CONTROLLING

GROUP 1

EUNICE SANCHEZ LAUREN VILLEGAS

Outline:

1) Control as a Management Process• Meaning of Controlling

2) Significance of Control Process• Its relation to Planning, Organizing, Directing and Staffing• Definition of Control System• Purpose of Control System in a firm

3) Role of Controls• Coping with Uncertainty• Detecting Irregularities• Identifying Opportunities• Handling Complex Situation

4) Levels of Control• Strategic Control• Tactical Control• Operational Control

5) Steps of Control Process• Determine areas to control• Establish Standards• Measure Performance• Compare Performance• If Standards are met, recognize performance• If Standards are not met, take corrective action• Adjust Standards and measures as necessary

6) Managerial Approaches to Implementing Controls• Market Control• Bureaucratic Control• Clan Control

7) Characteristics of an Effective Control System

• Future Oriented• Multidimensional• Cost Effective• Accurate• Realistic• Timely• Monitorable• Acceptable to Organization Members• Flexible

1) Control as a Management Process

We define management as the process of regulating organizational activities so that actual performance conforms to expected organizational standards and goal. As the definition suggests, controlling means that managers should verify whether everything occurs in conformities with the plans adopted, instructions issued and principles established. It also ensures that there is an efficient and effective utilization of organizational resources so as to achieve planned goals and standards.

2) Significance of Control Process

• Its relation to Planning, Organizing, Directing and Staffing

Controlling function has a relation to the other functions of management: planning, organizing, directing, and staffing. It builds more directly to planning, by providing the means of monitoring and making adjustments in performance, plans can be realized. Plans can be made by what controlling does in such activities in the firm. Still, controlling also supports organizing by helping ensure that resources are channeled toward organizational activities. For example, feedback from the control process might signal the need to reorganize, provide more training to workers or clarify communication. Also, with directing, controlling affects this function, thru controlling, managers would know what to instruct, guide and oversee to achieve predetermine goals. For instance, managers will know which is need to have more guidance in terms of performance to achieve high quality of products after controlling determines that workers who are assigned in the quality assurance are in need of strict guidance to ensure high quality of products. Lastly, it also has relation to staffing. By means of controlling firms will know if there is a need to hire more people, reassign workers and change schedules or workers.

• Definition of Control System and Purpose of Control System in a firm

Control System is a set of mechanisms that are designed to increase probability of meeting organizational standards. Control system can be also called as the game plan. It can be developed to regulate any area that a manager considers important. Control system is strictly followed by employees to achieve high quality of products and service, quantity produced, resources expended, profit margins, client satisfaction, and other specific activities in the firm.

3) Role of Controls

• Coping with Uncertainty

Uncertainties or problems arise because not all things always go according to plan. Different factors in the environment typically bring about changes in such areas as customer demand, availability of resources, and technology. By developing control systems, managers are able to monitor specific activities and react quickly to significant changes in the environment.

• Detecting Irregularities

Control systems also help managers detect undesirable irregularities that might affect the name of the business, product defects, or rising personnel turnover. Early detection helps firms to can save a great deal of time and money preventing minor problems to become major ones. It also avoids problems that are difficult to rectify.

• Identifying Opportunities

It highlights situations in which things are going better than expected, which alerts management to possible future opportunities.

• Handling Complex Situation

As firms grow larger or engage in more complex operations and projects, controls enhance coordination. Controls help manager to keep in track of various elements to be sure that they are well synchronized.

4) Levels of Control

• Strategic Control

Strategic control involves monitoring critical environmental factors that could affect the viability of strategic plans, assessing the effects of organizational strategic actions, and ensuring that strategic plans are implemented as intended. The one who is usually concern is the top-level

managers, who generally take an organizationwide view or perspective. They often concentrate on long time frames, such as quarterly, semiannual or annual reports. However, if environment is unstable or there is a keen competition, managers use shorter reporting cycles for strategic control.

• Tactical Control

A control that focuses on accessing the implementation of tactical plans at department levels, monitoring associated periodic results, and taking corrective actions as necessary. It involve middle management who are concerned with department-level objectives, programs, and budgets and who concentrate mid-term time frames and often use weekly and monthly reports. Middle managers are likely to engage in strategic control because they escalate information to top-level management on strategic issues.

