( rZ) .

CONTROL IN THE HOS,PITALITY Il\'l>USTR_y

MODULE 7:

LEARNIN G c oN'fENTS LEARNING OBJECflVEs

Studonts m\lst be able to

7 .1 The descnp1ion o.f e<mt.rol

7.J .I 1'be function U)d ne¢bSsity for control Describe the function and neces,f
control ity for

7- " Rcletfrmsltlp between planning and control Discuss the relationshlp betwe- 1__ •
·"" and control ""~ PUI.Ulllng

i~~ Tho principles of control Describe the principles of control

7.4 The control process Describe 1he control process with regard to:
7.4.1 Setting of standards and methods for measuring performance
7.4.2 The measurement of actual performance
7.4.3 Comparing performance to set standards
7.4.4 Corrective action
7.5 Control measures Briefly descdbe precautionary measures that
can be taken to ensure the full CO-Operation
of the worker towards achieving the
objectives ofthe enterprise
7.6 Control techniques Briefly explain
7.6.1 Control techniques
7.6.2 Classification of control techniques according to their uses
7.7 Management by exception
7.7.1 Name the advantages of management by exception
7.8 Budget control Briefly describe the following:
7.8.1 Budgets as a method of control
7..8.2 Advantages of budget control
7.8.3 Disadvantages of budget control
7.8.4 Formulating the budget
7.8.5 Types ofbudgets

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 Briefly expJain:
7 o Stock c"ntrol
w 'ty for stock control
1.9.1 The necessi
,. .l Purehasing and storage
,.9 k and components ofstock control
3 The fi'amewor
7.9. l Identify the problems regarding ,.,
7.10 Problems in control control
7.11 Control activities checklist .
,·.1z case ·studies

PRACTICAL COMPONENT
Written assignments on compiling a budget.
Students should get the opporbmity to assist in taking stock and completing stock sheets.
Students should do a practical assignment and determine the methods of control used in
hospitality organisations.
 Ifl'ROL ~ 'fliE liU:SPl'fALITY lNDUS'fR.y
I<
d - ~ ~ ; • . ; • ~~

. ;

1. co !• . i • --------!i
l I I
! ; :
i i ';

rr&ODUCflON
i c1amental element of management is control. The fact that organisations seldom
::ie ~ fun ding to their original planning, necessitates that managers monitor activities on a
- ,acco~ in order to identify problems in good time and to bring about necessary changes
: ! :ons. Control is essential on.all levels ?~ man~ge~ent in th~ ~os~itality industry. All
~ ent functions, such as planmng, orgamsmg, directing, co-ordinating and controlling,
·drnct with each other. The control function is somewhat un~ in thatt without the other
~ ons, there would no need for it Control evaluates the other functions and cannot operate
~ ofthem.

