PRINCIPLES OF MANAGEMENT CONTROLLING

by Dr. Gopal Iyengar Director - KIAMS

CONTROLLING
Measurement and Correction of Performance in order to make sure that Enterprise Objectives and plans to attain them are accomplished BASIC CONTROL PROCESS:  Establish Standards  Measure performance  Correct variations

The Links Between Controlling and the Other Management Functions

Planning Organizing Leading Controlling

Control

FEEDBACK LOOP OF MANAGEMENT CONTROL

Measurement of actual performance Comparison of actual performance against standards

Desired performance

Actual performance

Implementation of corrections

Program of corrective action

Analysis of causes of deviations

Identification of deviations

EFFECTIVE CONTROL REQUIREMENTS

1) 2) 3) 4) 5) 6) 7) 8)

Tailoring Controls to Plans and Positions Tailoring Controls to Individual Managers Making sure Controls point up Exceptions at Critical Points Objectivity of Controls Flexibility of Controls Fitting Control System to Organisational Culture Economy of Controls Establishing Controls that lead to Corrective Actions

Qualitative Control Techniques

Technique Audit External audit Internal audit Definition Examination of activities or records to verify their accuracy or effectiveness Verification of financial records by external agency or individual Verification of financial records by an internal group of personnel

Management Use of auditing techniques to evaluate the overall effectiveness of management audit Personal observation Performance appraisal Policy Manager s first-hand observation of how well plans are carried out Formal method or system of measuring, evaluating, and reviewing employee performance General guideline to follow in making decisions and taking action

Quantitative Control Techniques

Technique Gantt chart CPM/PERT Break-even analysis Definition Chart depicting planned and actual progress of work on a project Method of scheduling activities and events using time estimates Ratio of fixed costs to price minus variable costs

Inventory level that minimizes ordering and carrying Economicorder quantity costs ABC analysis Variance analysis Method of assigning value to inventory; A items are worth more than B or C items Major control device in manufacturing

Master budget Capitalexpenditure budget Human resources budget Materials purchase budget Cash budget

Types of Budgets
Revenueand-expense budget

Production budget