Controlling

Module 22- Controlling 1

Controlling
• The process of ensuring that actual
activities conform to planned
activities

Module 22- Controlling 2

Controlling
• The process of measuring
performance and taking action to
ensure desired results

Module 22- Controlling 3

Why control is needed?
• To create better quality
• To cope with change
• To create faster cycles
• To add value
• To facilitate delegation
and teamwork

Module 22- Controlling 4

Steps in the control process
Take
corrective
action and
re-evaluate

Establish Measure
objectives actual Compare
and performance
standards

Improve
Processes
Module 22- Controlling 5
Types of controls
• Feedforward controls or
preliminary controls
• Concurrent controls or
steering controls
• Feedback controls or
postaction controls

Module 22- Controlling 6

Types of controls
Work inputs Work throughputs Work outputs

Feedforward Concurrent Feedback

controls controls controls
Ensure the right Ensure the right Ensure final
direction are set and things are being results are up to
the right resource done as part of work- desired
inputs are available flow operations standards

Module 22- Controlling 7

Internal vs external controls
Internal External
control control
Allows Occurs through
motivated personal
individuals and supervision and
groups to the use of
formal
exercise self-
administrative
discipline in systems such
fulfilling job as rules and
expectations procedures

Module 22- Controlling 8

Standards used in functional
areas
Production Marketing Personnel Finance and
Management Accounting
Quality Sales volume Labor relations Capital
expenditures
Quantity Sales expense Labor turnover Inventories

Cost Advertising Labor Flow of capital

expenditures absenteeism
Individual job Individual Liquidity
performance salesperson’s
performance

Module 22- Controlling 9

Control system
• A multi step procedure
applied to various types
of control activities
• Provides accurate
feedback in a timely,
economical fashion that
is acceptable to
organization members
Module 22- Controlling 10
Characteristics of effective
control systems
• Should be strategic and
results oriented
• Should be understandable
• Should encourage self-
control
• Should be timely and
exception oriented
• Should be positive in nature
• Should be fair and objective
• Should be flexible
Module 22- Controlling 11
Key elements of a
control system
• Key performance areas or
key result areas - aspects of
a unit or organization that
must function effectively if the
entire unit or organization is
to succeed
• Strategic control points -
critical points in a system at
which monitoring or collecting
information should occur

Module 22- Controlling 12

Organizational
control systems

• Management process controls

• Compensation and benefits systems
• Employee discipline systems

Module 22- Controlling 13

Management process controls
• Control via strategy and
objectives – occurs when
work behaviors are initially
directed toward the right end
results
• Control via policies and
procedures – helps guide
behavior; members are more
likely to act uniformly on
important matters

Module 22- Controlling 14

Management process controls
• Control via learning – occurs
when past experience is
systematically considered and
incorporated into future
strategies, objectives, policies,
and procedures
• Control by selection and
training – occurs when capable
people are hired and given the
ongoing training needed to
perform their jobs very well
Module 22- Controlling 15
Management process controls
• Control via performance
appraisal – occurs when
individual performance is
assessed and evaluated to
ensure high performance
results and to identify areas
where training and
development is needed

Module 22- Controlling 16

Management process controls
• Control via job design and
work structures – involves
putting people to work in jobs
that are designed to best fit the
job holder’s talents
• Control through performance
modeling – means that
leadership sets the example
and that workers have good
models to follow in their job
activities
Module 22- Controlling 17
Management process controls
• Control by performance norms –
occurs when team or group
members share commitments to
high performance standards and
reinforce one another’s efforts to
meet them
• Control via organization culture
– occurs when an organization’s
leadership helps build strong
values for the organization as a
whole
Module 22- Controlling 18
Employee discipline systems
• Discipline – the act of
influencing behavior
through reprimand
• Progressive discipline
– the process of tying
reprimands to the
severity and frequency
of misbehavior

Module 22- Controlling 19

“Hot stove rules”
• A reprimand should be immediate
• A reprimand should be directed
toward someone’s actions,
not their personality
• A reprimand should be consistently applied
• A reprimand should be informative
• A reprimand should occur in a supportive
setting
• A reprimand should support realistic rules

Module 22- Controlling 20

Financial controls
• Financial ratio analysis – assessing
organizational performance in terms of
liquidity, leverage, asset management,
and profitability
• Auditing – process of appraisal that
seeks to validate the honesty and fairness
of financial statements and to provide a
critical basis for management decisions

Module 22- Controlling 21

Responsibility centers
• Revenue
centers
• Expense or
cost centers
• Profit centers
• Investment
centers

Module 22- Controlling 22

Operations
management and
control

• Purchasing control
• Inventory control
• Project management and control
• Statistical quality control
Module 22- Controlling 23
Inventory control
• Inventory – consists of
materials or products
kept in storage
• Economic order
quantity – method that
orders a fixed number
of items every time an
inventory level falls to a
predetermined point

Module 22- Controlling 24

Inventory control
• Just-in-time
scheduling (JIT) –
schedules materials to
arrive at a work station
or facility “just in time”
to be used; reduces
carrying costs and
maximizes use of space

Module 22- Controlling 25

Project management
• Makes sure that all activities in a
project are completed on time, in the
order specified, and with high quality

Module 22- Controlling 26

 Gantt chart
 Charting system for production
scheduling; Used to monitor the progress
of activities
Project Gantt Chart
Week 1 Week 2 Week 3 Week 4 Week 5 Week 6
Activity A
Activity B
Activity C
Activity D
Activity E
Activity F

Module 22- Controlling 27

Statistical quality control
• The use of statistical
techniques to assist
in quality control (i.e.
checking processes,
material, products,
services to ensure
that they meet high
standards)

Module 22- Controlling 28