·.1 DFSCR1PTION OF CONTROL

Controlis asystematic process whereby managers cm1.1~pin·e the actual performance with
?lzns,standards and objectives, and bring about adaptatio~rn~ or corrections when deviations
OCtllt
t,fuoo.servi
1h; ~~or~er for ex~ple has to produce a certain number of units per day in order that
~~~on can achieve~ w~ekly producti~n objective. If the weekly performance
i>ltpitigarliicved~!he weekly obJecbve, the supeI'Vl.sor must act to ensure that the planned
~lorteontinue th •eactual performance and objectives correspond the supervisor will let the
~ulne:!i~....- e1rnonna1 ,. C , t
-~ the Perfo worL ontrol can be seen as the regulating task of managemen
7,J,J l'Illance of the whole business.
tr 1'IfE Fr1Ncr10N
Planswere
lntyp1... ex.ecn•. . ~ .
AND NECESSITY FOR CONTROL
~ ·IQll ~ "\CU Without •
p~ ~e thatecuy, 0r&anise effi~
stakes, then there would not be a· need for control. Managers
o~ aini (/cti\tities are pe;iently and activate the workers effectively, but even this might
tivess\lcc:lltrol is toe onned according to plan and that objectives are reached. The
sfuny. OSUre that activities are undertaken in such a way as to achieve
CONTROL IS ESSENTIAL FOR THE FOL
LOWING REASONS·
* To ensure that the collective e.lliort is ~ •
. e.u.ective. .
'* To ensure that actual achievements ar .
.
.
e m agreement with plans.
* It 1s necessary as a remlt of the inher t h
People may order incorrect ingredients : ~ :1coming~ and ~~ts of people and goods.
incoITOOtly. , e correct pnce dec1s1ons or diagnose problems

* Change is an integral part of mo.st orgarusations.

developed and ne gulati •
· · New products, materi"al and methods are
those changes that~ influ:: ;e ~~uced. C~ntrol enables management to anticipate
and opportunities can be utilis':a.. eu usmess envuonment. Thus problems can be foreseen

* Managers retain their accountabilitytowards their seniors when responsibility is delegated

They have to exercise control to ensure that tasks have been completed satisfactorily. ·
* _<;omplexity ofor~ations necessitates effective control. The increase in diverse product
lin~ ~d ~ecentrali_sedmanagement necessitates extensive control systems to evaluate these
activities m good time. Tnnely control can prevent crises. In these complex. organisations,
a small error may cost millions of rands. Control points out deviations :from plans in order
that steps can be taken to correct it and prevent a recurrence. The more people working in an
organisation, the greater the need for co-ordination, the greater the pos_sibility of making
errors and therefoze the greate;: th~ need effective control.
* It leads to standardised adfo~ that mcnm..~ efficiency, e.g. quality control of food.
* It prevents malpractice, theft b,'1Xd l'if~~~g~.
* It leads to performance evaltt!itl~fil1 of -workers.
Effective control is an absolute requirement for the achievement of the lowest p'ossible 'llllit cost.
This is the benefit the manager derives ~?m effective control in his endeavour to achieve.a profit.
!t
c -ontrol also aims at improving th~ pos1!1on of the workers. also enables the wo~ker to increase
bis · come and to achieve job satiSfaction. The employee is encouraged to do his best when he
. a:ue of the expected level of performance and that he is under strict but fair control and that
:e will be compensated for bis efforts. .
Th problem for management is to find the proper degree of control that should be applied. On
theeone hand the modem organisation requires more direct control, but on the other hand people
_demand more personal freedom. Management has to find the proper balance between these two
tential conflicts. This will differ from one organisation to the next. Because ofcontinual change
k
the business environment, the control system will have to be adjusted regularly to remain
effective and balanced.
Control becomes increasingly ~portant as th~ organisation ~ws :'°'d involves ~or~ personnel.
A hotdog pushcart operated by its owner reqmres comparatively little control smce its owner is
resent and needs no formal reports and f~w policies. He may also be highly motivated to achieve
~ s because his rewards. are more ~l.rect. But ~ an. organisation gets larger, its personnel
acquire vested interests oftheu own. The m~ed ~ bangs ~ore problems~ communications
and ~a-operation. When the goals of the organisation are not m accordance with an employee's
goals, the need for control becomes much greater.

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 7.2 T.HE·RELATIONSHIP BETWEEN PLANNING AND CONTROL
Control is interrelated with planning (the first management function), because control is
undertaken to ensure that planned objectives have been reached. This interaction is illustrated in
_ Diagram 7.1. Control is undertaken to ensure that objectives are optimally strived for and that set
action plans are followed To integrate planning and control properly, suitable control systems
should be developed during the planning process. The control process measures -fheprogressmade
towards achieving organisational objectives and enables .management to detect deviations from
the plan so that remedial steps may be taken.
:Minor problems do not always cause an immediate crisis in the organisation, but with time it can
accumulate and lead to serious damage. A purchases manager who do not ask for the usual 2.5%
discount, only loses R2500 on the initial order of. Rl 00 000., but for the year this order
accumulates to RS million and this 'affordable mor' 1hen amounts to a stunning R125 000.
Any good plan should have built-in controls, e.g. budgets. Although one should differentiate
between the functions of control and planning, a process of control would be useless without
previously determined standards and goals, thus the control process starts during the planning
phase.

DIAGRAM7.2.l THE INTERACTION BETWEEN PLANNING AND CONTROL

❖ Objectives
❖ Plans
❖ Implementation

Monitoring of actual Formulate new plans or

activities adapt existing plan or adapt
implementation

Comparison of actual Deviation occurs

performance with
objectives

No deviation

Continue with planning

and control

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 rnzwj\rr TYPES OF CONTROL
i2.1 DIFFEADJTA • .
. d b ti re an activity starts, dunng the execution of the activii;,
Control can be exfethrcisecti ~tyo or during all three stages or after
the completion o e a vi •
·_, uti0 ofan task· This is aimed at the prevention ofproblems &ndfak
Controlthbt[Qrti~ ~tytcor p~o;ect is s~ed. To e:ffective-ly implement control before ex::lltip~
before e ac V1 ~ • h &-. ul· ti. f Ii o~
management should pay specific attenti~n to t e i ~ a on o po cy and. pr<>cedutes,
.;i"~
compilati of-·'esuu ,
scheduling and the deliberate gathering
.c..
ofrelevant
1i th and useful . informati·on,
F examp · when a restaurant orders frozen food J.l om a supp er, ey se1ect 1t on the criteria
or uality. d timely delivery. Personnel working at a hotel should have the required
0f
q
qualifications, · _,,. proper1y. These speci:fi c cntena
experience and ability to do thettWO.ll!I.. . • will be used
to evaluate the quality of the workers. ·
Control during work performance: The supervisor usually·does while the work is being done,
By personal observation, problems can be solved before they can become costly and extensive,
An important principle is that the next step of the activity &bould not be attempted before the
current step has not been completed satisfactorily. For ·ex~.rople when workers prepare pre-
packaged meals, such as macaroni and cheese, it is important tci ©heck ifthe cheese sauce has been
made according to the standard recipe. Ifthe sauce has curdled. or is not up to standard, then anew
sauce can only be made. Ifthe curdled sauce was not checked and was discovered only after it has
been added to the macaroni, then the damage and the cost in the preparation ofthe meal would
be more extensive. ·
Control after execution ofthe work: This form of control is the most popular and concentrates
on completed task or end results. The greatest single disadvantage of this type of control is that
~e ~ge has ~ady been done by the time that managers have sufficient and relevant
~~~ regar~g the problem or deviation. Unfortunately this type of control is the onlY
possibility m certain cases such as budget control and sales figures.
c;:i ~ ~o~pletionof
0
of
work a two--fold advantage. It provides planners with an indication
e.u.ectivttyplanning
the total
bas
d . . of nts
1

employees Control aft 0

rk . process an gives feedback on the achieveme
guided by historical res':i:. completion can be seen as an action where future activities are

7.3 THE P~CJPLEs OF CONTROL

Certain basic Principles are useful in the d .
► The techniques used • th evelopment ofan effective and reliable control systeJJJ•
systems that lll e control process sh0 uld C ttol
are not understood will b • be understandable to everyone. on
► The info · e 1&nored or imPIemented mcorrectly.
•
Imation concerning erfi
reliable and valid inf; .P 0 nnance in the ~te,
inaccurate informati onnation. Corrective acti conf:tol system must be based on ace doD
► Any control on. on Will fail if the control system is base
in the e 8Ystem should be 11 · .
nvhonment_ so that it c exihle in. order that it }lBJlSeS
► Control should be an. overcorne PtobI may be adjusted to respond to c
be justified by the :ononucat. The cost . ~ or Utilise opportunities.
vantages it b • lllcUrred by · Jd
nngs, • llnplenienting a control systell'.l shO

