MANAGERIAL

CONTROL
CONTROL
 Essential for the attainment of any management
objective.
 Is one of the fundamental forces that keep the
organization together and heading in the right
direction.
 Any process that directs the activities of individuals
toward the achievement of organizational goals.
Symptoms of an Out of Control
Company
 Lax Top Management
 Absence of Policies
 Lack of Agreed-upon standards
 “Shoot the messenger” Management
 Lack of Periodic reviews
 Bad information systems
 Lack of ethics in the culture
 CON TROL been called one of the Siamese Twins of
management. The other one is PLANNING
 If plans are not carried out properly, management must
take steps to correct the problem. This process is the
primary control function of management. By ensuring
creativity, enhancing quality and reducing costs,
manager must figure out ways to control the activities in
their organization.
 Effective planning, facilitates CONTROL and CONTROL
facilitates PLANNING
 PLANNING lays out the framework for the future ans
in this sense , provides a blueprint for control.
CHARACTERISTICS OF CONTROL
 PICTURE CELLPHONE
THE CONTROL CYCLE
 PICTURE CELLPHONE
Step 1. STANDARD
- Expected performance for a given goal; a target
that establishes a desired performance level, motivates
performance and serve as a benchmark against which
actual performance is essential.

Step 2. MEASURING PERFORMANCE

- this is the second step in the control process,
commonly obtained from three sources;
-Written Reports, Oral Reports and Personal
Observation.
Step 3. COMPARING PERFORMANCE WITH THE
STANDARDS
- the manager evaluates the performance, and
they save much time and effort if the apply the
“Principle of EXCEPTION”

Principle of Exception – it is a managerial principle

stating that control is enhanced by concentrating on
the exceptions to or significant deviations from this
expected result or standard.
Step 4. TAKING ACTION TO CORRECT PROBLEMS
AND REINFORCE SUCCESSES
- the last step in the control process is to
take appropriate action when there are significant
deviations.
- this step ensures that operations are
adjusted to achieve the planned results or to continue
exceeding the plan if the manager determines that is
possible.
 APPROACHES TO BUREAUCRATIC
CONTROL
 FEEDFORWARD CONTROL
-the control process used before operations begin
including policies, procedures, and rules designated to
ensure that planned activities are carried out properly

 CONCURRENT CONTROL
- control process used while plans are being
carried out, including directing, monitoring and
fine-tuning activities as they are performed.
FEEDBACK CONTROL
- Control that focuses on the use of information
about previous results to correct deviations from the
acceptable standard
- TIMING is an important aspects of feedback
control
The Role of Six Sigma
- SIGMA, is the Greek letter used in statistics to
designate the estimated standard deviations, or
variation, in a process. It indicates how often defects in
a process are likely to occur.

- SIX SIGMA aims for defect free performance

MANAGEMENT AUDIT
- An evaluation of the effectiveness and efficiency
of various systems within an organization.

EXTERNAL AUDIT
- An evaluation conducted by one organization ,
such as a CPA Firm, or another.

INTERNAL AUDIT
- A periodic assessment of a company’s own
planning, organizing, leading and controlling process.
BUDGETARY CONTROLS
- is one of the most widely recognized and
commonly used methods of managerial control.

BUDGETING/BUDGETARY CONTROLLING
- process of investigating what is being done and
comparing the results with the corresponding budget
data to verify accomplishments or remedy differences;
Types of Budget
1. Sales Budget – includes forecasts of sales by month,
sales area and product.
2. Production Budget- commonly expressed in physical
unit, require information for preparing this budget
includes types and capacities of machines economic
quantities to produce and availability of materials
3. Cost Budget - used for areas of the organization that
incur expenses but no revenue (ex: HR and other
support departments)
4. Cash Budget – essential to every business, should be
prepared after all other budget estimates are
completed
5. Capital Budget – used for the cost of fixed assets like
plants and equipments; treated not as regular expenses
but as an investments because of their long term
nature and importance to the 0rganizations
productivity.
6. Master Budget/ Budget of all Budget
- it is the one that brings together and
coordinates the activities of the other budgets.
Accounting Audits – procedures used to verify
accounting reports and statements.

Activity Based Costing- designed to identify streams of

activity and then to allocate costs across particular,
business processes according to the amount of time
employees devote to particular activities.
FINANCIAL CONTROL
 BALANCE SHEET
- a report that shows the financial picture of a company at a
given time and itemizes ASSETS, LIABILITIES and
STOCKHOLDERS EQUITY.

ASSETS = LIABILITIES + STOCKHOLDER’S EQUITY

Assets = values of the various items the corporation owns

Liabilities =amounts of corporation owes to various creditors
Stockholder’s Equity = amount accruing to the corporation’s
owner.
Profit and Loss Statement
- An itemized financial statement of the income and
expenses of a company’s operations.

Financial Ratios
- an effective approach for checking on the over all
performance of an enterprise is to use key financial
ratio.
-Ratios help indicates possible strengths and
weaknesses in a company’s operations.
CURRENT RATIO
-a liquidity ratio that indicates to which short
term assets can decline and still be adequate to pay
short term liabilities.

RESISTANCE TO CONTROL
- control system can change expertise and power
structures and can change social structure of an
organization.
- comprehensive control systems increase the
accuracy of performance data and make employees
more accountable for their action.
DESIGNING EFFECTIVE CONTROL SYSTEMS

1. Establish valid performance standards.

2. Provide adequate information to employees

3. Ensure acceptability to employees

4. Maintain open communication.

5. Use Multiple approaches

 7 Deadly Sin of Performance Measurement to avoid
according to Michael Hammer (Business Consultant)
1. Vanity – measures that make sure managers and the
organization look good.
2. Provincialism – measures to functional or
departmental responsibilities rather than the
organization’s overall objectives.
3. Narcissism – measuring from the employee’s,
manager’s or company’s point of view rather than the
customer’s.
4. Laziness- not expending the effort to analyze what is
important to measure.
5. Pettiness – measuring just one component of what
affects business performance.

6. Inanity – failing to consider the way standards will

affects business performance.

7. Frivolity – making excuses for poor performance

rather than taking performance standards seriously.
Some organizations , more effort goes to blaming
others than to correcting problems.
 Balance Scorecard
- this is a control system combining four sets of
performance measures; financial, customer, business
process, learning and growth.

THE OTHER CONTROL (MARKETS AND CLANS)

Market Control – helps maintain low prices;

- this control involves the use of economic forces and
the pricing mechanisms that accompany them o regulate
performance
- price becomes an indicator of the value of the good
or service
- price competition has the effect of controlling
productivity and performance