Critical point control, management by exception and techniques

A manager cannot watch everything, so two ideas help focus control.

Critical point control: focus on the key result areas (KRAs), the points that are critical to success. A small rise in a big cost matters more than a large rise in a tiny one: a 5% rise in labour cost is more serious than a 15% rise in postage.

Management by exception: 'an attempt to control everything results in controlling nothing.' Only significant deviations, outside the acceptable range, are reported to management. If the acceptable range for labour cost is 2%, management hears only about rises above 2%; smaller ones are handled lower down.

Its advantages: it saves managers' time and effort; it focuses attention on important areas; it helps delegation and raises morale, since routine problems are handled lower down; and it spots critical problems quickly.

Techniques of control:

• Traditional: personal observation, statistical reports, breakeven analysis, and budgetary control.
• Modern: return on investment, ratio analysis, responsibility accounting, management audit, PERT and CPM (for scheduling projects), and management information systems (MIS).