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► Planning and co~! must be ~tegrated. Control systems should be based on the
and objectives set m the planning process.
stan~;:;<.:· ·
,. Tlie correct timing ~or a co~trol process is important.. If corrective action is to be taken in
tillle, the necessary information should be gathered and processed immediately. Otherwise
inappropriate action might be taken, no action might be taken or the action might be too iate · .·
► The control system should be acceptable to employees. Ideally, a control system should lead
to greater productivity amo~~! workers, because they are being encouraged towards greater
self-management, responsibility and growth. When the control system is planned, the
psychological impact of the control system should be considered.
,. A control system should be objective. To prevent confusion instructions should be based on
objective information, be clear and easy to understand.
,. A control system should be suitable for the type of organisation. The con1rol system used in
· a food factory would differ from that used in an insurance company.
,. Control should be co-ordinated with workflow in the organisation. Information regarding
control should be readily available to everyone. Units can also be planned so those employees
can control themselves. This is generally used in sales when sales targets as set for individuals.
If an employee has to sell SO units per month, then he should sell about 10 units a week in
order to achieve his monthly target. The control system is both prescriptive and operational,
because it gives the salesman the exact sal~ figures.
► Control is based on feedback of infbxm~,:tlon concerning the actual performance. If the
salesman sells only 40 units per month then ieorrective action must be taken. This can take the
form of training or other a:ffionative actions.,
► Control should be direct and planned to maintain direct contact between those in control and
those being controlled. The kitchen supervi~o.r exercises control over the kitchen workers
because she is in close contact with the workers and knows what is expected of them.
► Optimum control can only be achieved if strategic key areas are identified. Control is
expensive and managers cannot control everything. The control system should focus on those
areas where actions can be applied most effectively.

_1nn
7.3.1 KEY PERFORMANCE ARE4S OF CONTROL
Management should identify certain key areas of performance in the organisation. These are the
areas or departments that are responsible for the effectivity ofthe entire organisation. For example
the key area for a manufacturing organisation would be the production area. The key· area for a
chain store wo\lld be the sales department. The greater part of a process usually depends on only
a few critical activities or individuals. For example only 10% of a manufacturer's products can
xesponsible for 60% ofits total sales or 2% ofthe staffresponsible for 80% of the complaints and
problems. By concentrating on these strategic points, the main areas for control are exposed.
Management should take the human) financial, physical and information resources into account
when striving to achieve objectives, especially those aimed at improving profits. By implicati~n
management should focus on the effective managem~t of these resources in order to achieve
objectives. The focus areas are illustrated in Figure 7.3.1.1:

FIGURE 7.3.1.1 THE KEY AREAS OF CONTROL

0
The control of the physical resources includes aspects such as stock control, quality control
and control over equipment.
"'-·tr I er human resources includes orderly selection, placement of staff, efficient
o '-AIU O CJV • --&'. val • d
training and personnel clevelopment as well as effective p~u.ormance e uation an
remuneration.
The control of information resources ~eludes accurate market forecasts, thorough
0
exploration of the environment, and econonuc forecasts.
• •I are central to the other resources. This includes control over cash flow,
0 Financ1a resources • •• bi h be
Pro duction costs market share and other actlVIties, w c can
debtors, budgets, sales, '
quantified in :financial terms.

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 . as a control point for key activities. A strategic control point
Strategic key control polll~ serv:ding to the time requirements. Then activities can be stopped
should be care:fWlY sclecte daccobefore serious deviations occur. A healthy balance between
or adaptatiOns can be ma tifieble activities is essential.
· Sometimes· quan:u.ua · · suen·as
~=.c ble acti:vtties
quantifiable and non-quan a ·vely controlled while non-quantifiable activities such as extemal
ti and sales are excess1 • 1
. produc on development are not subjected to contro .
relations and personne1 .

7_4 , THE CONTROL PROCESS

· ed by 8 manager of a large hotel does not di1fer fundamentally from that
The control rrochcess us .rvisor of a provincial hospitaL The process consists of four steps as
used by a kit en supe 1 ·ea1 £ st • acti ·1
. .· ted in Diagram 7.4.1. Although the process follows these ogi our eps, m pr ce 1
illustra al ha en m· this way It is recommended that the four steps should be followed as
does not ways PP ·
closely as possible:
DIAGRAM 7.4.1 STEPS IN THE CONTROL PROCESS

STlil'I
~ Set s&andanls (demaA rrom ~

abjtcUYSI)

\lTEP4
Takc:H~lstqll
STEPJ
M1.11un 1ci11al pcrfol'!III.U
\

nu,
,
. C.•parc adual puf_.ll"
'WIU. J&Hdanla - Jdpt!fj'
dfflallioDS

STEP 1 - SETI'ING OF STANDARDS i.lND :METHODS TO MEASURE

PERFORMANCE
Any organisation has objectives regarding profitability, service rendering, productivity, turnover
and production. Objectives may e.g. be to increase the market share by 25%, to reduce overheads
by 12% or to reduce the complaints of clients by 50%. These objectives are the standards and
performance targets of the organisation. Typical standards are usually exp1essed in terms of
money, quantity, quality and/or time. It is usually included in budgets, units, objectives or other
forms of expected and measurable_results.
The development of standards takes place during the planning process. Standards should
obviously be realistic, measurable and acceptable to everyone involved. Managers should pay
attention to relevant key achievement standards where the following common elements are
emphasised:
✓ Pr~ducti.on standards. These refer to the execution ofproduction activities relative to the cost
of mput m terms of manpower, money, material and/or equipment.
✓ Marketing standards. These refer to an aspect such as market share relatively to that of
competitors within the same market segment.
✓ Profu standards. These refer to profit on an investment or increase in turnover.

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 • • sti dards These refer to the input-output ratio within the organisation.
✓ ProductiVitY 'all sta;dards refer to labour turnover, absenteeism or labour productivi-h,
✓ Human resources • th 1 , t..-.. Th d
4.- ,....,.
Standards are a function of the objectives set d\U'lllg c p aoumg pWIJ)e. ese R-~n ards enable
.u.....:-m,;sh between acceptable and unacceptable performances.... o be effecij,,
management to w:tu.uo- ds . . t •C,
• divi·dual should control these standar at a strategic pol.flt o ensure that
a responsiible m .
objectives are achieved timeously and econo1D1cally.

