Operational Control

What is operational control

• Operational control systems are designed to ensure that day-to-day actions

are consistent with established plans and objectives.

• It focuses on events in a recent period.

• Corrective action is taken where performance does not meet standards.

• Allocation and use of organizational resources.

• Short term objectives and main is to control the actions.

 Process of evaluation

• The process of evaluation basically deals with four steps:-

1. Setting standards of performance.

2. Measurement of performance.
3. Analyzing variances.
4. Tacking corrective actions.
 1. Setting of standards

• It will includes three questions while dealing with standard setting.

1. What standards should be set?

2. How should these standards be set?
3. In what terms should these standards be expressed?

• The answer is

1. Finding out the key areas of performance.

2. The special requirements for the performance of key tasks.
3. Evaluation of special requirements to best express.
• The standards have to be set on the basis of…..

• Quantitative criteria:-
It includes the criteria like net profits, stock price,
dividend rates, return on capital, growth in sales, production
cost and efficiency etc.

• Qualitative criteria:-
Qualitative criteria is the subjective assessment of factors
such as capabilities, core competences, risk-bearing capacity,
strategic clarity, flexibility and workability.
 2. Measurement of performance

• The evaluation process operates at the performance

level as action takes place.

• Standards of performance act as a benchmark against

which the actual performance is to be compared.

• Measurement is done through the accounting, reporting

and communication systems.
• Apart from this the other important aspect of measurement
relate to following.

1. Difficulties in measurement
2. Timing of measurement
3. Periodicity in measurement
 3. Analyzing variances

• The actual performance matches the budgeted

performance.

• The actual performance is better.

• The actual performance is below.

 Sample variance chart for performance evaluation

Performance indicator standards Actual Deviation

s
Profit over sales 12 10 -2
Dividend 10 10 0
Sales revenue 25 27 +2
Customer complains 1.5 1.3 +0.2
Capacity utilization 85 90 +5
 4. Taking corrective actions

• Checking of performance

• Checking of standards

• Reformulating strategies, plans and objective.