CONTROLLING

Anuj Tagra (25)

Shweta Singh (22)
Anuja Deora (28)
Vikash Bairoliya (04)
 Controlling
 A process of monitoring performance and
taking action to ensure desired results.
 Any process that directs the activities of
individuals toward the achievement of
organizational goals.
 It sees to it that the right things happen, in
the right ways , in the right time.
 Characteristics/ Strategies Of Controls

System control Features and requirements

Bureaucratic control Uses formal rules, standards, hierarchy, legitimate

authority. Works best where tasks are certain and
workers are independent.

Market control Uses prices, competition, profit centers, exchange

relationships. Works best where tangible output can
be identified and market can be established between
parties.

Clan control Involves culture, shared values, beliefs, expectations,

and trust. Works best where there is “no one best
way” to do a job and where employees are
empowered to make decisions.
 The Control Process
Set
Measure Determine
performance Compare
performance deviation
standards

Within
Standards
limits

Take
corrective No Yes
action

Continue
work
progress
 Bureaucratic Control Systems

Approaches to bureaucratic control

Feedforward control - control process used before

operations begin
 future oriented
 prevent problems before they occur

 includes policies, procedures, and rules

Concurrent control - control process used while plans are

being carried out
 the heart of any control system
 directing, monitoring, and fine-tuning activities as they are
occur
 advances in information technology have created powerful
concurrent controls
 Bureaucratic Control Systems

Feedback control

Control that focuses on the use of information about previous

results to correct deviations from the acceptable standard
 Implies that performance data were gathered and analyzed
 Results used to make corrections
 Timing is an important aspect of feedback control
 Some feedback processes are under real-time (concurrent)
control
 Six Sigma

 A type of feedback control.

 Most important quality control tool.
 Developed by Motorola in the late 1980’s.
 GE Commercial introduced it in financial services
domain.
 Six sigma achieves 99.99966 percent level of
accuracy.
 Relationship Between Sigma Level
And Defects/Million Opportunities

Sigma level DPMO Examples of four sigma quality

2 308,537 20,000 lost articles of mail per hour

3 66,807 Unsafe drinking water 15 minutes per day

4 6,210 5,000 incorrect surgical operations per week

5 233 200,000 wrong prescriptions each year

6 3.4 No electricity for 7 hours each month

 Dabbawallas
 Dabbawala Association is Six sigma certified.

 Employee strength of 5000.

 Deliver 2 lacs dabbas everyday.

 They rely on low capital .

 Groups work independently and network.

 Meet once a month where all the groups gather and thrash out issues.

 No retirement age. People work as long as they want to.

 Involves a lot of physical exercise, so they rarely suffer from illnesses.

 Dabbawallas have a credit society which gets them through money crunches.

 Being ‘annadattas’ they are automatically treated with respect

 How Is The Dabba Delivered

 The first dabbawalla picks up the tiffin from home and takes
it to the nearest railway station.

 The second dabbawalla sorts out the dabbas at the railway

station according to destination and puts them in the
luggage carriage.

 The third one travels with the dabbas to the railway stations
nearest to the destinations.
Scope of Competition
Working of Dabbawallas
 Bureaucratic Control
 Management Audits
• Evaluation of the effectiveness and efficiency of various systems
within an organization.

 External Audit
• Evaluation conducted by one organization, such as a CPA firm, on
another.

 Internal Audit
• Periodic assessment of a company’s own planning, organizing,
leading, and controlling processes.
 Budgetary Control
Most widely recognized and commonly used
method of managerial control
Budgeting
Process of investigating what is being done and
comparing the results with the corresponding
budget data
 Budgetary Control
Fundamental Budgetary Considerations

Budgetary control proceeds through several stages

Types Of Budgets
 Budgetary Control
 Accounting Audits
• Procedures used to verify accounting reports and statements

• Performed by an outside firm of public accountants

 Activity-Based Costing (ABC)

• Cost accounting method that identifies streams of activity

• Employees break down what they do to define basic activities

• Total amounts spread over the activities according to time spent

on each

• Provides an accurate picture of how costs should be charged

• Highlights where wasted activities are occurring

 Financial Controls
Balance Sheet
Report that shows the financial picture of a company at a given time