STEP 2-MEASURING THEA~ALPERFORMANCE

The measuring of the actual performance is the most difficult step of the control process, becaUSe
it is very important to determine exactly what, how and when performance should be measured.
After the standards have been developed the control system should offer the opportunity to
evaluate the actual performance and determine whether the results meet the requirements. For the
marlceting manager the daily, weekly and monthly sales :figures would, for example, represent
actual performance.
Feedback in the form of information is necessary to determine how the real perfonnance
compares with expected performance. For example, the marketing manager would be pleased if
the report indicated that sales were 10% higher in a certain month than in the previous month. He
would be most displeased if sales were down by 10%. The period between the actual
performance and the measurement of performance shcmld be ~ sed in order to identify
deviations as soon as possi"ble. Ifthis drop in sales was OfuJ' discovered only after three months,
the results could have disastrous effects. .
Management by exception where every level of management attend to only a certain level of
exception or difference is usually performed during this steps

Performance measurement should fulfil the following requirements:

• Measurements should be reliable. This means that the measurement should yield the same
results for similar circumstances in the long term.
• Me~ments should be valid. It must measure what it is suppose to measure. If the
:CI'VlSO~ w~ts to test the new employee's theoretical knowledge on kitchen utensils then
c:a:,:v:.~
cake,
■ Measurem
::,,re::~:wandh11:
e e
test. If sho wants to see whether he can !Nike a
es the cake and evaluate the end oduct
~ ! : h o u l d correspond with organisational objectives, and key a!:'as sh~uld be

STEP3-COMPARISONOFACTUALPERFORMANCEWITH .
This . SET STANDARDS
step involves the evaluation of th difft
~ - Actual Performance may beebette;ences between the actual performance and the set
. ~ c e couesponda with the s+..-..t-~d,pothorer or on 1he same level as the set standards. If
18 not up to standard, th ~ en everythin 18 ·
The c11:r..lllntio • • en the deviation should be g under control. Ifperformance
. .--)! n PIJ.nc1ple is im . corrected.
~nnciple attention is focused portant m the control of activitie• and
lllSpection of 1oo · · on exceptions or signifi d :- . processes. According to thiS
an: the exception :Willle~,five ~y not fulfil the mjnr::n. eq":~~~- For example during an
receive furthe att . . ~J' standards Th "
r ention m the form of . · ese five articles
corrective action.

\ · -103-
 ··ug this st~p there are three facets wbicb should b . .. .,
·J>Ul'l e taken int0 · ··
A deviation analysis should be done to determine the d . . account: · .·
• the estunated results. Control is geared to diagnos ~ation between the actua1
It should be determined how much deviation is an:
an dcorrect shortconungs an;s~ts and
we , What ca d tnistakes
,.ctual perfonnance c~mpared to that expected. It is . use the deviation and .
onlY equalled and not unproved upon. unportant to know Why standards::
• There should be accou11tabillty by responsible workers to h" gh .
example if a salesman has not achieved his expected sal ~ er autho.rtty for deviations. For
reason for this deviation. es get, then he should explain the
• Results based on the deviation should be reported to dil'"erent , __
l.JJ' u:.vels 0/ management.
All the possible variables responsible for the deviation should b 1.d .
regarding future actions should be made in the next step. e enti:fied and decisions

STEP 4 - CORRECTIVE ACTION

The final step in the control process is taking corrective measures to correct the deviation or-to
introduce improvements. !h?rough research ofthe ~~use ofthe deviation is important to prevent
that symptoms are dealt with instead ofthe actual ongm ofthe problem. Corrective action is taken
to ensure that the business is run according to plan, activities are improved, and to prevent the
same deviations from recurring.
Corrective action involves the impr<rvement of operations (e.g. discarding faulty units), :financial
actions (e.g. a price increases) or perb.aps training of sales staffto improve their sales techniques.
Corrective steps should be implt."IDen:red with great care, so that the normal operation of the
business is not disrupted. Drastic ch.mlges usually have a disruptive effect on employees and
should be avoided at all costs. In certain cases, drastic changes are unavoidable, e.g. when
departments are closed or employees dismissed for dishonesty or theft.

7~ CONTROL1\1EASURES
. directl in the organisation. The
Management Cail control an individual's behaviour directly or m &. rt ·s 1Dl.,nnrtant to gain the
· divi"dual plays an Jmportant
m • . the controI process and.there1ore
role m . nal 1b"1 ctt'ves
>r-
A number of
1. , · •
WorA.er s co-operation when attempting to ac eve
hi orgamsatio o ~e ·

Piecautionary measures can be taken: d biectives ofthe

. line with the values an o 'J ful
► Appoint personnel with values and needs that are lD f th . working conduct. Care
·
organisation. · · con
These workers maintain · trol as part O eu
selection of personnel is therefore necessary. . •. ual eedsandgroupg~s
. :ti The mdivid n . • -non
► The individual must be integrated with the orgaDlSa on.. an bring about this 1D1el!Y:....
should be in unison. Induction, training and persuasion c
process.

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 ► Management development is necessary in order that managers acquire the necessary
knowledge and experience that would be beneficial to the organisation and prevent
unnecessary mistakes.
► There should be some form of reward for the worker who achieves expected performance.
► Punishment or negative measures should be used only as an extreme measure.
► Control can be applied by acknowledgement and applying factors that could 'motivate,
employees to work harder. .
Efficient control can be obtained ifthere is co--operation and teamwork amongst the stafftowards
the achievement of common goals in the organisation.

