Control Final Class Module 6

8/8/2019 Control Final Class Module 6

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CONTROLLING

MODULE-6


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Why Control?

Control is an issue everymanager faces.

How does control help

the manager? Control is a process to

regulate organizationalactivities to make themconsistent with

established: Plans

Targets

Standards


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What Is the Purpose of Control?

It is one of the four

basic management

functions and has four

basic functions. Whatare the functions?

Adapts to change.

Limits accumulation of

error.

Helps coping with

complexity.

Helps minimize costs.


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Concept of Control

Control is the process of monitoring activities to

ensure they are being accomplished as planned

and of correcting any significant deviations.

It is the last of the FOUR FUNCTIONS OF

MANAGEMENT and entails taking corrective

action to fix a problem or correct a deviation in

performance.

Actual performance is compared to theperformance against a standard. Significant

deviations are corrected.


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Importance of Control

Control monitors whether objectives are

being accomplished as planned, and

delegated authority is being properly used. Serves as the final link in the functional chain of

management.

Provides feedback on performance ofsubordinates to whom delegated authority has

been granted.


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The Purpose of Control

Adapt to

environmental change

Limit the

accumulation of error

Control helps the organization

Cope with organizational

complexityMinimize costs


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Name the Levels of Control?

Operational control: Focuses on the processes used to transform

resources into products or services.

Financial control: Concerned with financial resources.

Structural control: How the elements of structure are serving the

intended purposes.

Strategic control: How effective are the functional strategies helping

the organization meet its goals.


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Levels of Control


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Who Is Responsible for Control?

Control rests with all

managers.

Large corporationshave a controller.

What does a

controller do?

Helps line managerswith their control

activities.


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What Are the Steps in the Control Process?

Establish standards.

Measure performance.

Compare performance againststandards.

Determine need for corrective action.

The sub-steps:

Maintain status quo. Correct deviation.

Change standards.


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Steps in the Control Process


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Importance of Control

Control serves as final link in the

functional chain of management

The manager measures actual

performance as compared to a standard,

and acts to correct deviations or

inadequate standards

Control may help lessen resistance todelegation


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The Planning-Controlling Link


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The Control Process


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The Control Process

Measuring

Personal observation

Statistical reports

Oral reports

Written reports

What we measure is more critical

than how we measure


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The Control Process

Comparing

Determines the degree of variation

between actual performance and the

standard Range of variation is the acceptable

parameters of variance between actual

performance and the standard


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The Control Process

Taking managerial actiontwo alternatives:

1. Correct actual performance

Immediate corrective actionchange activity at once to

get performance back on track

Basic corrective actiondetermine why performance

deviated and correct the source of deviation

2. Revise the standard

May be set too high

May be set too low


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The Control Process


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What Does Preliminary Control Monitor?

It attempts to monitor quality and

quantity of:

Financial resources.

Material resources.

Human resources.

Information resources.

Why?

Before they become part of the system.


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What Is the Purpose of Screening Controls?

They focus on how

inputs are being

transformed into

outputs. They also rely

heavily on feedback

processes during

the transformationprocess.


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What Do Postaction Controls Focus On?

Focus is on outputs from

the organizational system.

What do they monitor? They monitor the output

results of the organization

after the transformation

process is complete.


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Forms of Operational Control


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What Are the Reasons for Financial Controls?

They control the financial resources as

they flow into the organization.

Then they are held by the organization.

Then they flow out of the organization.

Businesses must manage their finances

so that revenues are sufficient to cover

expenses and still return a profit.


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What Is a Budget?

It is a plan expressed in numerical

terms.

What is the time frame for a budget?

Usually a year, but sometimes broken

down into quarters and months.

Budgets are quantitative in nature and

provide yardsticks for measuringperformance and facilitating

comparisons.


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What Are the Types of Budgets?

Types of budget:

Financial

Operating

Non-monetary

What the budget

shows:

Sources and use of

cash. Operations in

financial terms.

Operations in non-

financial terms.


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Developing Budgets

Operating

Unit

Budget

Request

Division

Budget

Request

Organizational

Budget Prepared

by BudgetCommittee

Approved by

Budget

Committee


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Developing Budgets in Organizations


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Financial Statement:

A profile of

some aspect of an

organizations financial

circumstances.

Balance Sheet: List of assets

and liabilities of an

organization at a specific

point in time, usually the last

day of the fiscal year.

Income Statement: A

summary of financial

performance over a period of

time, usually one year.

Ratio Analysis: The

calculation of one or more

financial ratios to assess

some aspect of the

organizations financialhealth.

Audit: An independent appraisal of an organizations

accounting, financial, and operational system.

Other Tools for Financial Control


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What Is Bureaucratic Control?

A form of organizational

control characterized by

formal and mechanistic

structural

arrangements.

What is clan control?

An approach to

organizational control

characterized by informal

and organic structural

arrangements.


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Organizational Control


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What Is Meant by Strategic Control

Control aimed at

ensuring that the

organization is

maintaining aneffective alignment

with its environment

and moving toward

achieving itsstrategic goals.


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Characteristics of Effective Control

Integration with

planning

Flexibility

Accuracy

Timeliness

Objectivity


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What Influences Resistance to Control?

Over-control

Inappropriate focus

Rewards forinefficiency

Too much

accountability


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How Can Resistance to Control Be

Overcome?

When employees are

involved with planning

and implementing the

control system, they are

less likely to resist.

Verification procedures

need to be developed to

provide checks and

balances in order formanagers to verify the

accuracy of

performance indicators.


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Three Basic Types of Control

Feedforward

control:

Control that

preventsanticipated

problems

Concurrent

control:

Control that

occurs whilean activity is in

progress

Feedback

control:

Control

imposed afteran action has

occurred


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Three Types of Control


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FEEDFORWARD CONTROL

THEMOST DESIRABLE TYPE OF

CONTROL BECAUSE IT ALLOWSMANAGERS TO PREVENT

PROBLEMSBEFORE THEY OCCUR,

VICE FIXING THEM AFTER THE

DAMAGE ISDONE.


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Qualities of an Effective

Control System

Accuracy

Timeliness

Economy

Flexibility

Understandability

Reasonable criteria

Strategic placement

Emphasis on theexception

Multiple criteria

Corrective action

Control Final Class Module 6

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