ASIA PACIFIC COLLEGE OF ADVANCED STUDIES, INC.

City of Balanga, Bataan

BES 109 – Engineering Management

2nd Semester AY 2021-2021

RESOURCE UNIT

FACULTY-IN-CHARGE : Engr. Aldrian C. Garcia

COURSE CODE AND TITLE : BES 109 – Engineering Management
PROGRAM/ YEAR/ SCHEDULE : BSCE-3 (T, 6:00-8:00PM)

WEEK 11 : CONTROLLING

I. LEARNING OUTCOMES

● Discuss the importance of Controlling

II. TOPIC/S

● Controlling

APCAS Core Value : Integrity & Commitment

Integration : Discussion on Activity and Weekly Output (Google Meet)

III. ACTIVITIES

PART 1: REAL-TIME CLASS SESSION via GOOGLE MEET

P - PRE- TEST
PRE-TEST

L - LESSON PRESENTATION

Week 8 - Powerpoint Presentation

A - ASSESSMENT

LONG QUIZ 2

W - WEEKLY OUTPUT

Instructions:
1. Attached files are instructions for the format of your activity/ weekly output. (FORMAT)
2. Attached the file/s on the designated Activity/Weekly Output, Follow File Name format
 3. Answer the following questions in essay form with a minimum of 100 words each question.

1. Why is controlling a very important management function?

2. How do strategic plans provide a basis for control?
3. What are policies? In what ways do they facilitate control?
4. Compare and contrast the three distinct types of control.
5. What is controlling? It is applicable to the day to day activities of the engineer
manager?

PART 2: SELF-DIRECTED LEARNING via Google Classroom

CONTROLLING

WHAT IS CONTROLLING?

● Controlling refers to the "process of ascertaining whether organizational objectives have been
achieved; if not, why not; and determining what activities should then be taken to achieve objectives
better in the futures.
● Controlling completes the cycle of management functions.
● Objectives and goals that are set at the planning stage are verified as to achievement or completion at
any given point in the organizing and implementing stages. When expectations are not met at
scheduled dates, corrective measures are usually undertaken.

IMPORTANCE OF CONTROLLING

● When controlling is properly implemented, it will help the organization achieve its goal in the most
efficient and effective manner possible.
● Deviations, mistakes, and shortcomings happen inevitably. When they occur in the daily operations,
they contribute to unnecessary expenditures which increase the cost of producing goods and services.
Proper control measures minimize the ill effects of such negative occurrences. An effective inventory
control system, for instance, minimizes, if not totally eliminates losses in inventory.
● The importance of controlling may be illustrated as it is applied in a typical factory. If the required
standard daily output for individual workers is 100 pieces, all workers who do not produce the
requirement are given sufficient time to improve; if no improvements are forthcoming, they are asked to
resign. This action will help the company keep its overhead and other costs at expected levels. If no
such control is made, the company will be faced with escalating production costs, which will place the
viability of the firm in jeopardy.

STEPS IN THE CONTROL PROCESS

The control process consists of four steps, namely:

1. establishing performance objectives and standards

2. measuring actual performance
3. comparing actual performance to objectives and standards, and
 4. taking necessary action based on the results of the comparisons.

Establishing Performance Objectives and Standards

In controlling, what has to be achieved must first be determined. Examples of such objectives and standards
are as follows:

1. Sales targets - which are expressed in quantity or monetary terms;

2. Production targets - which are expressed in quantity or quality;
3. Worker attendance - which are expressed in terms of rate of absences;
4. Safety record - which is expressed in number of accidents for given periods;
5. Supplies used - which are expressed in quantity or monetary terms for given periods.

● Once objectives and standards are established, the measurement of performance will be facilitated.
Standards differ among various organizations. In construction firms, project completion dates are useful
standards. In chemical manufacturing firms, certain pollution measures form the basis for standard
requirements.
● After the performance objectives and standards are established, the methods for measuring
performance must be designed. Every standard established must be provided with its own method for
measurement.

Measuring Actual Performance

● There is a need to measure actual performance so that when shortcomings occur, adjustments could
be made. The adjustments will depend on the actual findings.
● The measuring tools will differ from organization to organization, as each have their own unique
objectives.
● Some firms, for instance, will use annual growth rate as standard basis, while other firms will use some
other tools like the market share approach and position in the industry.

Comparing Actual Performance to Objectives and Standards

Once actual performance has been determined, this will be compared with what the organization seeks to
achieve. Actual production output, for instance, will be compared with the target output. This may be illustrated
as follows:
A construction firm entered into a contract with the government to construct a 100 kilometer
road within ten months. It would be, then, reasonable for management to expect at least 10 kilometers
to be constructed every month. As such, this must be verified every month, or if possible, every week.

Taking Necessary Action

The purpose of comparing actual performance with the desired result, is to provide management with the
opportunity to take corrective action when necessary. If in the illustration cited above, the management of the
construction firm found out that only 15 kilometers were finished after two months, then, any of the following
actions may be undertaken:

1. hire additional personnel;

 2. use more equipment; or
3. require overtime.

TYPES OF CONTROL

Control consists of three distinct types, namely:

1. feedforward control
2. concurrent control, and
3. feedback control.

Feedforward Control

● When management anticipates problems and prevents their occurrence, 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 is 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 preoperative 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 is 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

Organizational control systems consists of the following:

1. strategic plan
2. the long-range financial plan
3. the operating budget
4. performance appraisal
5. statistical reports
6. policies and procedures

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. As presented in Chapter 3, the financial
plan recommends a direction for financial activities. 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 performance. 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
Figure 9.3 shows a sample statistical 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."

It is expected that policies and procedures laid down by management will be followed. When they are
breached once in a while, management is provided with a way to directly inquire on the deviations. As such,
policies and procedures provide a better means of controlling activities.

STRATEGIC CONTROL SYSTEMS

To be able to assure the accomplishment of the strategic objectives of the company, strategic control systems
become necessary. These systems consist of the following:
1. financial analysis
2. financial ratio 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:
1. liquidity
2. efficiency
3. financial leverage
4. profitability
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. 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 ratio = profit before tax + interest expense/ interest expense

"Profitability Ratios. These ratios measure how much operating income or net income a company is able to
generate 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
non academic staff have direct access to the president, their purchase requests almost always get top
priority. Later on, when the pre- sident made an inspirational speech on quality teaching, many
members of the faculty just shrugged their shoul ders 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 effectiveness 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 con-
trol measures are in place.

References:
Engineering Management by Roberto G. Medina

PART 3: ASSESSMENT RESULT

As of:

Program/Level: BSCE 3

Total Number of Students:

No. of G-Meet Attendees:

SUBMITTED PASSED SUBMITTED FAILED

NO SUBMISSION
no. of students w/ passings score/ no. of students w/ failed score/ total
Total no. of students with submission no. of students with submission

Pre-Test

Seatwork

Weekly Output
Long Quiz