Chapter 9 Summary

I. Why and how to control?
Controlling purpose is to measure performance in order to take corrective action. The target of
it is to assure the right things happen, with the right process at the right time
II. Types of control
 Feedforward controls input: solve problem before it occurs: make sure the objective is cleared,
direction is set and resource is available
 Concurrent controls throughput: solve problem during it occurs: keep things go as planned
 Feedback controls output: solve problem after it occurs: perform improvement or learning
 Internal – self-control: self-discipline influences the behavior.
 External: external factors influnece behavior
- Bureaucratic control: influences behavior by authority, policies, budget, regulations
- Clan control: influence behavior by the organizational culture, norms
- Market control: market influences organization behavior with product adjustment, process
improvement
III. Steps of controlling process:
Establish
objective and
standards
Take corrective Measure actual

action performance
Compare actual
and desired
performance
IV. Tools and techniques:

1. Gantt chart:
i. What Is a Gantt Chart?
A Gantt chart is a commonly used graphical depiction of a project schedule. It's a type of bar
chart showing the start and finish dates of a project's elements such as resources, planning, and
dependencies.
The chart shows the project timeline, which includes scheduled and completed work over a
period of time. The Gantt chart aids project managers in communicating project status and
completion rate of specific tasks within a project, and also helps ensure the project remains on
track. By convention, it is a standard tool that makes communication unified among the
graphic display of scheduled tasks required to complete a project.
ii. Benefits of a Gantt Chart
The chart identifies tasks that may be executed in parallel and those that can't be started or
finished until others are complete. It can help detect potential bottlenecks and identify tasks
that may have been excluded from the project timeline.
The chart depicts things like task slack time or additional time for completion of a task that
shouldn't delay the project; noncritical activities that may be delayed; and critical activities that
must be executed on time.
2. CPM/PERT chart: combination of the critical path method and program evaluation and review
technique
i. PERT:
A PERT chart, also known as a PERT diagram, is a tool used to schedule, organize, and map out
tasks within a project. It provides a visual representation of a project's timeline and breaks
down individual tasks.
A PERT chart works by visually representing a project’s tasks and the dependencies connected
to each one. You might use one to create an initial project schedule and estimated timeline to
share with project stakeholders before the project actually begins.
ii. CPM
The critical path is the longest sequence of tasks that must be completed to execute a project.
The tasks on the critical path are called critical activities because if they’re delayed, the whole
project completion will be delayed.
Finding the critical path is very helpful for project managers because it allows them to:
 Accurately estimate the total project duration.
 Estimate the time that’s necessary to complete each project task.
 Identify critical activities which must be completed on time and require close
supervision.
 Find out which project tasks can be delayed without affecting the project schedule by
calculating slack for each task.
 Identify task dependencies, resource constraints and project risks.
 Prioritize tasks and create realistic project schedules.
iii. CPM vs. PERT
The critical path method (CPM) and program evaluation and review technique (PERT) are both
project scheduling techniques. But they aren’t interchangeable.
The difference between them lies in that PERT is about time planning and time management,
while CPM is about time and budgeting. PERT delivers a project quickly and CPM gets the
project done on budget and on time.
However, PERT and CPM can be used together for project planning and scheduling.
3. Inventory control: ensures that inventory is only big enough to meet immediate needs
i. Economic order quantity: places new orders when inventory levels fall to predetermined
points
ii. Just-in-time scheduling: routes materials to workstations just in time for use
4. Breakeven analysis: performs what-if calculations under different revenue and cost conditions
i. Breakeven point: occurs where revenues just equal costs
5. Financial control: basic Financial Ratios
o Liquidity measures ability to meet short-term obligations: the higher the better
 Current Ratio = Current Assets/Current Liabilities
 Quick Ratio = Current Assets - Inventories/Current Liabilities
o Leverage measures use of debt: the lower the better
 Debt Ratio = Total Debts/Total Assets
o Asset Management measures asset and inventory efficiency: the higher the better
 Asset Turnover = Sales/Total Assets
 Inventory Turnover = Sales/Average Inventory
o Profitability measures ability to earn revenues greater than costs: the higher the better
 Net Margin = Net Income/Sales
 Return on Assets (ROA) = Net Income/Total Assets
 Return on Equity (ROE) = Net Income/Owner’s Equity
6. Balanced Scorecard: were originally meant for for-profit companies but were later adapted
for nonprofit organizations and government agencies. It is meant to measure the
intellectual capital of a company, such as training, skills, knowledge, and any other
proprietary information that gives it a competitive advantage in the market. The balanced
scorecard model reinforces good behaviour in an organization by isolating four separate
areas that need to be analyzed. These four areas, also called legs, involve:
Factors used to develop scorecard goals and measures:
 Learning and growth are analyzed through the investigation of training and knowledge
resources. This first leg handles how well information is captured and how effectively
employees use that information to convert it to a competitive advantage within the
industry.
 Business processes are evaluated by investigating how well products are manufactured.
Operational management is analyzed to track any gaps, delays, bottlenecks, shortages,
or waste.
 Customer perspectives are collected to gauge customer satisfaction with the quality,
price, and availability of products or services. Customers provide feedback about their
satisfaction with current products.
 Financial data, such as sales, expenditures, and income are used to understand financial
performance. These financial metrics may include dollar amounts, financial ratios,
budget variances, or income targets.

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I. Why and how to control?

Take corrective Measure actual

IV. Tools and techniques:

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