CONTROLLING

MANAGEMENT
Controlling
Consist of seeing that everything is being carried out in
accordance with the plan which has been adopted, the orders
which have been given, and the principles which have been
laid down.

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Controlling
• I t ’ s object is to point out mistakes in order that they may
be rectified and prevented from recurring.
• T h e process of measuring performance
and taking action to ensure desired results.
• Organizational learning and after- action
review.

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Controlling
• Control is checking current performance
against predetermined standards contained in the
plans with a view to ensure adequate progress
and satisfactory performance.

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Relationship Between Planning and Controlling
• Planning is a process of setting organization’s objectives, goals and standards,
whereas controlling is a process of ensuring that the goals are achieved as per the
set plan.
• Planning should be done in such a way that it lays foundation for the
establishment of controlling standards and keeps controlling in view
• Planning involves what an organization aspires to achieve in the future, whereas
controlling includes what the organization has achieved in the past.

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What is the control process?
Steps in the control process:
Step 1 — establish objectives and standards.
Step 2 — measure actual performance.
Step 3 — compare results with objectives and standards.

Step 4 — take corrective action as needed.

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Four steps in the control process.
Four steps in the control process.
Step 1 — establishing objectives and standards
– Output standards
• Measure performance results in terms of quantity, quality, cost,
or time.
– Input standards
• Measure effort in terms of amount of work expended in
task performance.

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Examples of Objectives and Standards:
1. Sales target-expressed in quantity or monetary terms
2. Production targets- expressed in quantity or quality
3. Worker attendance-expresses in terms of rate of
absence
4. Safety record-expressed in number of accidents for given periods
5. Supplies used-expressed in quantity or monetary terms for given
periods

✓ Every standard established must be provided with12 its own method for
measurement.
Four steps in the control process.
Step 2 — measuring actual performance
– Goal is accurate measurement of actual performance results and/or
performance efforts.
– Must identify significant differences between actual results and
original plan.

– Effective control requires measurement.

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Four steps in the control process.
Step 3 — comparing results with objectives and standards
– Need for action reflects the difference between desired
performance and actual performance
– Comparison methods:
• Historical comparison
• Relative comparison
• Engineering comparison

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Four steps in the control process.
Step 4 — taking corrective action
– Taking action when a discrepancy exists between
desired and actual performance.
– Management by exception
• Giving attention to situations showing the greatest need for action.
• Types of exceptions
– Problem situation
– Opportunity situation

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Purpose of Controlling
Types of Control
Feedforward controls …
– Employed before a work activity begins.
– Refers to the preliminary or preventive control that attempts to identify
and prevent deviations in the standards before their occurrence.
– Ensures that:
• Objectives are clear.
• Proper directions are established.
• Right resources are available.
– Focuses on quality of resources.

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Types of Control

Concurrent controls …
– Focus on what happens during work process.
– Monitor ongoing operations to make sure they are being done
according to plan.
– Can reduce waste in unacceptable finished products or services.

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Types of Control
Feedback controls …
– Take place after work is completed.
– Focus on quality of end results.
– It is applied to check whether the actual information is as
per the set standards.
– Provide useful information for improving future operations.

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The role of feedforward, concurrent, and feedback controls
in organizations.
Components of Organizational Control Systems
1. Strategic plan
-basic control mechanism for the organization
2. Long-Range Financial Plan
-the planning horizon differs from company to company
3. Operating budget
-indicates the expenditures, revenues, or profits planned for some
future period regarding operation

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Components of Organizational Control Systems
4. Performance appraisals
-measures employee performance
5. Statistical reports
-contain data on various developments within the firm
6. Policies and Procedures
Policies refer to the framework within which the objectives must be
pursued
Procedure is a plan that describes the exact series of actions to be taken in
a given situation.