7.5.1 CONTROL TECHNIQUES AND MEASUREMENTS

After deciding on standards, management should define suitable measurements for each standard.
The control system is exclusively concemed with the internal operations of a food service unit.,
Specific activities can be monitored after which the system can be evaluated in total, just as a
doctor may make judgements ori the overall health of a person by first measuring blood pressure
or body temperature. The quantity of onions peele~ patrons served or rands returned on
investment can indicate the performance of a food service production worker, waiter of business
project.
Ratios and percentages can also be useful. It is widely accepted that the ratio of food cost to sales
of a commercial restaurant should be 30%. Unfortunately having a 30% food cost may not be the
least indicative ofa food-service overall perfmmanoo. It is poSSiole to sell only one item a day for
one rand although the sales volume may almost oo -CCQ small to measure. In contrast it may also
be possible to sell 500 items per day with a sw:illttr food r:ost.
~

A high rate of employee turnover may be denim~ Fn ~ operation that depends on trained
employees to produce its product, e.g. in a goiumet restaurant, but may be less significant in a
food service operation such as a fast food outlet where mostly pre-prepared items are sold.
Similarly a lot of broken dishes may indicate either that business is brisk or that handling is
slovenly.
Using different indicators to assess the same performance increases the reliability of control. The
control techniques which management uses may be unique to a particular operation, therefore a
manager transferred to a different type ofoperation may encounter a totally different set ofcontrol
techniques of business performance.

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p
. TECBNlQUES
l\'IENTSAND .
OL N.[EASVRE erati.on in financtal telDlS. Profits on
co~ , JJl~asures perfonnanthrcefroghm :!counting. It must however be realised
• • AccountiDS
.AccounffJJg. nses are us
uallYJllCasured f ou •
perational performance smce many aspectc;
0
w.vesunent~de_'
untiJll ~0
!:";, t ·Jlleasure dever}' asp~al~m~ts e 8 food quality or employee attitudes.
in financ1 , • •
that aeco uantified or expresse • unit uses her senses - hearing, taste, smell, sight
cannot bead:n • The roanager of adfoodti.-sestanrvt°:ards The manager simply notes the quality and
·0
Observ •
d touch to measure man:
y pro uo on • kin
f baked rolls the progress of peop1e stac g or was g
bin
an ..,,.,v1Q g the co1our o , • 11
quantity of !Svv-! e. · f eo le trimming vegetables. Observation may we seem to be
dishes or the actions 0 • ~!auger may in fact know at a glance whether a product complies
subjective, but
stan
:,!t~
8
sip of coffee should for instance be sufficient to assess whether it
with tbe set tabl to ~ost clients. Observation should be systematic, purposeful and goal-
would accep e
direeted.beManagers should not make workers feel that she 1s . ' chec,.,mg
.z..:
up • up on them because
this may lead to an atmosphere of distrust.
Internal checking: When accounting is inappropriate as a form of control or measurement,
0
management uses internal checking which is often simply counting items for future comparison.
Items in storerooms, drinks sold, employees at a workstation and worker hoW'S are examples
of counting that are frequently used. Intemal checking is by far the most common way of
measuring in food service operations. Since it is so frequently used by so many employees and
rnanagets, a worker may tend to see it as the only measure of control or identify it as the total
control system.
O Audit and revision: This is when a plan is set up to ensure that every facet of control will be
involved. It includes the periodic revision of procedures, rules and policy.
a Example: The supervisor can set an example to serve as a norm. By setting a positive example
you illustrate that you do not expect anyone else to oo M.}1hing you could not or would not do
yomself. A supervisor cannot expect the empfoy~:s to be at work promptly if you arrive late
regularly.
□ Surveys and reports: Accounting or internal checkmg cannot measure all aspects, somethings
are to be measured formally in other ways. Humm performance is conventionally quantified
in hours, money value or units of output, but human attitudes cannot be quantified in such a
manner. The acceptability of a menu item can for instance be measured by a survey. Surveys
~ usually more complicated and may involve inputs from specialists e.g. marketing analysts,
who measw:e aspects such as brand loyalty or behavioural scientists who can measure aspects
such as motivatio~ leadership or intelligence of staff members. A supervisor can compile a
report which may include forms and data sheets. Forms for formal control are also produced
by government departments and are widely used, e.g. forms relating to safety, unemployment,
security etc.
Q Oral communication is a very simple method ofcontrol. A manager can observe perfor-mance
and compare it with standards and prescribe remedial actions directly to workers. . .
Q Standing limits or borders: These limits define the areas of freedom of action. PerJlllSSlon
must first be obtained, to go outside of these limits. The limits ~ adj~ed to
levels. For example if the kitchen supervisor wants to buy certain eqwpm~t ~~ ~
~g:en:
glassware etc. for the kitchen, be usually has the authority to do so as long as it 15 and
budget. If the kitchen supervisor wants to change the entire kitchen and put in new 5toves
 1\-Janagen show~ be able to:
◊ Plan a budget and set up a system of records that will provide adequate financial operating data
0 Use recordi. to prepare financial reports.
◊ Review and evaluate data from records and by compllrlng them with budget figures be able to
take corrective actioru to k~ financial operations in. line with the desired goals.

7.8.1 BUDGETS AS A. METHOD OF CONTROL

Financial planning includes the development of investment oppommities, budgeting and 1he
implementation of budgeb. Owners of food-service operations are continually looking for new
oppom.mities to invest or to expand their businesses with the ultimate goal of increasing profits or
improved service.

Budgets fonn an integrated part of any organisation's control system. A budget can be desm"bed
as • statement of planned expenditure in terms of money, time, personnel and equipment.
The preparation ofthe budget is primarily a planning function, ·while the administmtion is the actual
a,ntrol function. The quantitative nature of budgets serve as an excellent guideline to evaluate
human resources, production, advertisements, sales and management ofphysical resources. During
the compilation of the budget there is interaction between managers of different departments and
between managers and their subordinates, this contributes to the integration of organisational
activities.

THE OBJECTIVES OF BUDGET CONTROL

► To help managers to plan their work more efficiently. The budget serves as a financial plan that
covers all the organisational activities. Programs for rendering a specific food-service or product
are quantified in ten:ns of money.
► The budget serves as a source ofmfo:rm~tfo~ to top m.rngement and helps managers to allocate
resources more effectively. Man~ger~ ro:ust set «,bjectivea in terms of money and what the
organisation hopes to achieve in tlwt r,t,1:.fod r_;f thne in order to make provision for enough
working capital. ·
► It-serves as a measure of control because it c~ be used to ensme that the funds voted for a
specific program in the budget are not exceeded or used for another progranL To determine this,
the actual and the budgeted results are compared.