• Operational Control

Operational control involves overseeing the implementation of operating plans, monitoring day-to-day results and taking corrective action when required. Lower-level managers has a large responsibility in this control, they are more concerned on rules, specific outputs, and schedules normally associated with individuals. Managers in the operational control give feedbacks about what is happening in the very near term to achieve both short- term and long-term goals.5) Steps of Control Process

• Determine areas to control

Determining areas to control is the first major step in the control process. Manager must make wise choices or decision because it is expensive and impossible to control every aspect of organization’s activities. Prioritizing is important in this steps, managers should know which to prioritize in which the organization will earn more profit, gain more consumer and will avoid loses.

• Establish Standards

Second step in the control process is establishing standards. Every firm has its own standard or criteria for evaluating performance and related employee behaviors. There are requirements, characteristics that an employee should have that will become an asset to the company. Standards are also set to provide excellent customer service, quality products and to achieve organizational goals.

• Measure Performance

Once standards are set, the next step is to measure performance. Managers should decide how to measure performance and how often to do so. Measuring standards depends on the standards set, but may also include such data as units produced, amount of materials used, or stores opened. After managers measure performance they will then identify the opportunities of its employees, products or services and branches.

• Compare Performance

This step is consists of comparing the performance measured with the standards established. Managers often base their comparisons on the information provided in the reports that summarize planned versus results. Reports may be verbal, written or by computerized process. Through technology, reports are escalated up-to-the-minute.

• If Standards are met, recognize performance

If standards are met, there is usually no corrective action to be done. Managers usually give out incentives like, bonuses, substantial rewards or pay raises. Having these incentives or these types of recognitions motivates employees to work harder or be competitive in terms of ranking or aiming for higher positions. It also encourages further improvements.

• If Standards are not met, take corrective action

If standards are not met, managers must carefully assess or investigate the reasons why and must take corrective actions. Evaluation of performance should be done to make sure that they are still realistic. Sometimes, managers don’t do corrective actions, because standards may also be inappropriate because of changing in conditions.• Adjust Standards and measures as necessary

Control is a dynamic process. As a result, managers need to check standards periodically to ensure that standards and performance measures are still relevant for the future. Standards may be changed due to circumstances have changed. Adjustments are also necessary depending upon the reports of the different levels of management. Managers may raise their standards for future efforts or may lower down their standards because some standard may consume too many resources.

6) Managerial Approaches to Implementing Controls

• Market Control

A managerial approach that relies on market mechanisms to regulate prices for certain clearly specified goods and services needed by an

organization. To use market control, there must be a reasonable level of competition in goods and services and it must also be possible to specify requirements clearly. Without bidding and specifications, purchasing agents may expend more time and effort attempting to control costs.

• Bureaucratic Control

A managerial approach that relies on regulation through rules, policies, supervision, budgets, schedules, reward systems, and other administrative mechanisms aimed at ensuring that employees exhibit appropriate behaviors and meet performance standards. These approach follows a procedure, rules or policies. Employees should always comply to avoid sanctions.

• Clan Control

Clan control relies on values, beliefs, traditions, corporate culture, shared norms, and informal relationships to regulate employee behaviors and facilitate the reaching of organizational goals. It has greater emphasis on internal motivation. With clan control, managers concerted effort to encourage participation and ideas from everyone.

7) Characteristics of an Effective Control System

• Future Oriented

To be effective, control systems need to forecast future events, rather than developing a resolution after knowing problems in the firms. With control system, the firm may prevent future problems or uncover unforeseen opportunities that might be developed.

• Multidimensional

Control systems need to be multidimensional or should consider every aspect that might affect the firms whether about production, its employees or its resources and to capture major relevant performance factors.• Cost-Effective

The cost of controls is an important consideration. A firm may invest more money on such activities but the benefits should outweigh the costs.

• Accurate

Since controls provide the basis for future actions, accuracy is vital. Every information escalated to top managers should be accurate in order for

them to regulate such standards, rules, policies that will highly affect the entire organization.

• Realistic

Control systems should incorporate realistic expectations about what can be accomplished. Standards established should have a clear and definite reasons why it was set or it should be reasonable.

• Timely

Control systems are designed to provide data on the state of a given production cycle. It should be timely or submitted at a specific time for the managers and employees respond promptly to irregularities.

• Monitorable

Control systems should be monitorable to ensure that they are performing as expected. If control systems are monitorable it will be easier to determine which areas to improve.

• Acceptable to Organization Members

Control system operates best when the are accepted by organization members. Otherwise, members may sabotage or override controls. Control system should always give a win-win result to managers and members.

• Flexible

Control systems should be flexible enough to meet new or revised requirements. They should be designed so that they can be changed quickly to measure and report new information.