CONTROLLING

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System & Process of Controlling Requirements for Effective Control

CONTROLLING

Definition

The measurement and correction of performance in order to make sure that enterprise objectives and plans devised to attain them are being accomplished.

THE BASIC CONTROL PROCESS

Establishment of Standards

Criteria of Performance First step in the control process logically would be to establish plans They are the selected points for measurement of performance (verifiable) check points. Thus do not have to watch every step in the execution of plans Also note down deviations at critical points

Measurement of Performance

Deviations are avoided by appropriate actions

THE BASIC CONTROL PROCESS

Correction of Deviations

Correction of deviations is the point at which control can be seen Managers may correct deviations by redrawing their plans or by modifying their goals or by reassignment or clarification of duties Managers may correct by additional staffing, by better selection and training of subordinates or by ultimate restaffing measure firing Correction through better leading fuller explanation of the job or more effective leadership techniques

Critical Control Points, Standards and Benchmarking

Standards are yardsticks against which actual or expected performance is measured. In a simple operation, a manager might control through careful personal observation of the work being done For big operations, this is not possible because of the complexity of the operations and the fact that a manager has far more to do than personally observe performance for a whole day.

TYPES OF CONTROL

Feedback Control

Many systems control themselves through information feedback, which shows deviations from standards and initiates changes.

TYPES OF CONTROL Feedback loop of Management Control

Actual Performance Measurement of Actual Performance Comparison of Actual Performance against Standards

Desired Performance

Implementation of Corrections Program of Corrective Action

Identification of Deviations

Analysis of Causes Of Deviations

TYPES OF CONTROL

Real Time Information and Control (due to use of computer and from electronic gathering, transmission and storage of data

Information about what is happening while it is happening Seat availability : enter the data : immediately responds with the information Supply chain management (Just in Time) Real time information as a means of getting real-time control In the case of quality control and more complex case of inventory control

TYPES OF CONTROL

Feed Forward Control or Preventive Control

Managers need for effective control a system that will tell them potential problems, giving them time to take corrective action before those problems occur. Management control process shows that control must be directed toward the future if it is to be effective. Whereas historic data tells managers that has happened (lost) in past Feedback from the output of a system is not good enough for control. It is little more than a postmortem. A motorist, who wishes to maintain a constant speed in going up a hill would not usually wait for the speedometer to signal a drop in speed before depressing the accelerator.

TYPES OF CONTROL

Simple feedback systems measure outputs of a process and feed into the system or the inputs of the system corrective actions to obtain desired outputs. Because of time lags in the correction process, this is not good enough. Whereas Feedforward systems monitor inputs into a process to ascertain whether the inputs are as planned. If they are not, then inputs or processes are changed in order to obtain the desired results. Correction can be made before the system output is affected.

Control through Return on Investment (ROI)

Measures both the absolute and the relative success of a company or company unit by the ratio of earnings to investment of capital

Profit and Loss Control

The income statement for an enterprise as a whole serves important control purpose shows all revenues and expenses for a given time, so it is a true summary of the results (success or failure) of business operations. Since profits are a definite standard against which to measure success, many companies use the income statement for divisional or departmental control. Limitations : Duplicating of accounting records, efforts involved in allocating the many overhead costs and the time and effort required to calculate intracompany sales can make this control costly (But the use of computers has reduced this cost)

REQUIREMENTS FOR EFFECTIVE CONTROLS

Tailoring Controls to Plans and Positions

Control techniques different for different different plans Control techniques different for vice president and for shop supervisor

Tailoring Controls to Individual Managers

Control systems are such that each manager can understand and trust (individual manager based control system)

Designing Controls to Point Up Exceptions at Critical Points

Point up exceptions allow managers to benefit from the time-honored exception principle and detect areas that require their attention A manager might be concerned if the cost of office labor deviated from the budget by 5 percent but might be unworried if the cost of postage stamps deviated from the budget by 20 percent It is not enough just to look for exceptions, one must look for them at critical points.

REQUIREMENTS FOR EFFECTIVE CONTROLS

Seeking Objectivity of Controls

Effective control requires objective, accurate and suitable standards. Subordinate is doing a good job should ideally not be a matter for subjective determination.

Ensuring Flexibility of Controls

If controls are to remain effective despite failure or unexpected changes of plans, they must be flexible

Fitting the Control System to the Organization Culture

To be most effective, any control system or technique must fit the organization culture. Employees with considerable freedom and participation, a generalized and permissive control system will work With less participative management style, tight control system will work

REQUIREMENTS FOR EFFECTIVE CONTROLS

Achieving Economy of Controls

Controls must be worth their costs.

Establishing Controls that lead to Corrective Action

NON BUDGETARY CONTROL TECHNIQUES

Statistical Data

Special Reports and Analyses

Operational Audit Personal Observations

INFORMATION TECHNOLOGY