Controlling

Functions of Management

Control consists of verifying whether everything occurs in conformity with the plan adopted, the instructions issued, and principles established. It's object is to point out weaknesses and errors in order to rectify them and prevent recurrence.
Henri Fayol -1904

Controlling is the measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are accomplished. Harold Koontz

Concept

Process of keeping activities on track Determine whether goals are met Decide changes needed to get back on track May use an informal or formal system of evaluations Employee job assignments Routine problem solving Conflict resolution Effective communications

Decision making is not a separate management function, but the outcome of the exercise of good judgment in planning, directing, and controlling. Feedback in the form of performance reports that compare actual results with the budget are an essential part of the control function

Characteristics of Control

Control is a continuous process Control is a management process Control is embedded in each level of organizational hierarchy Control is forward looking Control is closely linked with planning Control is a tool for achieving organizational activities

Management Control
>Assure that resources are obtained and used effectively and efficiently in the accomplishment of the organizations objective >Has financial and non financial performance measurement Concerned with the implementation of strategies and Task control >Done well, it ensures that the overall directions of individuals and groups are consistent with short and long range plans. >It helps ensure that objectives and accomplishments are consistent with one another throughout an organization. >It helps maintain compliance with essential organizational rules and policies.

Every work is a process

Closed Looped process

Control to maintain Performance

Equipment, Work quality, Health Everything deteriorate naturally unless maintained maintenance is important to everything. Control is the maintenance need of management. Wise managers rely on systems to do the control. They get to do know critical happenings from information of their systems

The Best Control

Performance rest on a slope all the time. It has a tendency to slide down. Control acts like a brake to prevent performance from sliding down. But affordable control measures are always imperfect. Performance will still slide down. The best way to ensure performance does not slide down is to always push it even higher, so that it will not have a chance to slide below its original level. Continual improvement effort is the best control

Planning and Control Cycle

Formulating longand short-term plans (Planning) Comparing actual to planned performance (Controlling)

Begin

Decision Making

Implementing plans (Directing and Motivating)

Measuring performance (Controlling)

The Control Process

The Control Process

Establish objectives and standards. Measure actual performance. Compare results with objectives and standards. Take necessary action.

Establish Objectives and Standards

The control process begins with planning and the establishment of performance objectives. Performance objectives are defined and the standards for measuring them are set. There are two types of standards: Output Standards - measures performance results in terms of quantity, quality, cost, or time. Input Standards - measures work efforts that go into a performance task.

Measuring Actual Performance

Measurements must be accurate enough to spot deviations or variances between what really occurs and what is most desired. Without measurement, effective control is not possible.

Comparing Results with Objectives and Standards

The comparison of actual performance with desired performance establishes the need for action. Ways of making such comparisons include:

Historical

/ Relative / Engineering Benchmarking

Taking Corrective Action

- Taking any action necessary to correct or improve things.

- Management-by-Exception focuses managerial attention on substantial differences between actual and desired performance.

Management-by Exception can save the managers time, energy, and other resources, and concentrates efforts on areas showing the greatest need. There are two types of exceptions: Problems - below standard Opportunities - above standard

Discussion Question

A finance professor and a marketing professor were recently comparing notes on their perceptions of corporations. The finance professor claimed that the goal of a corporation should be to maximize the value to the shareholders. The marketing professor claimed that the goal of a corporation should be to satisfy customers.

What are the similarities and differences in these goals?

Control Techniques
Financial controls

Liquidity ratios Profitability ratios Debt ratios Activity ratios

Budget controls

Top-down budgeting Bottom-up budgeting Zero-based budgeting Flexible budgeting

Marketing controls

Market research Test marketing Marketing statistics

Responsibility Centers
1. 2. 3. 4.

Profit Centers Cost / Expense Centers Investment Centers Revenue Centers

Budgetary Control
1.
2. 3. 4. 5. 6.

Sales Budget Production Budget Purchase Budget Capital Expenditure Budget Cash Budget Master Budget

Advanced/ New Control Techniques

Return on Investment Program Evaluation & Review Technique Critical Path Method Total Quality Management & Quality Circles Just-In-Time Scheduling Statistical Quality Control

Span Control
Factors affecting Span of Control

Level in the Organisation Type of Work Abilities of the Person Involved The Degree of Decentralisation Control Mechanism