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Identifying Control Problems
Recognizing the need for control is one thing, actually
implementing it is another.
1. Executive Reality Check
- employees at the frontline often complain that
management imposes certain
requirements that are not realistic

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2. Comprehensive Internal Audit
-aims to detect the dysfunction in the organization before
they bring bigger troubles to management

3. General Checklist of Symptoms Of Inadequate Control

-behind every symptom is a problem

waiting to be solved 24
Common Symptoms
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 and personnel
6. Disorganized operations (work flow bottlenecks, excessive paper
work
7. Excessive costs.
8. Evidence of waste and inefficiency ( scrap, rework)

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Types of Control Systems
STRATEGIC CONTROL SYSTEM
✓ To be able to assure the accomplishment of the strategic
objectives of the company, strategic control systems become
necessary.
1. Financial Analysis
The success of most organizations depends heavily on its
financial performance.
-balance sheets : assets, liabilities and capital accounts
-income statement : gross income, expenses and profits

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2. Financial Ratio Analysis
-a more elaborate approach used in controlling
activities
-one account appearing in the financial statement is
paired with another to constitute a ratio
- The result will be compared with a required norm.
Internal and External Control

Internal control
• Allows motivated individuals and groups to exercise self-
discipline in fulfilling job expectations.
• The potential for self-control is enhanced when capable
people have clear performance objectives and proper
resource support.

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External Control
Occurs through personal supervision and the use of formal
administrative systems.
– Performance appraisal systems, compensation and
benefit systems, employee discipline systems, and
management-by-objectives.

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External control
Compensation and Benefits
–Attract talented people and retain them.
–Motivate people to exert maximum effort in
their work.
–Recognize the value of their performance
contributions.

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External control
Employee discipline systems
– Discipline is the act of influencing behavior through

reprimand.

– Discipline that is applied fairly, consistently, and

systematically provides useful control.

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What are the common organizational controls?

To be effective, reprimands should …

– Be immediate.
– Be directed toward actions, not personality.
– Be consistently applied.
– Be informative.
– Occur in a supportive setting.
– Support realistic rules.
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What are the common organizational controls?

Employee discipline systems

– Progressive discipline ties reprimands to the severity and frequency of
the employee’s infractions.
– Progressive discipline seeks to achieve compliance with the least extreme
reprimand possible.
– Positive Discipline tries to involve people more positively and directly in
making decisions to improve their behavior.

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External control
Management by Objectives (MBO)
– A structured process of regular communication.
– Supervisor/team leader and workers jointly set performance
objectives.
– Supervisor/team leader and workers jointly review results.

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Financial Control
Important financial aspects of organizational performance …
– Liquidity
• The ability to generate cash to pay bills.
– Leverage
• The ability to earn more in returns than the cost of debt.
– Asset management
• The ability to use resources efficiently and operate at minimum cost.
– Profitability
• The ability to earn revenues greater than costs.

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Financial Control
Break-even analysis …
– Determination of the point at which sales revenues are
sufficient to cover costs.
– Break-Even Point = Fixed Costs / (Price – Variable Costs)
– Used in evaluating:
• New products
• New program initiatives

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Graphical approach to break-even analysis.

Management - Chapter 8
Purchasing control
– A productivity tool
– Trends in purchasing control:
• Leveraging buying power
• Committing to a small number of suppliers
• Working together in supplier-purchaser partnerships

Management - Chapter 8 39
Inventory control
– Goal is to ensure that inventory is just the right size to meet
performance needs, thus minimizing the cost.
– Methods of inventory control:
• Economic order quantity
• Just-in-time scheduling

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Statistical Quality Control
– Quality control involves checking processes, materials,
products, and services to ensure that they meet the
standards.
– Statistical quality control involves:
• Taking samples of work.
• Measuring quality in the samples.
• Determining the acceptability of results.

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Three Tools For Quality Control
CONTROLLING
The managerial function of
controlling should not be confused
with control in the behavioral or
manipulative sense. This function
does not imply that managers should
attempt to control or to manipulate
the personalities, values, attitudes,
or emotions of their subordinates

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CONTROLLING
Instead, this function of management concerns the
manager’s role in taking necessary actions to ensure that
the work-related activities of subordinates are consistent
with and contributing toward the accomplishment of
organizational and departmental

objectives. 45
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