Controlling Jeffrey L. Cuartero

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Chapter 9

Controlling

Prepared by:

Jeffrey L. Cuartero



Controllingo What is Controlling?

o Importance of Controlling

o Steps in Controll Process

o Types of Control

o Components of Organizational Control System

o Strategical Control Systems

o Identifying Control Process



Controlling



What is Controlling?

Controlling refers to the ´process of ascertaining

whether organizational objectives have been achieved;

if not, why not; and determining what activities should

then be taken to achieve objectives better in the

future. Controlling completes the cycle of management

functions. Objectives and goals that are set at the

planning stage are verified as to achievement or

completion at any given point in the organizing andimplementing stages. When expectations are not met

at scheduled dates, corrective measures are usually

undertaken.



Importance of Controlling

y When controlling is properly implemented, it will help

the organization achieve its goal in the most efficient

and effective manner possible.

y Deviations, mistakes, and shortcomings happen

inevitably. When they occur in the daily operations,they contribute to unnecessary which increase of

producing goods and services. Proper control measures

minimize the ill effects of such negative occurrences.

An effective enventory control system, for instance,

minimize, if not totally eliminates losses in inventory.



Steps in the Control ProcessThe control process consists of four (4) steps, namely :

1. Establishing performance objectives and standards.

2. Measuring actual performance.

3. Comparing actual performance to objectives and

standards, and

4. Taking necessary action based on the results of the

comparisons.



Establishing Performance Objectives and

Standards

In controlling, what was to be achieved must first bedetermined. Examples of such objectives and standards

are the following:

1. Sales targets- which are expressed in quantity or

monetary terms.2. Production targets- which are expressed in quantity

or quality.

3. Worker attendance- which are expressed in terms of

rate of absences;

4. Safety record- which are expressed in number of

accidents for given periods;

5. Supplies used- which are expressed in quantity or

monetary terms for given periods.



Measuring Actual Performance

There is a need to measure actual performance so

that when shortcomings occur, adjustments could be

made. The adjustments will depend on the actual

findings.

The measuring tools will differ from organization

to organization, as each have their own unique

objectives. Some firms, for instance, will use annual

growth rate standard basis, while other firms will usesome other tools like the market share approach and

position in the industry.



Comparing Actual Performance to Objectives andStandards

Once actual performance has been determined, this will

be compared with what organization seeks to achieve.

Actual production output, for instance, will be comparedwith the target output.



Taking Necessary ActionThe purpose of comparing actual performance with

the desired result is to provide management with the

opportunity to take corrective action when necessary.

1. Hire additional personnel

2. Use more equipment

3. Require overtime



`

`

teps n ontro

Process

EstablishPerformance Objectivesand Standards

Measure Actual

Performance

Does Actual

Performance Match

the Standards?

Take

Corrective

Action

Yes

Do nothing

No



Types of Control

Control consists of three distinct types, namely:

1. Feed forward control

2. Concurrent control

3. Feedback control



Feed forward ControlWhen management anticipates problems and

prevents their occurrences, the type of control measure

undertaken is called feed forward control. This type of

control provides the assurance that the required

human and nonhuman resources are in place before

operations begin.



Concurrent Control

When operations are already ongoing and activities

to detect variances are made, concurrent control is said

to be undertaken. It is always possible that deviations

from standards will happen in the production process.When such deviations occur, adjustments are made to

ensure compliance with requirements. Information on

the adjustments are also necessary inputs in the pre-

operation phase.



Feedback ControlWhen information gathered about a completed

activity, and in order that evaluation and steps for

improvement are derived, feedback control is

undertaken. Corrective actions aimed at improvingfuture are features of feedback control.

Feedback control validates objectives and standards.

If accomplishments consists only of a percentage of

standard requirements, the standard may be too high

or inappropriate.



Component of Organizational

Control System

Organizational control systems consists of the following:

1. Strategic plan

2. The long-range financial plan

3. the operating budget

4. Performance appraisals

5. Statistical reports

6. Policies and procedures



Strategic Plans A strategic plan provides the basic control

mechanism for the organization. When there are

indications that activities do not facilitate the

accomplishment of strategic goals, these activities areeither set aside, modified or expanded. These

corrective measures are made possible with the

adoption of strategic plans.



The Long-Range Financial Plan

The planning horizon differs from company to

company. Most firms will be satisfied with one year.

Engineering firms, will require longer term financial

plans. This is because of the long head times needed

for capital projects. An example is the engineering firm

assigned to construct the Light Rail Transit (LRT)

within three years. As such, the three-year financial

will be very useful.



The Operating Budget

An operating budget indicates the expenditures,

revenues, or profits planned for some future period

regarding operations. The figures appearing in the budget

are used as standard measurements for performance.



Performance Appraisals

Performance appraisals measures employee

performance. As such, it provides employees with a

guide on how to do their jobs better in the future.

Performance appraisals also function as effective

checks on new policies and programs. For example, if a

new equipment has been acquired for the use of an

employee, it would be useful to find out if it had a

positive effect on his performance.



Statistical ReportsStatistical Reports pertain to those that contain

data on various developments within the firm.



Policies and ProceduresPolicies refer to the ´ the framework within which

the objectives must be pursuedµ. A procedures is a ´

plan that describes the exact series of actions to be

taken in a given situationsµ.



Strategic Control SystemTo be able to assure the accomplishment of the

strategic objectives of the company, strategic

control systems become necessary. These systemsconsists of the following :

1. Financial analysis

2. Financial ratio analysis



F

inancial AnalysisThe success of most organizations depend heavily

on its financial performance. It is just fitting that

certain measurements of financial performance be

made so that whatever deviations from standards are

found out, corrective actions may be introduced.



Financial Ratio AnalysisFinancial ratio analysis is a more elaborate

approach used in controlling activities. Under this

method, one account appearing in the financial

statement is paired with another to constitute a ratio.

The result will be compared with a required norm

which is usually related to what other companies in

the industry have achieved, or what the company has

achieved in the past



Identif ying Control Problems

Recognition the need for the control is one thing,

actually implementing it is another. When operations

become complex, the engineer manager must consideruseful steps in controlling. Kreitner mentions three

approaches.

1. Executive reality check

2. Comprehensive internal audit

3. General checklist of symptoms of inadequate control



Executive Reality CheckEmployees at the frontline often complains that

management imposes certain requirements that are

not realistic. In a certain state college, for instance,requests for purchase of classroom materials ad

supplies take last priority. This is irregular because

requests of such kind must be of the highest priority

considering that the organization is an educational

institution.



Comprehensive Internal Audit An internal audit is one undertaken to determine

the efficiency and affectivity of the activities of an

organization. Among the many aspects of operations

within the organizational, a small activity that is not

done right may continue to be unnoticed until is

snowballs into a full blown problem.



Symptoms of I

nadequate ControlIf a comprehensive internal audit cannot be

availed of for some reason, the use of a checklist for

symptoms of inadequate control may be used.



The End

Controlling Jeffrey L. Cuartero

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