Controlling is a process of measuring performance and taking action to ensure desired results.

Monitoring performance,
comparing results to goals and taking corrective actions.

TYPES OF CONTROLLING:

Feedforward Control
-When management anticipates problems and prevents their occurence, the type of control measure undertaken is called
feedforward control. This type of control provides the assurance that the required human and nonhuman resources are in place
before operations begin. An example provided as follows:

The manager of a chemical manufacturing firm makes sure that the best people are selected and hired to fill jobs. Materials
required in the production process are carefully checked to detect defects. The foregoing control measures are designed to
prevent wasting valuable resources. If these measures are not undertaken, the likelihood that problems will occur is always
present.

Concurrent Control

When operations are already ongoing and activities to detect variances are made, concurrent control is said to be undertaken. It
is always possible that deviations from standards will happen in the production process. When such deviations occur,
adjustments are made to ensure compliance with requirements. Information on the adjustments are also necessary inputs in the
pre-operation phase.

Examples of activities using concurrent control are as follows:

The manager of a construction firm constantly monitors the progress of the company's projects. When construction is behind
schedule, corrective measures like the hiring of additional manpower are made.

In a firm engaged in the production and distribution of water, the chemical composition of the water procured from various
sources is checked thoroughly before they are distributed to the consumers.

The production manager of an electronics manufacturing firm inspects regularly the outputs consisting of various electronics
products coming out of the production line.

Feedback Control

When information is gathered about a completed activity, and in order that evaluation and steps for improvement are derived,
feedback control is undertaken. Corrective actions aimed at improving future activities are features of feedback control.

Feedback control validates objectives and standards. If accomplishments consist only of a percentage of standard requirements,
the standard may be too high or inappropriate.

An example of feedback control is the supervisor who discovers that continuous overtime work for factory workers lowers the
quality of output. The feedback information obtained leads to some adjustment in the overtime schedule.

COMPONENTS OF ORGANIZATIONAL CONTROL SYSTEMS

Strategic Plans

A strategic plan provides the basic control mechanism for the organization. When there are indications that activities do not
facilitate the accomplishment of strategic goals, these activities are either set aside, modified or expanded. These corrective
measures are made possible with the adoption of strategic plans.

The Long-Range Financial Plan

The planning horizon differs from company to company. Most firms will be satisfied with one year. Engineering firms, however,
will require longer term financial plans. This is because of the long lead times needed for capital projects. An example is the
engineering firm assigned to construct the Light Rail Transit (LRT) within three years. As such, the three-year financial plan will
be very useful.

If the goal does not appear to be where the firm is headed, the control mechanism should be made to work.

The Operating Budget

An operating budget indicates the expenditures, revenues, or profits planned for some future period regarding operations. The
figures appearing in the budget are used as standard measurements for performance."

Performance Appraisals

Performance appraisal measures employee per- formance. As such, it provides employees with a guide on how to do their jobs
better in the future. Performance appraisals also function as effective checks on new policies and programs. For example, if a
new equipment has been acquired for the use of an employee, it would be useful to find out if it had a positive effect on his
performance.

Statistical Reports

Statistical reports pertain to those that contain data on various developments within the firm. Among the information which
may be found in a statistical report pertains to the following:

1. Labor efficiency rates

2. Quality control rejects

3. Accounts receivable

4. Accounts payable

5. Sales reports

6. Accident reports

7. Power consumption report

Policies and Procedures

Policies refer to "the framework within which the objectives must be pursued." A procedure is "a plan that describes the exact
series of actions to be taken in a given situation."

An example of policy is as follows:

"Whenever two or more activities compete for the company's attention, the client takes priority."

An example of a procedure is as follows:

"Procedure in the purchase of equipment:

1. The concerned manager forwards a request for purchase to the purchasing officer;

2. The purchasing officer forwards the request to top management for approval;

3. When approved, the purchasing officer makes a canvass of the requested item; if disapproved, the purchasing officer returns
the form to the requesting manager;

4. the purchasing officer negotiates with the lowest complying bidder."

STRATEGIC CONTROL SYSTEMS

To be able to assure the accomplishe=ment of the strategic objectives of the company, strategic control systems become
necessary. These system consist of the following:
1. Finantial analysis
2. Finantial ration analysis

Financial Analysis

The success of most organizations depends heavily on its financial performance. It is just fitting that certain measurements of
financial performance be made so that whatever deviations from standards are found out, corrective actions may be introduced.
A review of the financial statements will reveal important details about the company's performance. The balance sheet contains
information about the company's assets, liabilities, and capital accounts. Comparing the current balance sheet with previous
ones may reveal important changes, which, in turn, provide clues to per- formance.

The income statement contains information about the company's gross income, expenses, and profits. When also compared
with previous years' income statements, changes in figures will help management determine if it did well.

Financial Ratio Analysis

Financial ratio analysis is a more elaborate approach used in controlling activities. Under this method, one account appearing in
the financial statement is paired with another to constitute a ratio. The result will be compared with a required norm which is
usually related to what other companies in the industry have achieved, or what the company has achieved in the past. When
deviations occur, explanations are sought in preparation for whatever action is necessary.

Financial ratios may be categorized into the following types.

