CONTROLLING

What is CONTROLLING?
 Is the process of measuring and correcting
activities of an organization. It establishes
performances standards used to measure
progress toward goals.
 PLANNING
 Chooses goal and maps out the necessary tactics

 CONTROLLING
 Attempts to prevent failure (and promote success) by
providing means to monitor the performances of
individuals, departments, divisions, and the entire
organization.
Control Process
 The planning process determines objectives which
eventually become the foundation for controls.
The Relationship of Planning and Controlling

 The mission of organization gives direction to

planning and is the basic purpose for the
organization’s activities.
 From these plans flow the coordinated goals to be
achieved by succeedingly lower levels of
management.
 Control process consists of three basic steps
applicable to any persons, items, or processes being
controlled.
 These steps are as follows:
 Establish standards to be used in measuring progress, or lack of
progress towards goals.
 Measure performance against standards, noting deviations from
the standards.
 Take control necessary for correct deviations from standards.
 Establishing Standards
 A standard – is a measuring device, quantitative or
qualitative designed to help monitor the performance
of people, capital, goods, or processes. 
 Standards for comparison can apply to personnel,
marketing, production, financial operations, etc.
 Standards can be assigned to one of two groups:
1. MANAGERIAL Standards
2. TECHNICAL Standards
 Managerial Standards
 Include such things as reports, regulations, and
performance evaluations.
 All should focus on only the key areas and the kind
of performance required to reach specific goals.
 State the "who", "when", and "why" of the business.
 The report shows monthly progress on the key areas
being monitored:

1. Total sales made in peso and units

2.Itemized sales by account name
3. Potential sales to be made and status of sales in
process
4. An analysis of "lost sales" that stated decisions
made and why.
5. Report on sales calls made, including a review on
establishes accounts and new accounts
Technical Standards
 Specify the "what“ and "how“ of the business.
 They apply to productions methods, and processes,
to materials, machinery, safety equipment, parts,
and supplies.
 TYPES of CONTROLS
 Work performed by organizations and their
employees has a starting point, a period of
performance, and a final product.

 Three basic types of controls:

1. Prevention controls
2. Feedforward controls
3. Feedback controls 
 Prevention Controls
 Monitoring devices or systems designed to establish
conditions that will make it difficult or impossible
for deviations from standards to occur.

 "An ounce of prevention is worth a pound of cure." 

Better to prevent trouble than have to deal with its
problems.
Feedforward Controls
 A monitoring device or system designed to detect
and to anticipate deviations from standards at
various points throughout ongoing processes.
 Diagnostic Controls  Therapeutic Controls

 Sense both the "what" and

 Attempt to determine
what deviation is
taking or has taken  The most important are
place. It makes use of
measurements that rely
on five senses.
the "why", then take
corrective action.
these:
1. Acceptance by members
of the organizations
2. Focus on critical control
points
3. Economic feasibility
4. Accuracy
5. Timeliness
6. Ease of understanding
 Feedback Control
 A monitoring device or system designed to provide
end result information in a project for future
planning.
 Making Controls Effective
 Controls are effective as long as they:
1. Do what they are intended for - prevent, diagnose,
treat deviations, or provide information for future
planning
2. Do not create organizational problems that result in
costs greater than the benefits of the control devices.
 UPDATE THE CONTROLS
 Controls are effective as long as they do what they are
intended to do.

 MONITOR THE ORGANIZATIONAL IMPACT

 A second critical area for managers to monitor is the
degree of organizational impact, both on people and on
systems. 
It should be expected that control systems will affect
employees and organizational operations, but extreme
changes should be avoided.
 SOME FORMS OF CONTROL

 General controls considered here are these:

1. The Management Information System (MIS)
2. Key Indicator Management (KIM)
3. Human Asset Accounting
4. Inventory Control Systems 
 Management Information System (MIS)
 A formal method of providing management with
accurate and timely information.
 Managers can make decisions and carry out the
managerial function and operations effectively.
 The information provided by the system relates to past,
present and future events outside and inside the
organization
 Provides information, not raw data
 DATA
 Are unprocessed facts and figures that are of little use to
managers

 INFORMATION
 Data that has been deliberately selected, processed, and
organized to be useful
 According to William H. Sihler, four critical factors
need to be considered in building, using, and
evaluating any control system.

 These factors are:

1. Meet organizational objectives
2. Provide information flow
3. Deliver the right quality and quantity of
information
4. Provide timely information
 Establishing the MIS
1. Involve the users in the systems design.
2. Establish clear lines of direction, as well as control
of the information - processing operations. Avoid
confusion on authority, problem solving, and
answer.
3. Construct clear procedures for gathering, sorting,
interpreting, processing, and distributing data.
Structure reduces fear of the unknown. Answers
"how", "when", and "where".
4. Use specialists where they are needed and explain
their roles to users. Establish the service role of the
specialists, rather than their alleged superiority.
5. Build the staff in line with requirements, for service.
Don't overstaff for the sake of empire building, and
don't under staff: both will affect the quality of
service.
6. Centralize where possible. Decentralize when it is
more effective and cost efficient to do so.
Centralization brings concentrated resources and
expertise.
 Key Indicator Management (KIM)
 Is a monitoring system that provides managers with
information which provides the essentials they need. 
 For each measure, a target is established and a
monthly report created to show progress (or lack
thereof) against a particular goal.
 The following is a simplified approach to setting up
a key indicator management system of monitoring:
1. Identify the operating departments or functions to
be measured.
2. Determine the items to be used in the measuring
program.
3. Determine the measurement details.
4. Establish the targets (goals).
5. Prepare a periodic report.
Human Asset Accounting
 Treats the money spent on and for employees as
investment expenditures
 Inventory Control Systems
 Maintains an orderly flow of supplies, raw materials,
or finished goods through an office, shop, or factory.
Costs connected with inventory control include the
following:
1. Items in inventory
2. Waste, spoilage, or damage
3. Freight charges
4. Security expenses
5. Obsolesces
6. Storage costs
7. Administrative costs (wages and salaries)
Purpose of Inventory Control for Management

1. Keep inventory levels and costs at desired

minimums.
2. Maintaining the proper safeguards over materials.
3. Sustaining the proper flow of materials to places
and people who need.