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MODULE 5 - Controlling

The document discusses controlling as the process of measuring performance and taking action to ensure desired results. It describes the four steps of the controlling process as establishing objectives and standards, measuring actual performance, comparing results to standards, and taking corrective action. The document also discusses different types of controls such as feedforward, concurrent, and feedback controls, as well as control techniques like management audits, budgeting, balance sheets, and income statements.

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Joshua Roberto Gruta
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69 views

MODULE 5 - Controlling

The document discusses controlling as the process of measuring performance and taking action to ensure desired results. It describes the four steps of the controlling process as establishing objectives and standards, measuring actual performance, comparing results to standards, and taking corrective action. The document also discusses different types of controls such as feedforward, concurrent, and feedback controls, as well as control techniques like management audits, budgeting, balance sheets, and income statements.

Uploaded by

Joshua Roberto Gruta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 10

26/10/2020

CONTROLLING

Why and How Managers Control


• Controlling
1. The process of measuring performance and taking action
to ensure desired results
2. Has a positive and necessary role in the management
process
3. Ensures that the right things happen, in the right way, at
the right time
Benefit: Organizational learning (Example: After-action
review)

Figure 1
The role of controlling in the management process

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The Control Process


• Step 1 — establishing objectives and standards

Output standards
• Has a positive and necessary role in the management
process
Input standards
• Measure effort in terms of amount of work expended in
task performance

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

The Control Process


• Step 3 — comparing results with objectives and
standards
Need for action = Desired Performance – Actual
Performance
Comparison methods:
• Historical comparison
• Relative comparison
• Engineering comparison

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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

Controlling Process
The Controlling Process

Set performance Measure actual Determine


Compare
standards performance deviation

Standards Within limits

Take corrective
No Yes
action

Continue work
progess

Establishment of Standards
• Standards are simply criteria of performance .

• They are selected points in an entire planning


program, at which measures of performance are
made so that managers can receive signals about how
things are going and thus, do not have to watch every
step in the execution of plans.

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Measurement of Performance
• If standards are clearly & objectively established
and made known to the performer of a job, then
measurement of performance becomes easy.
• The most common means of measurement are:
personal observations, use of statistical data
and reports, both oral and written.

10

Correction of Deviations
• Managers may correct deviations by:
1. Redrawing their plans or modifying their goals;
2. Exercising their organizing function through reassignment or clarification
of duties;
3. Additional staffing;
4. Better selection and training of subordinates;
5. Ultimate re-staffing measure—firing;
6. Better leading—fuller explanation of the job or more effective leadership
techniques.

11

Why and How Managers Control


• Feedforward controls
▪ Employed before a work activity begins
▪ Ensures that:
• Objectives are clear
• Proper directions are established
• Right resources are available

▪ Goal is to solve problems before they occur


Ex. Inspection of raw materials, proper selection and training of employees

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26/10/2020

Why and How Managers Control


• Concurrent controls
▪ Focus on what happens during work process
▪ Monitor ongoing operations to make sure they are being
done according to
▪ Goal is to solve problems as they occur
Ex. directing, monitoring

13

Why and How Managers Control


• Feedback controls
▪ Take place after work is completed
▪ Focus on quality of end results
▪ Goal is to solve problems after they occur and
prevent future ones

14

Figure 2
Feedforward, concurrent, and feedback controls

15

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26/10/2020

Management Audits
They are means for evaluating the
effectiveness and efficiency of various
systems within the organization, from social
responsibility to accounting control.

16

Types of Audits
1. External Audits
occurs when one organization evaluates another
organization; used in feedback control in the discovery and
investigation of the savings and loan scandals.
2. Internal Audits
improve the planning process and the organization’s
internal control systems; essential functions include
periodic assessment of a company’s own planning,
organizing, leading, and controlling.

17

Budgeting
Budgeting (or budgetary control)
– the process of finding out what’s being
done and comparing the results with
corresponding budget data to verify
accomplishments or to remedy
differences.

18

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26/10/2020

Types of Budget
1. Sales Budget
• Usually data for the sales budget that are prepared by
month, sale area, and product.
2. Production Budget
• Commonly expressed in physical units, required
information include types and capacities of machines,
economic quantities to produce, and availability of
materials.

19

Types of Budget
3. Cost Production Budget
• Usually data for the sales budget that are prepared by
month, sale area, and product.
4. Cash Budget
• Prepared after all other budget estimates are completed,
shows the anticipated receipts and expenditures, the
amount of working capital available, the extent to which
outside financing may be required, and the periods and
amounts of cash available.

20

Types of Budget
5. Master Budget
• Includes all major activities of the business, brings
together and coordinates all the activities of the other
budgets and can be thought of as a “budget of budgets”.

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Comparative Balance Sheets


It shows the financial picture of a company at a
given time. Itemizes 3 elements:
1. Assets – values of the various items the corporation
owns.
2. Liabilities – amounts the corporation owes to various
creditors.
3. Stockholder’s Equity – amount accruing to the
corporation’s owners.

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Comparative Balance Sheets


Balance Sheet Equation:
• Assets = Liabilities + Stockholder’s Equity

Profit and Loss Statement


• An itemized financial statement of the income and
expenses of the company’s operations during the
accounting period.

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Figure 5
Basic foundations of a balance sheet and income statement

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Balance sheet – an example

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Income statement – an example

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Characteristics of an Effective Control System


1. Valid Performance Standards
• Standards should be expressed in quantitative
terms, should be objective rather than subjective.
2. Adequate Information to Employees
• Information should be accessible as possible,
particularly when people must make decisions
quickly and frequently.

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26/10/2020

Characteristics of an Effective Control System


3. Acceptability to Employees
• Control systems should emphasize positive
behavior rather than trying to control negative
behavior alone.

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