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Chapter 1: It's the manager's job to control
A controller doesn't control. This may sound paradoxical, but the controller's job is to provide the best possible information and interpretation of it so that the controlling funtion can be carried out.
So who performs the actual controlling function? It's the CEO (Chief Executive Officer) or manager, as we shall call him or her in this book. It's the manager's job to do the controlling. The controller has to ensure that the managers actually do carry out their controlling. The controller, in short, is an internal controlling consultant.
A controller is an adviser, not an executive. He needs to persuade people to take the right course; he acts through them. The controller manages controlling – getting controlling done by the managers.
The manager's job
A salesman doesn't make a sales manager just because he knows the needs of his customers. Nor is a good engineer, simply by being a good engineer, necessarily cut out to manage a plant or a construction office. The head of the sales department in a pharmaceutical company once said to me after a lecture I had given on contribution accounting: „My dear fellow, here you have to look at everything from a medical point of view.“ There speaks the typical medic! His products require a doctor's prescription. He himself is a trained doctor. But now he's a sales manager too, he needs to look to the financial returns. Otherwise the company's economic health will suffer! And he has to guide people who did not learn the medical profession.
Take another example. A perfectly running machine built by a team of first-rate engineers must also have a price tag. Otherwise those engineers can't be paid for their excellent work. In other words, you cannot build a machine without also calculating its cost. Everything we do in selling, production, purchasing, research and development has to be accompanied by figures. Because we have to exchange goods and services in market place – following the divison of labour laws and the propensity to exchange as has been formulated by Adam Smith in his famous book on „Wealth of Nations“, already 1776.
And the controller is the „engineer of the figure-producing machine“ as a condition to get running the famous „Marktwirtschaft“. He also needs to be an expert. It is not something that can be done in passing.
But what it is exactly that makes a manager? It is not a professional education, whether in economics, law or technical subjects, not to mention physics or theology. Being a manager is not confined to any particular level in the hierarchy. The managing director is not the only manager in the company. Anybody in charge of a group must be a manager. Indeed, even a self-employed individual needs managerial skills. And, of course, managing is not restricted to any particular branch of organised activity. It's just as essential in the manufacturing industries as it is in the service industries, insurance and banking, or running a hospital.
How to construct a management model
Fig. 2 is an outline management model. As a model, of course, it has to apply to all cases. It doesn't claim to be original: it's simply a system which imposes some order on a tangle of management functions we are familiar with in our day-to-day work. First we have to define the job. The job is what we do. The objectives associated with the job define what we achieve by doing the job. Unfortunately, it is perfectly possible to do a lot and achieve nothing. Now we must ask ourselves: what kind of objectives – what kind of figures – apply to my type of job and responsibility? If I'm a salesman, then my objectives are sales volume and market share. If I'm involved in production, then my objectives are expressed in terms of units, cost per item, quality, i.e. standards of performance. The idea of attainable objectives applies generally to our economic activities. It also applies to sport.
I can play tennis without keeping the score. But then, I'm an amateur. The professional tennis-player watches the score. We could have amateur managers, of course, but the professional manager uses a scoring system.
On the left-hand side of the management model in fig. 2 we have to match the requirements of the job with the capabilities of the men and women employed to perform it. Do we have the right person in the right place? Or is this a case for job development? And if so, does this apply to every body? It's the manager's task to ensure that the people under his guidance are learning on the job and broadening their capacities. He's responsible, in short, for implementing job enrichment. The model's third component is dynamic. This is real life. Jobs, after all, are dynamic, for ever changing, allowing us to discover new potential in ourselves.
Incidentally, our management model works for the top manager in the same way as for the junior manager or the foreman. The junior manager's job is integrated into the senior manager's job – and vice versa. In the same way, the senior manager's objectives include the objectives of those working under him. This is most readily apparent where the top manager is head of sales and those below him are area chiefs. The area chiefs have their own objectives in terms of sales volumes, but these figures are incorporated into the senior sales department manager's overall sales objective figures. Again, the contribution II figure provided by area managers is incorporated in the contribution III figure
Figure 2: Management model
provided by the manager in charge of all domestic sales. When combined with the chief export manager's figures, these contribution III figures produce the sales director's contribution IV figures for total sales.
The right-hand side of the management model (fig. 2) illustrates the controlling process. We now have to ask what kind of activities need to be undertaken to reach the objectives. And what budgets do they need? The plan must say whether the objectives seem to be realistic; the objectives demand appropriate plans and budgets. To bring objectives and budgets into harmony, I should say that two or three budget rounds will be necessary. But, as we all know only too well, we can make a plan, but the best-laid plans seldom work out in practice. We have to recognise this and start making corrections. The need to make corrections is central to the dynamic art of management. But we should not change our plans and objectives because of variances. This would mean that we were painting our targets after we had shot our arrows. And no doubt the best time to make a budget would be the end of the financial year! But, unfortunately, this would leave us without a compass by which to steer our daily business. The advantage of the budget is that it highlights any variances; no budget: no variances.
But we have to make a forecast. We should announce how we think our corrections will be working out up the end of the budget period. This is the rolling forecast which we could make twice or three times a year.
Our management model also shows how plans of action are related to judgements of capabilities. How should we regard a budget proposal? Should a salesman set a sales volume target of 1000, when he really thinks he can reach 1200? If he does, he is off to a flying start. Or should a man budget for the cost of 1000 units when he really only needs 800? Perhaps he is guarding against a possible future cut. So there's more to preparing budgets than just shuffling budget proposals. It's more of a discussion process top down and bottom up.
And the controller is not just someone who tots up figures and staples papers together. He has to take part in he whole business of piecing together the budget jigsaw from the individual bits. At the same time he has to participate in discussions designed to break down the company objectives into individual objectives according to the defined jobs.
Testing the management model
Let's test out the model with some examples. Let's assume we are responsible for selling beer in a particular area. (This means  in fig. 2). We must ask the following questions to get our job description: How big is our district? Where are its borders ? What products are we going to sell ? All the company's products, i.e. beer, lemonades and mineral waters? Or are we specialising in just beer? Do our salesmen visit all the customers in our district, or are there special customers, the headquarters of big retailers, for example, who are the province of the sales director himself? What resources have we got for sales promotion? What kind of deductions and bonuses can we offer?
Then we have to match what the job requires with what we are able to do ( in fig. 2). We come next to the dynamic concept of job enrichment , At first we may just be concerned with selling. Then pricing comes into it. Then sales promotion, then logistics, and so on. On the right-hand side  of the management model we need to list the kind of figures representing the objecives of the brewery's district sales manager. Do we express them in hectolitres or sales money, or are we talking about profit, or is it the contribution left once the costs of sales promotion and office administration have been deducted? The lower down the target figure in the area profit and loss statement, the greater the...