 Shows trends over time

 Gives managers insight into overall performance

 Identifies areas which require adjustments

Profit and loss statement
Itemized financial statement of the income and expenses of a
company’s operations
 Comparisons of profits and losses can identify trouble areas

 A common control for the enterprise as a whole

 Financial Controls
Financial Ratios
Indicate possible strengths and weaknesses calculated from
selected items on the Profit and Loss statement and the
Balance Sheet

 liquidity ratios
 leverage ratios
 Profitability ratios
 Downside of bureaucratic control

 Rigid bureaucratic behavior

• Acting in ways that make one look good on the control system’s measure

 Tactical behavior
• Behavior aimed at “beating the system

 Resistance to control
• control system can change expertise and power structures
• control system can change the social structure
• control system may be perceived as an invasion of privacy
 Markets Control
 Market control
 involves the use of economic forces - and the pricing
mechanisms that accompany them - to regulate performance

 as a market for these transactions becomes established:

 price becomes an indicator of the value of the product or service
 price competition effectively controls performance

 market controls at the corporate level

 used to regulate independent business units
 business units treated as competing profit centers
 profit and loss data used to evaluate performance
 Markets Control
 Market control (cont.)

• market controls at the business unit level

 regulates exchange among departments and functions

 transfer price - price charged by one unit in the organization for a

product or service that it supplies to another unit of the same
organization

• ideally, reflects the price that the receiving business unit would
have to pay for that product or service in the marketplace

 provide natural incentives to keep costs down when organization has

the option to outsource products and services to external partners
 Example Of Market Control

CEO uses market

controls to evaluate
performance of business
unit heads
CEO/
President Managers use transfer
pricing to establish
values for internal
transactions among
units

Business Business Business Business

unit unit unit unit
manager manager manager manager

Market rates determine

the base wage/salary for
managers and employees
 Clan Control
 Clan control: the role of empowerment and culture
• Bureaucratic and market controls are no longer sufficient because:
 employees’ jobs have changed

 the nature of management has changed

 the employment relationship has changed

• Empowerment - has become a necessary aspect of a manager’s repertoire

of control
 employees trusted to act in the best interests of the firm

 does not mean giving up management control

• Clan control - create relationships built on mutual respect

 encourage each person to take responsibility for her/his actions
 Clan Control
 Clan control
• diagnosing culture - clues about culture
• corporate mission statements and official goals

• business practices

• symbols, rites and ceremonies

• the stories people tell

 cultures can be categorized according to whether

they emphasize flexibility versus control and whether
their focus is internal or external to the organization
 Clan Control
 Clan control (cont.)
• diagnosing culture (cont.)
• general cultures can be categorized
 group culture
• dominant attribute: cohesiveness, participation,
teamwork, sense of family
• leadership style: mentor, facilitator, parent-figure
• bonding: loyalty, tradition, interpersonal cohesion
• strategic emphasis: toward developing human
resources, commitment, and morale
 Competing Values Model Of Culture

Flexible
Processes

Group Adhocracy
Internal External
Maintenance Positioning

Hierarchy Rational

Control-Oriented
Processes
 Management Control In An
Empowered Setting
1.Put control where the operation is
2.Use “real time” rather than after-the-fact
controls
3.Rebuild the assumptions underlying management
control to build on trust rather than distrust
4.Move to control based on peer norms
5.Rebuild the incentive systems to reinforce
responsiveness and teamwork
DESIGNING EFFECTIVE CONTROL SYSTEMS

1. Establish valid performance standards

2. Tend to expressed in quantitative terms
3. Provide adequate information Relevant ,right amount,
accesible, feedback
4. Ensure acceptability to employees
5. Useful but not over controlling standards
6. Maintain open communication
7. Use multiple approaches
 Performance Metrics
 Customer Satisfaction
 Market Share
 Revenue Growth
 Expenses
 Earnings
TIME EVENT NETWORK ANALYSIS PERT

•Circle – event
•Arrow – activity
•Activity times
-numbers beside
the arrows