Systems of Controlling

Source: Controlling Modern Government

The four methods of controlling chart above can be very helpful to envision ways to improve risk management control systems.  A control system can use one or several of these methods.  But first it might require a little translation:

  1. Contrived Randomness – choosing by lots does not seem to be a control method, but in fact it is a part of a method that is used every day in almost every business.  Contrived randomness is usually used along with another of the control techniques.  Instead of constantly applying the other control processes, they are applied in a random fashion.  It is easy to imagine how the contrived randomness is vital to cost effective and just plain effective controlling.  If Oversight, for example, is used for controlling on a constant basis, it is very costly, requiring review of every single outcome.  However, if the Oversight is applied regularly, say every 10th event, then the cost is reduced by 90%, but the effectiveness is also reduced by up to 90%.  That is because the person who is being overseen can easily adjust to comply with the control process only on every 10th event and fail to comply the other 9 times without the control process noticing.  Using a random schedule means that a person seeking to avoid the effort of compliance is at much higher risk of being caught by oversight.  And even better, BF Skinner found that intermittent reinforcement provided by positive situations found in random inspections can have much higher impact on creating favorable habits than regular or even constant reinforcement.  The chart also suggest rotation of staff.  This part of the Contrived Randomness approach to controlling is seen in the efforts by banks to control fraud by shifting employees and especially by doing more thorough audits during employee vacations, which is again a combination of randomness and Oversight.
  2. Mutuality – When Mutuality is used as a control system, it sometimes uses peer review, in addition to processes that involve partnering.  The partnering process can be very expensive, or it may save time and money depending on the process.  When the partnering involves two people doing what one might have done, then the extra cost is obvious.  In fact, the cost might well be more than double for a two person term because of the degree in interaction between the partners that might add time to the tasks.  This must be offset by an increase in effectiveness, quality or continuity for the doubling of resources to make sense.  But the control system application of peer review is very common.  The peer review can be at several possible levels – the peer can be doing a very high level check – “does this make sense?”  Or they can be doing a more thorough review.  Or the peer can be trying to totally independently reproduce the work being reviewed.  In addition, the decision must be made of the frequency of the peer review.  The same ideas expressed above about intermittent reinforcement apply to peer review.
  3. Oversight – monitoring from a supervisory position is the most common form of control.   The supervisor is the most natural candidate for the type of oversight that is needed.  It means broadening the supervisor’s role to go beyond the accomplishment of the primary objective of the unit to also include the controlling objectives.  The downside to this method is the dilution of the supervisor’s attention distracting them from the accomplishment of the primary objective.  In addition, there is the potential mismatch of skills and talents.  In some cases, the primary objective and the controlling objectives require very different methods and skills.
  4. Competition – Competition is another technique that  may be difficult to imagine as a control method.  And what is needed to make competition a controlling system is openness of information about the activities that are to be controlled.  For different members of a team to compete, they need to know what and how the others are doing.  This openness is not very common.  But one of the objectives of the open office movement is the free controlling that automatically comes in the open environment.  Some firms do use Competition through a totally open system of managing where all members of a unit know about what every other member is doing.  Control breaches then can only happen if the entire unit agrees that they are necessary.

Many would think that Oversight is the main form of controlling.  Hopefully, this post will expand your view to include these other options.

Explore posts in the same categories: Enterprise Risk Management, Risk Management System


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