Professional Documents
Culture Documents
Five distinct decision-making styles are identified under the Vroom •Comparing actual performances to objectives and standards
model. Two of them are autocratic, two others are consultative, and Once actual performance has been determined, this will be
one is group directed. compared with what the organization seeks to achieve. Actual
production output, for instance, will be compared with the target
9. CONTROLLING output. This may be illustrated as follows:
A construction firm entered into a contract with the government to
“Refers to the process of ascertaining whether organizational construct a 100-kilometer road within ten months. It would be, then,
objectives have been achieved; if not, why not; and determining reasonable for management to expect at least 10 kms to be
what activities should then be taken to achieve objectives better in constructed every month. As such, this must be verified every month,
the future.” or possible, every week
Objectives and goals that are set to the planning stage are verified •Taking necessary action based on the results of the comparisons
as to achievement or completion at any given point in the The purpose of comparing actual performance with the desired
organizing and implementing stages. result is to provide management with the opportunity to take
corrective action when necessary. If in the illustration cited above,
When expectations are not met at scheduled dates, corrective the management of the construction firm found out that only 15
measure are usually undertaken. kms were finished after 2 months, then, any of the actions may be
undertaken:
IMPORTANCE OF CONTROLLING 1. Hire additional personnel
2. Use more equipment
Help the organization achieve its goal in the most efficient and 3. Require overtime
effective manner possible.
TYPES OF CONTROL STRATEGIC CONTROL SYSTEMS
1. Feed forward control – when management anticipates problems
and prevent their occurrence, this is undertaken. This type of control 1. Financial Analysis - the success of most organizations depends on
provides the assurance that the required human and non-human heavily on its financial performance. A review of financial statements
resources are in place before operations begin. will reveal important details about the company’s performance.
2. Concurrent Control – when operations are already ongoing and
activates to detect variance are made, this is undertaken. It is always 2. Financial Ratio Analysis - is a more elaborate approach used in
possible that deviations from standards will happen in the controlling activities. One account appearing in the financial
production process. statement is paired with another to constitute ratio.
3. Feedback Control – when information is gathered about a • Liquidity Ratios – ratios that assess the ability of a company to
completed activity, and in order that evaluation and steps for meet its current obligations.
improvement are derived, it is undertaken. Corrective actions aimed a.) Current ratio - this shows the extent to which current
at improving future activities are features of feedback control. It also assets of the company can cover its liabilities.
validates objectives and standards. b.) Acid-test ration – measure of the firm’s ability to pay
off short-term obligations with the use of current assets without
TYPES OF CONTROL AND THEIR RELATION TO OPERATIONS relying on the sale of inventories.
• Efficiency Ratios – ratios show how effectively certain
assets/liabilities are being used in the production of goods and
services.
a.) Inventory turnover ratio - ratio that measures the
number of times an inventory is turned over each year.
b.) Fixed asset turnover – ratio is used to measure
utilization of the company’s investment in its fixed assets, such as its
plant equipment.
• Financial Leverage Ratios - group of ratios designed to assess
the balance of financing obtained through debt and equity sources.
a.) Debt to total assets ratio – shows how much of the
firm’s assets are financed by debt.
b.) Times interest earned to ratio – measures the number
of times that earnings before interest and taxes are cover or exceed
COMPONENTS OF ORGANIZATIONAL CONTROL SYSTEMS the company’s interest expense.
1. Strategic Plan – provides the basic control mechanism for the • Profitability Ratios – measures how much operating income/
organization. net income a company is able to generate in relation to its assets,
owners’ equity, and sales.
2. The Long-Range financial plan - recommends a direction for a.) Profit margin ratio – compares the net profit to the
financial activities. level of sales.
b.) Return on assets ratio – shows how much income in
3. The Operating Budget – indicates the expenditures, revenues, or the company produce for every peso invested in assets.
profits planned for some future period regarding operations. c.) Return on equity ratio – measures the returns on the
owner’s investment.
4. Performance Appraisals - measures employee performance
IDENTIFYING CONTROL PROBLEMS
5. Statistical Reports - pertain to those that contain data on various When operations become complex, the engineer manager must
developments to find out if it had a positive effect on his consider useful steps in controlling. Kreitner mentions 3 approaches
performance Information which may be found in a statistical report: 1. Executive Reality Check
-Labor efficiency rates
-Quality control rejects 2. Comprehensive Internal Audit
-Accounts receivable
-Accounts payable 3. General checklist of symptoms of inadequate control
-Sales reports -Unexplained decline in revenues and profits
-Accident reports -A degradation of service (customer complaints)
-Power Consumption report -Employee dissatisfaction (complaints, grievances, turnover)
-Cash shortages caused by bloated inventories or delinquent
6. Policies and Procedures - refer to the “framework within which accounts receivable
the objectives must be pursued.” A procedure is a “plan that -Idle facilities or personnel
describes the exact series of actions to be taken in a given -Disorganized operations (work flow bottlenecks, excessive
situation. paperwork)
-Excessive costs
-Evidence of waste and efficiency (scrap, rework)