TBREESTEPSREGARDINGBUDGETCONTROL
► The estimation of sales will indicate the possible sales and expenses. This serves as a guide for
management regarding sales, financing and production.
► Planning the task of individual departments in order to produce
► Maintaining a system by which achievements can be evaluated and controlled.
 , ~ 1\1'1'AGES OF BUDGET CONTROL
7. 8.1 AD 'f/f1l U J

. i d from estimated sales, costs and expenses.

.
►Profits are proJeC e . •
. is facilitated because there is a forecB:5t of th~ future financial standing of the
► PJ~g. D l ,nment plans can be prepared m good time.
organ.tsation. eve Or .
ave a better understanding of their personal contn1mtions and responsibilities
► Manageroent h .
,.. Taking preventative steps can control problems and variables.
► Physical resources such as machinery and equipment can be used in a mote productive and
economical way.
► Co-ordination and co-operation between the different departments and sections are increased.
► Economical methods save money by preventing waste.

7.8.3 DISADVANTAGES OF BUDGET CONTROL

® Managers may use the budget as a holy law instead of an aid, this can lead to an in.flexible
organisation hampered by red tape. It can also create problems when the organisation needs to
adapt to sudden extemal changes.
® If management compiles a poor budget, th.is will have a negative influence on the organisation.
The budget is not an alternative to good management. .
® Budgets can sometimes encourage spend.in~ instead of saving.
® Growth may be inhibited because attentit~. i~ ft"":~ed on previous achievements, instead of on
present performance.

7.8.4. FORMULA.TING THE BUDGET

Usually a member of top management acts a& a co-ordinator in the drafting and application of the
budget A budget committee is normally responsible for the formulation and implementation ofthe
budget The budget committee usually consists of the heads of the different departments, e.g. the
financial manager, production manager, personnel manager, kitchen manager, marketing manager
etc.
The following steps can be distinguished in the preparation of a budget:
► Record all sources of income. This usually starts with the budgeting of sales and the income
derived from this, as well as earnings from capital investments. The estimation of future sales
should be based on thorough research to ensure that the forecast is correct.
► Clusify all items of expenditure. Expenditure by a food-service unit usually ~ludes ~o~ odf
food, labour, buildings, equipment and operating costs. These main groups are m tum divide
into individual items for which expenses are incurred.
► Relate activities to previous records of business. A profound knowledge of all activi:
essential to prepare a good budget. The following information should be collected to b ge
i:
realistically:
• Study the budget of the previous year and take into account any deviations that occurred-
• The objectives of the food-service concern. . .
• Statistics on experience of sales, sales reports and other sales statistics.
• Future operational policy of the enterprise.

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I
 • National, regional and lo~al ec~nomlo oondltioru:.
Sales and expenditure tendencies. •
• · • · ustomer choice.11 portion sizes and food cost per portion.
• Men.u pun~, C tt'ou ee g th" n:imbe:c of emnloyees, their duties, work hours and wage
• Pay ro uuoffl18 , · · •
levels. • • •• .&-. d ·
► Set priorities and make firm decisions. To determine pnorities, a .100 -semce ~aoagerm.ust
• Consider the needs of every section ofthe organisation and look for non-essential expenditure.
• Decide whether specific items can be obtained at lower cost.
• Make provision for maintenance, equipment and development of personnel.
► Explain the information included in the budget d~cull!-ent. The document us1!911y ~ntaima
atement of all the expected income with a classification of sources and a list of items of
expenditure,
► Utilise the budget! Whatever budget system is used, it is obvious that if such a budget does not
serve as guideline for controlling expenditute, it does not mean much. A budget should be h
most valuable resource at the disposal oftop management for the evaluation of daily actions and
to control income and expenditure patterns.
7.8.5 TYPES OF BUDGETS
To obtain budget control, most organisations have a ntQsfg b:..tdget that is compiled from different
smaller budgets. A few of the more important budgd.8 m~ organi,'Jation are given below:
◊ SALES BUDGET
This budget is important because the estimated sales form the basis of other budgets. This is the
measurement of the effectivity of marketing and sales and gives and indication ofthe expected rand
value of the number ofunits sold, and thus ofthe expected sales. This budget should be developed
for each product or product line and for every area up to the total sales budget by the sales
1q,rt$eJl.tativcs. There should be co-operation with the other departments to ensure that the budget
is realistic. l

◊ PRODUCTIONBUDGET
Thia follows fro~ the sales budget because it has to give an indication of the quantity that should
be prodDccd. It is the task of the production budget to organise production in such a way that the
demmda of the ~es department can be met, as and when the demand arises. It should be poSSlolo
to keep .production at a constant level and still to cover seasonal fluctuations in demand. '1110
prod~lon budget sho~d be form~ated ~ both physical and monetary terms to ensure that ~o
~ l a b o u r , ~ and machinery "h'lll be available. The budget is also developed a ~
~ \Dput of the different pr~ducts ~d departments. For example, w oolworths will have to
. -e1op &epuate budgets for the11 clothing, food and goods departments.
◊ PURCHASES BUDGET
Tb.is ia com.piled with reference to the production budg t t tha ·ats
ate purc~ased ~ the conect time. Thero should always~ s ~ : =raw t the ~eeded raw mate11. d
::dquality available ·~ that the production process is not interru ted H lllatenals ofthe con:ct ~11
to unnecessary high storage costs,, finance costs and the risk ~f . owever overpurchasingWJJ>
◊ STA.FF BUDGET agemg and depreciation ofstock,

This . deals with the number of workers and their de . .