Liquidity Ratios. These ratios assess the ability of a company to meet its current obligations. The following ratios are important
indicators of liquidity:

1. Current ratio- This shows the extent to which current assets of the company can cover its current liabilities. The formula for
computing current ratio is as follows:

Current ratio = current assets/current liabilities

2. Acid-test ratio- This is a measure of the firm's ability to pay off short-term obligations with the use of current assets and
without relying on the sale of inventories." The formula is as follows:

Acid-test ratio = current assets - inventories/current liabilities

Efficiency Ratios. These ratios show how effectively certain assets or liabilities are being used in the production of goods and
services. Among the more common efficiency ratios are:

1. Inventory turnover ratio- This ratio measures the number of times an inventory is turned over (or sold) each year. This is
computed as follows:

Inventory turnover ratio = cost of goods sold/inventory

2. Fixed asset turnover-This ratio is used to measure utilization of the company's investment in its fixed assets, such as its plant
and equipment.10 The formula used is as follows:

Fixed asset turnover = net sales/net fixed assets

Financial Leverage Ratios. This is a group of ratios designed to assess the balance of financing obtained through debt and equity
sources. Some of the more important leverage ratios are as follows:

1. Debt to total assets ratio- This ratio shows how much of the firm's assets are financed by debt. It may be computed by using
the following formula:

Debt to total assets ratio = total debt/total assets

2. Times interest earned ratio- This ratio measures the number of times that earnings before interest and taxes cover or exceed
the company's interest expense. It may be computed by using the following formula:

Times interest earned ration = (profit before tax + interest expense)/interest expense

Profitability Ratios. These ratios measure how much operating income or net income a company is able to gen- erate in relation
to its assets, owner's equity, and sales. Among the more notable profitability ratios are as follows:

1. Profit margin ratio - This ratio compares the net profit to the level of sales. The formula used is as follows:

Profit margin ratio = net profit/net sales

2. Return on assets ratio- This ratio shows how much income the company produces for every peso invested in assets. The
formula used is as follows:

Return on assets ratio = net income/assets

3. Return on equity ratio - This ratio measures the returns on the owner's investment. It may be arrived at by using the following
formula:

Return on equity ratio = net income/equity

IDENTIFYING CONTROL PROBLEMS

Recognizing the need for control is one thing, actually implementing it is another. When operations become complex, the
engineer manager must consider useful steps in controlling. Kreitner mentions three approaches:

1. Executive reality check

2. Comprehensive internal audit

3. General checklist of symptoms of inadequate control

Executive Reality Check

Employees at the frontline often complain that management imposes certain requirements that are not realistic. In a certain
state college, for instance, requests for purchase of classroom materials and supplies take last priority. This is irregular because
requests of such kind must be of the highest priority considering that the organization is an educational institution. Ironically,
because certain officers of the nonacademic staff have direct access to the president, their purchase requests almost always get
top priority. Later on, when the president made an inspirational speech on quality teaching, many members of the faculty just
shrugged their shoulders and listened passively.

One school, the Central Luzon State University, provides a good example on how the executive reality check may be exercised. It
requires its executives to handle at least one subject load each. What the executives will experience in the classroom will make
him more responsive in the preparation of plans and control tools.

The engineer manager of a construction firm could, once in a while, perform the work of one of his laborers. In doing so, he will
be able to see things that he never sees inside the confines of his air-conditioned office. Because the said action exposes the
engineer manager to certain realities, the term "executive reality check" is very appropriate.

Comprehensive Internal Audit

An internal audit is one undertaken to determine the efficiency and effectivity of the activities of an organization. Among the
many aspects of operations within the orga- nization, a small activity that is not done right may continue to be unnoticed until it
snowballs into a full blown problem.

An example is the resignation of an employee after serving the company for 15 years. After one week, another employee with
ten years of service also resigned. Both were from the same department. If after another week, a third employee is resigning, a
full investigation is in order. Even if the source of the problem is identified, it may already have caused considerable losses to the
organization. A comprehensive internal audit aims to detect dysfunctions in the organization before they bring bigger troubles to
management.

Symptoms of Inadequate Control

If a comprehensive internal audit cannot be availed of for some reason, the use of a checklist for symptoms of inadequate
control may be used.

Kreitner has listed some of the common symptoms as follows:

1. An unexplained decline in revenues and profits.

2. A degradation of service (customer complaints).

3. Employee dissatisfaction (complaints, grievances, turnover).

4. Cash shortages caused by bloated inventories or delinquent accounts receivable.

5. Idle facilities or personnel.

6. Disorganized operations (work flow bottlenecks, excessive paperwork).

7. Excessive costs.

8.Evidence of waste and inefficiency (scrap, rework).

It must be noted that behind every symptom is a problem waiting to be solved. Unless this problem is clearly identified, no
effective solution may be derived. Nevertheless, problems are easily recognized if adequate control measures are in place.

SUMMARY

Controlling is one of the main functions of management. It comes after planning, organizing, and directing. Controlling is aimed
at determining whether objectives were realized or not, and if not, by providing means for achievement.

Controlling is important because it complements the other management functions.

Controlling is a process consisting of various steps, namely: establishing performance objectives and standards, measuring actual
performance, comparing actual performance with objectives and standards, and taking necessary action based on the results of
the comparison.

Control/may be classified either as feedforward, concurrent, or feedback.

Organizational control systems consist of the strategic plan, the long-range financial plan, the operating budget, performance
appraisals, statistical reports, policies and procedures.

Strategic control systems consist of financial analysis, and financial ratio analysis.

There are means to identify control problems. They are the executive reality check, the comprehensive internal audit, and the
general checklist of symptoms of in- adequate control.