerpublishing.com/isbn/9781409407522