~~!~~ :~e~~~e ·~n:t
eci Y
number of ~~k~~~~g» ~ch will be required
budget. This Wille estimated accurately by
O Production
enable an estimate to be
IJlade ofthe :finance required to pay wages/salaries d . · ·~:.: : ·<i- ..
indUStrY, which is l~bo~ "?-tensive, management an ove~e. For example in the deci . ·· · ·
fruit. During the fruit-picking season, the labour :1willY.appomts seasonal workers to hefpop~kfruitht
be more than d . th 1c e
the year· unng e other months of
◊ :RESEARCH AND DEVELOPI\1ENT BUDGET
This 111oney is usually used for research and development Of ·
particularly important to organisations such as market resear hprodu:15 and processes. Research is .
rorers, food companies (such as 'Irvine and Johnson') an: agen~ie~, universities, carmanufac-
produats such as computers and electronic equipment. Res:1~ations focusing_ on high tech
Products and to develop new products to satisfy the needs and the dis necdsessary to llllprove their
eman of the consumer
◊ FINANCIAL BUDGET .
This budget is ~mpile~ when all the other budgets are completed so that one can form an idea of
whatthe fin~ncial_ reqwremen!5 t~ meet these budgets will be. The :financial budget is an exposition
of the ways m which the orgarusation can obtain funds and how they intend to use it.
The financial budget can be divided into the following different parts:
e The cash ·budget is a projection of the future flow of cash within the organjsation and
includes cash receipts, e-xpenditw:e and the use of capital for a specific period. This budget
indicates the amount of cash available at present and the pattern of cash flow in the
organisation. The cash bu~lget ·will reflect whether or not the organisation can meet its current
obligations and if not, ·whiit measures can be taken to ensure that they can be meL Thus the
budget will indicate possibfo ~111sh shortages or cash surplus and will indicate ifmay be
necessary to obtain credit
e The capital budget indicates the planned investment in pro~erty, eq~pmml:t and other
physical facilities in order to maintain or extend present production capacity. This can be an
extension ofthe present production facilities orth~ upgrading of~ ?~dated plant Although .
the budget items in this budget are intend~~ for long term use, .it ~~because~e
capital expenses will influence the competitiveness of'lh:e orgamsation !11 the lo:term~~
projected profit and loss sheet or the pro-forma shee~mcorporates ~ ~h:'an ine:cation
profits with reference to the budgeted sales and production.costs. !h,us it 81V
oftb.e expected status of the assets, liabilities and propnetary mterest.
◊ THE MASTER BUDGET ..A:.....ted. In its
In this bud d summarised and co-o1uwa •
get, all the estimates of the other bu gets are that will be applicable if the esfuD8tes

:roved
COtnpleted form the master budget provides the final accounts sh ts are prepared. The master
correct. Expected profit and loss accounts and balance ee
get has a dual goal· • ·ti during the
1 •
1t should co-ordinate the activities of all 1he departmen~ so that individual actiVJ es
Prescribed trade period can run according to a general P an. ll the relationship
• Th 1 1 indicated as we as od b hich
e cash situation of the organisation should b~ c ~ar YThe budgetisthusametb yw me
bthe~een ~xpected cash income and imme~te o~bg~dt1onsita1 to meet obligations as tbey beCO
e orgamsation can ensure that it bas sufficient liqw cap
Payable.
7•9 STOCK CONTROL
7.9.1 THE NECESSITY FOR ST~CK CONTROL

enough stock to comply with the eman s .LOr quan 1 ,

yaiu:!~J1;f!eto!~a:e!!:
The aim of stock control is ~o be abide to dedt~e thettyize· qanualityd
, ,
control over the price of stock.
Stock is the greatest trade asset in many organisations. The enormous investment in stock and the -
costs incurred by stock control require that efficient control be exercised ~er stock. S-f:?~k ~ontrol
is needed to help the production system flow more easily and to achieve ht:tte! utilisation of
production means. An 'out-of.. stock' situation can prove ver:y costly to the enterpnse m terms ofloss
of sales and customers. ·
It is important to management that stock ofthe various items should always be available on demand,
that the stock is of good quality, that purchases be as economical as possible and the safety of stock
is ensured.

COSTS INCURRED BY STOCK CONTROL ARE:

a Purchase c:osts is the actual price paid for an article or food product and can be compared to the
input cost in production. Food costs can only be oo.~lled properly if well-planned menus are
used. Menus can be adapted in line with the seasonally available foods. This could keep costs
down without sacrificing variety. The cost of c@nv~ui~~e foods should be evaluated bearing in
mind the amount of labolD' that could be sawi.
a Costs of carrying stock are incurred 1hrmlf:;h k-mdlmg,).~ stration, depreciation, insurance
cost, electricity, damage, perishing and the rl~ Qf ~hiV.n.~ in price.
a Other costs_can hll:lude administrative costs such as s$.larles, telephone bills, paperwork, quality
control and mspections. . ·
Efficient stock control is an essential process when providing good customer service. It is important
to ensure that the satisfaction of the consumer's need is not hampered by 'out--of-stock' conditions.
For example it is very irritating to a customer when he orders a fillet steak and then hears that the
restamant does not have fillet or rump steak at that moment Stock control should ensure that there
is enough stock of everything needed for preparation or items offered on a food-service menu.

7.9.2 PURCHASING AND STORAGE

Food costs begin_ at the point of purchase, therefore excellent control procedures are good steps
towards effective purchasing. Effective procurement of food relies on the ability of food-service
managers to train skilled personnel for this special task. Such a person should have knowledge ofthe
grades of raw products, prices, quality and quantity specifications. The purchaser should be aware
of market fluctuations. Menu choices end the extent ofproducts and services offered detennine the
nature and extent of food procurement. The menu will not only affect the efficiency of purchasing,
but has a direct bearing on all the activities perfonned in food service units.
Any 0tg30isation that keeps stock should have a properly organised central storage area to facilitate
timely re-stocking. Storage facilities for food arc usually divided in two sections, namely storage of
dry foods like cans, bags and cartons, which do not require refi:igeration and refrigerated section
where frozen and perishable stocks are stored.

