The implementation of controlling functions in
management
in the context of nonlinear development of economic systems
Tatiana
A. Golovina, Ph.D., Associate Professor
State
University – Academic Research and Production Complex
Economics
and Management Department
Orel,
Russia
e-mail:
golovina_t78@mail.ru
The
intense structural changes and the continuously increasing complexity of the
economic objects and their environments call for the creation of a fundamentally
new controlling function in management.
In
the modern world, strategic planning includes management of changes within the
enterprise and the external environment, and searching for innovative flexible
methods of decision-making in situations when the manager does not have the
complete information about the current situation.Because the access to full
information is often limited, the contemporary management turns to a process of
controlling. Implementation of controlling functions in management helps, in a
real-time mode, to get the following results:
-
to foresee the opportunities for
development and to prevent the threats;
-
and to be informed about and control
the various internal and external factors.
One
of the main issues that the modern strategic management deals with is finding
the ways for the enterprises to adapt to a constantly changing nonlinear economic
environment. The additional functions of the management include finding the
effective methods that could influence and change the external environment to
the benefit of the internal goals.
These
new controlling functions of management are implemented because the company’s
strategic planning and development is done in the context of nonlinear economic
systems, where the decisions are made in conditions of absence of complete
information, which is needed for the identification and model description of
the analyzed system.
In
the context of nonlinear development, the economic systems management has to be
based on the following principles:
-
Careful examination of the current
state and development of the forming markets, the individual enterprises, and
the state government interests;
-
Creation of appropriate conditions
for the economic systems structure for it to be maximally adapted to the internal
and external factors;
-
Active promotion of the industrial
interests of the enterprises.
For
the open nonlinear economic systems it is crucial to keep balance between the
information coming from the external and created in the internal environments.
The economic system is able to keep the informational balance through its own
special acts that either absorb the incoming information or discharge of it. If
imbalance occurs, the open system reacts to it by either creating functional
connections or by destroying them. The system is self-organized as a result of
local orderliness.
Picture
1 outlines the principles of management of the economic systems in nonlinear
economic environment.
It
is important to study controlling functions of management because of the
following factors:
-
The functions of controlling in
management change rapidly due to intensive structural and technological
progress that has been happening in the modern times;
-
The
priorities of the academic research on controlling are evolving and lead
to changes in the objectives of research, the initial hypotheses, and all other
factors of research as different hierarchal levels;
-
The incommensurability of data is
one of the biggest obstacles for modern day researches. It is important to come
up with new data gathering and comparison techniques;
-
The research methods and standards
are rapidly changing;
-
The access to data is limited due to
an inappropriate development of informational infrastructure and dataware
systems;
Picture
1 – Properties and Principles of Economic Systems Management for Nonlinear Type
of Development
-
Corporate reporting is limited due
to the failure of the companies to disclose full and complete information;
-
The quality of the automatic data
analysis has been reduced because of the incommensurability of the many qualitative
and quantitative factors that need to be analyzed;
-
The accuracy and adequacy of the
calculations is reduced due to neglect of important factors and implementation
of additional auxiliary variables.
The
implementation of controlling functions in the context of nonlinear development
of the economic systems is based on stochastic approximation of random sets of system
parameters. These parameters are used to describe the changes in the
characteristics of the system through the iterative procedures for linking the
object model descriptions and the statistical data in the following situations:
1)
in regression models with a moving
structure in which the structural coefficients are represented by the functions
of time or factors, or both. This means that new econometric models based on
principles of self-organization need to be formulated and constructed [3];
2)
in production functions with
variable structural parameters which are capable in accounting the significant
variations of factor effects and the effects of technological change;
3)
in solving the problems about the
dynamic optimization of controlling methods where the structural system of
equations is brought to a normal form. These kinds of problems give the
opportunity to express the exogenous variables through the endogenous
variables, find the equilibrium state for the economic system, and create a
long-haul development trajectory. Controlling functions provide a smooth
transition from a deviated state to a stable state; they act like an exit to
the turnpike for management. Controlling functions organize the system
parameters and bring the system to its best condition.
Controlling
in management increases the adaptive capacity of the enterprises and reduces
the expenditures as the enterprise comes to stability. In the context of
nonlinear development of the economic systems, the implementation of
controlling functions fulfills two managerial purposes – the management does
not only examine the system, but also determines its most effective condition.
The
implementation of controlling functions in management in the context of
nonlinear development should not only be limited to the construction of a
training model of a real system, since it is very difficult to formally describe
all the strategic planning procedures and all the enterprise development
options, especially in the environment that is developing nonlinearly.
Controlling should also deal with choosing the special methods of strategic
management which are then implemented in the interactive procedures, such as
creation of scenarios for the future enterprise development. The function of controlling
also means coordinating the strategic decisions in various aspects of a
company’s industrial and economic activities.
The
use of controlling functions at enterprises leads to reconciliation of
properties and purposes of the sub-systems, connects the elements of the
sub-systems to the integrated system, and accounts for the object changes and
system-wide disturbances.
One
of the features of a controlling function, the iterative matching, uses the
training models and managerial impact to assess the decisions that were made at
the enterprise. Qualitative assessment of internal capacities and of the
functional external environment of the enterprise directly depends on the
adequate understanding of the dynamical macroeconomic processes and the
internal corporate changes.
The
use of controlling functions can be implemented in the following: the
introduction of new managerial technologies, the continued development of the managerial
system and the corporate culture, and in the use of self-organization practices.
One
of the functions of controlling is collecting and analyzing large amounts of
vague, non-formatted, raw information. This data analysis, however, plays a
great role in keeping homeostasis, or the constancy, of the internal
environment. Data gathering, analysis, and the consequent actions result in the
minimization of losses of profit and of fixed production costs. It facilitates
the new opportunities for growth and development, and helps the enterprise to
be better adapted to any possible changes under the conditions of uncertainty. The
use of controlling functions has a synergetic effect which is expressed in
qualitative and quantitative changes at the enterprise: the internal structure,
connections, and behavior are being transformed in accordance with the
challenges coming from the external environment.
Controlling
functions in strategic management is a very complex issue, understanding and
implementing which is crucial to successful management in contemporary economic
environment. The various aspects of controlling include: methodological
principles of controlling functions in strategic management, methods of problem
solving, complex mathematical models and economical indicators, and strategic
decision-making tools. Applying all of these functions is necessary for
successful strategic planning and future development of the enterprises in the
context of complex nonlinear economic environment.
References
1. Ajrapetjan M. S. Conservative
modernization as process of adaptation to cyclic fluctuations in economy. A
series «Reports ÌÀÎÍ» - Ì: ZMI RAN, 2010.
2. Katkalo V. S. Initial concepts of
strategic management and their modern estimation//The Russian magazine of
management. – 2003. - ¹1. – Ò.1
3. Levitsky E. M. Adaptation in
modeling of economic systems. – Novosibirsk: Science, 1977.