Controlling as

Management Function
Lecture 12

1
 Controlling as a Management
Function
• Controlling
• A process of monitoring performance and taking action to
ensure desired results.
• It sees to it that the right things happen, in the right ways,
and at the right time.

2
 Controlling as a Management
Function
• Controlling
• Done well, it ensures that the overall directions of
individuals and groups are consistent with short and long
range plans.
• It helps ensure that objectives and accomplishments are
consistent with one another throughout an organization.

3
 Controlling as a Management
Function
• Controlling
• It helps maintain compliance with essential organizational
rules and policies.

4
 Controlling as a Management
Function
• Cybernetic Control System
• One that is self-contained in its performance monitoring
and correction capabilities. (thermostat)
• The control process practiced in organizations is not
cybernetic, but it does follow similar principles.

5
 The Control Process

• Establish objectives and standards.

• Measure actual performance.
• Compare results with objectives and standards.
• Take necessary action.

6
 Establish Objectives and Standards

• The control process begins with planning and the

establishment of performance objectives.
• Performance objectives are defined and the standards
for measuring them are set.

7
 Establish Objectives and Standards

• There are two types of standards:

• Output Standards - measures performance results in terms of quantity,
quality, cost, or time.
• Input Standards - measures work efforts that go into a performance
task.

8
 Measuring Actual Performance
• Measurements must be accurate enough to spot deviations or
variances between what really occurs and what is most
desired.
• Without measurement, effective control is not possible.

9
 Comparing Results with Objectives and
Standards

• The comparison of actual performance with desired

performance establishes the need for action.
• Ways of making such comparisons include:
• Historical / Relative / Engineering
• Benchmarking

10
 Taking Corrective Action

• Taking any action necessary to correct or improve

things.
• Management-by-Exception focuses managerial
attention on substantial differences between actual
and desired performance.

11
 Taking Corrective Action

• Management-by Exception can save the managers time, energy, and

other resources, and concentrates efforts on areas showing the
greatest need.
• There are two types of exceptions:
• Problems - below standard
• Opportunities - above standard

12
 Effective Controls
The Best Controls in Organizations
are

• Strategic and results oriented

• Understandable
• Encourage self-control

13
 Effective Controls
The Best Controls in Organizations are

• Timely and exception oriented

• Positive in nature
• Fair and objective
• Flexible

14
 Types of Control
• Preliminary
Sometimes called the feedforward controls, they are
accomplished before a work activity begins.
They make sure that proper directions are set and that the
right resources are available to accomplish them.

15
 Types of Control

• Concurrent
Focus on what happens during the work process.
Sometimes called steering controls, they monitor
ongoing operations and activities to make sure that
things are being done correctly.

16
 Types of Control
• Postaction
Sometimes called feedback controls, they take place after an
action is completed. They focus on end results, as opposed to
inputs and activities.

17
 Types of Controls

Managers have two broad options with respect to

control.
• They can rely on people to exercise self-control
(internal) over their own behavior.
• Alternatively, managers can take direct action
(external) to control the behavior of others.

18
 Types of Control
• Internal Controls
Allows motivated individuals to exercise self-control in
fulfilling job expectations.
The potential for self-control is enhanced when
capable people have clear performance objectives and
proper resource support.

19
 Types of Control
• External Controls
It 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.

20
 Organizational Control Systems

• Management Processes
• Strategy and objectives
• Policies and procedures
• Selection and training
• Performance appraisal
• Job design and work structures
• Performance modeling, norms, and organization culture

21
 Organizational Control Systems
• 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.

22
 Organizational Control Systems
• Employee Discipline
• Discipline is defined as influencing behavior through reprimand.
• Progressive Discipline ties reprimand to the severity and frequency of
the employee’s infractions.
• Positive Discipline tries to involve people more positively and directly in
making decisions to improve their behavior.

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 The “Hot Stove Rule”
To be Effective Discipline Should be:
• Immediate • Informative
• Focus on activity not • Occur in a supportive
personality setting
• Consistent • Support realistic rules

24
 Organizational Control Systems
• Information and Financial
• Activity-based costing - the true cost of all products and services.
• Economic value added - examine the value added by all activities.
• Understand the implication of key financial measures of (ratios)
organizational performance

25
 Operations Management and
Control
• Purchasing
• Economic Order Quantity
automatic reorder points

• Just-In-Time Scheduling

26
 Operations Management and
Control
• Project Management
• Program Evaluation and Review Technique (PERT) - Identifies and
controls the many separate events in complex projects.

27
 Operations Management and
Control
• Statistical Quality Control
• Based on the establishment of upper and lower control limits, that
can be graphically and statistically monitored to ensure that products
meet standards.

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