-113-
 The minimum stock should ~e determined in a way that leaves ample time for re-stocking. Rigid
stock control exercised by a smgle person. accountable for all stocks. is essential. This can be done
by means of markers on the actual stock and/or by mechanical computer control. Stocks must prefe-
rably only be issued by written requisitions and according to set menus and also be based on specific
number of portions to prepare or customers to serve. Records of purchases and sales together with
planned cyclical or other menus and the use of properly standardised recipes. help in solving the
problem of how much to produce and help to prevent over and under production. ·
Whenever stock is replenished. the physical stock should be checked against the number that should
be present according to the stock inventory. Differences must be investigated and explained.
Control over stock in storage must be efficient to prevent loss. Control can be exercised by means of
continual supervision, authorised entry. taking precautions against fire theft and ageing, and obtai-
ning required insurance. •

7.9.3 · THE FRAMEWORK AND COMPONENTS OF STOCK CONTROL

Whal is the optimum quantity ofstock to have?
This depends on the requirements of the production department of the food-service organisation. It
is therefore important to determine maximum and minimum levels of stock.

What is the re-order level?

This is the amount of stock that necessitates placing the standard order, to ensure that stock is
replenished at a required time.

What is the economical lot sir.e/or an order? .

After levels ofstock have been determined, the most economical quantity for replenis~imt at a ~
has to be decided upon. This requires a comparison between fundamental costs of o~nng stock d
keep· stock. Stock ordering costs are kept at a maximum when small_ quantities are ordere
fte ,~ly while stock ordering costs iuerniniroised by placing large?~ in:frequ~tly. Therefore,
w.eqmost econoJnic
~1.. ' • al quan-,:N.!'
I& ..., ~
"-
'""' •.,..,,M,.., _.-i, M -n,t..-e
"us:;~ the costs are at a m1mrnum.
ef>G,<•~ - ; , ,
. This ts also known as
the fundamental stock control mr_.,.-.,l.,l filtd can be calculated mathematically.

Which stock control methnti tit~,~yr;!Jem ;;~011/d be_used? .

Tuere are several Stock ....~.,,...,.....,....1 fli.,p
UJJi,t,.11.U.s
r-·u;1..-t0t1rw. the most nnportant are.
~ , ;, • d whil nm11ntiti
◊ The constant oider eye Ie, wherebv ~ stock replenished is done at fixed peno s, e ' 1 ~ - es

ordered can vary. . d where the same quantity is ordered each time. The periods between
◊ The constant quantity or er,
will di:ffi
as demand fluctuates. . ..
orders er, d int model with a normal demand dunng the waiting
◊ Other probability modelsa: ~e re-o~:1-~ the limit analysing model.
period, the output-table ysmg m

Stock control has received m~

.
~CO::c!:::ahly.
.
t ears. New techniques help to solve stock
Since, stock~ a high
problems. The computer can sllDRde bl time in developing a system of his own m
1'!:N'~~:a;
-~n!:lger
evezy ~ should spend consi ra e
his specific standards.

-114-
7,11 FOOD-SERVICE CONTROL ACTIVITIES CHECKLIST
The control activities in a food-service unit are extensive. The routine activities of a food-
service manager covers seven operational areas namely: policy administration, office
maintenance~ control of ~peratlng systems, contr~l of personnel, control of cash,-
communication and reportmg to head office or superwrs and corrective action.

pOUCY ADMINISTRATION
The manager must plan and execute all activities according to the policy guidelines of the
food--service concern. She must match her unit's capabilities, operating procedures, products
and performances with the established company standards. Procedure manuals may cover the
following:
.
/ Responsibilities and duties of managers.
✓ Pricing of menu items.
✓ Credit policies.
✓ Relations with suppliers.
✓ Communication with head offitfi3~
✓ Payroll procedures.
✓ Food quality and portions.
✓ Labour relations as it affects the company as a whole.
✓ Insurance and legal matters. .
✓ Worker privileges such as free meals, purchasing of products and oth~ fringe benefits.
✓ Matters, which affect the company image, e.g. dress code and advertiSmg.
✓ Client relations and procedures for control of operating systems.

DFFICEMAINTENANCE dde ·ces

•:th h as 50 different forms an VI
Atypical catering office unit is controlled WI as muc • ment and furniture. The
al~ugb. e~ may not be used every day in addition to 0~~
unit must mamtain control records for several years alon~
i': on hundreds ofprodu_cts
with individuals and outside
awi scores of suppliers. A certain amount of correspon ence
companies is also likely.

CONTROLOFOPERATINGSYSTEMS . d ·ervicerequirethe
'l• • ply production an s fth
lvtenu planning work programmes, purchastng, sup ' have to deal with many O e
use of forms and devices for their control. A unit manager may
following:
✓ Menu analysis, planning and costing.

_ 1 1 Ii-
✓ Food and beverage costing.
✓ Inventory of food, service ware, linen, equipment etc.
✓ Forecasting of expenditure, business and labour.
·✓ Record keeping of purchasing.
✓ Food transfers within the unit and within the company.
✓ Business volume analysis.
✓ Preventative maintenance.
✓ Value and cost analysis of purchased products.

CONTROL OF PERSONNEL
The control of personnel may be one of the most important parts of a manager's control
functions. Managers are responsible for the induction of new employees and must fill in
numerous forms and records and must control payroll records. In some instances they even
have to control the pay cheques ofemployees. Other activities involve the transfer, dismissal,
discipline or possible injuries and illness of personnel. These procedures are executed
according to company policy and mostly involve clerical actions.

CONTROLOFCASH
Cash control procedures are of considerable ooucem to the food-service concern. The unit
maoagPX must prevent losses and must make it obvious to all employees that losses will be
promptly identified. The control of cash involves the manager in:
✓ Counting cash.
✓ Approving non-cash payments.
✓ Balancing cash with cash accounts using control devices such as
cash register data.
✓ Preparing bank deposits and sometimes making them.
✓ Supervising persons handling caslL
✓ Authorising cash disbursements.
✓ Managing petty cash accounts.
✓ Monitoring documents that represent cash such as void guest checks and free meal tickets.

Although none ofthese activities are in itselftime-consuming, a manager spends a lot oftime
on cash control procedures. The timing of cash control activities is usually critical.
Efu~---tmmfat{I 11m mm1mr1lfflniiitdikltumtb:~
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