CONTROLLING

BUSINESS ORGANIZATION AND MANAGEMENT

OBJECTIVES

Define the meaning of controlling

Describe the purpose and importance of controlling
Identify the steps in the control process
Differentiate the various types of control
Examine the components of organizational control
systems
Evaluate various strategic control systems
Identify ways to control problem
 WHAT IS CONTROLLING?

Controlling is a process which measures and directs

the actual performance against the planned goals
of the organization.

Refers to the process of ascertaining whether

organizational objectives have been achieved; if
not, to determine why not; and determining what
activities should be taken to achieve objectives in
the future.
PURPOSE AND IMPORTANCE

Controlling completes the cycle of management

functions. Objectives and goals at any given point
in the organizing and implementing stage are
verified as to achievement or completion.

- Effective control measures minimizes the ill effects of

such negative occurrences. It minimizes, if not It is
one of the main function of the management totally
eliminates losses in inventory.
STEPS IN THE CONTROL PROCESS

Established Performance
objectives and standards

Measure actual
performance

Actual performance
match the Do Nothing
standards

Take corrective
action
STEPS IN THE CONTROL PROCESS
1. Establishing Performance Objectives and Standards
- Sales targets expressed in quantity or monetary terms
- Production targets expressed in quantity and quality
- Worker attendance expressed in terms of rate in absences
- Supplies Used expressed in quantity or monetary terms of
given period
2. Measuring Actual Performance
3. Comparing Actual Performance to Objectives and Standards
4. Taking Necessary Action
TYPES OF CONTROL

PRE-
OPERATIONS Feed forward
PHASE Control

ACTUAL
OPERATIONS Concurrent
PHASE Control

POST
OPERATIONS Feedback
PHASE Control
TYPES OF CONTROL

Feedforward Control management anticipates

problems and prevents their occurrences. It
provides the assurance that the required human
and nonhuman resources are in place before
operations begin.
Concurrent Control - operations are already
ongoing and measures to detect variances are
made.
Feedback Control information is gathered about
completed activity for purposes of evaluating and
deriving required steps in improving the activity. It
validates objectives and standards.
COMPONENTS OF ORGANIZATIONAL
CONTROL SYSTEMS
1. Strategic plan
2. Long-range Financial Plan
3. The operating budget
4. Performance appraisal
5. Statistical Reports
6. Policies and Procedures
COMPONENTS OF ORGANIZATIONAL
CONTROL SYSTEMS
1. Strategic plan it provides the basic control
mechanism for the organization. When there are
indications that activities undertaken do not
facilitate the accomplishment of strategic goals,
these activities are set aside, modified, or
expanded. These corrective measures are made
possible with the adoption of strategic plan.
2. Financial plan recommends a direction for
financial activities. It differs from company to
company. Most firms will be satisfied with one year
plan. Engineering firm however will require long
term financial plan.
COMPONENTS OF ORGANIZATIONAL
CONTROL SYSTEMS
3. The operating budget indicates the expenditures,
revenues, or profits planned for some future period
regarding operations. The figures appearing in the
budget are used as standard requirements for
performance.
4. Performance appraisal measures employees
performance. It provides employees a guide on how
they could do their jobs better in the future.
COMPONENTS OF ORGANIZATIONAL
CONTROL SYSTEMS
5. Statistical reports contain data on various
development within the firm.

6. Policies and procedures refer to the framework

within which the objectives of the organization must
pursued. Procedure is a plan that describes the
exact series of actions or steps to be taken n a given
situation.
 STRATEGIC CONTROL SYSTEMS

Financial Analysis
- the success of most organizations depend on
heavily on its financial performance. (IS, BS)
Financial Ratio Analysis
a. Liquidity ratio used to assess the ability of the company to
meet its current obligation.
- Current Ratio (current assets / current liabilities)
- Acid Test ratio (current assets-inventories / current liabilities)

b. Efficiency Ratios shows how certain assets or liabilities are used

efficiently in the production of goods and services.
- Inventory Turnover ratio (cost of good sold / inventory)
- Fixed Assets Turnover (net sales / net fixed assets)
STRATEGIC CONTROL SYSTEMS

c. Financial Leverage Ratios this is a grouping of ratios

deigned to assess the balance of financing obtained through
debt and equity sources.
- Debt to Total Assets ratio (total debt / total assets)
- Times Interest Earned Ratio (profit before tax + int. expense)
Interest expense
d. Profitability ratio measures how much operating
income/net income a company is able to generate in
relation to its assets, owners equity and sales.
- Profit Margin ratio (Profit margin ratio = netprofit/netsales)
- Return on Assets ratio (Return on assets ratio =netincome/assets)
- Return on Equity ratio (Return on equity = net income/equity)
IDENTIFYING CONTROL PROBLEMS

Executive reality check.

- Employees manning the frontlines often complain about
managements imposition of certain requirements that are
not realistic. the manager of a construction firm could,
once in a while, perform the work of one of his laborers. He
may be able to see things he could not see inside in his four
corner air-conditioned office.
Comprehensive Internal Audit.
- An internal audit is undertaken to determine the efficiency
and effectiveness of the activities of an organization.
 IDENTIFYING CONTROL PROBLEMS

Symptoms of Inadequate Control.

- it must be noted tat every symptoms is a problem
waiting to be solved
a. An unexplained decline in income and profits
b. Customers complaining about poor service they get
c. Employee dissatisfaction
THANK YOU!