The Control Function

Definition
Management control is a systematic effort to set
performance standards with planning objectives, to design
information
feedback
systems,
to
compare
actual
performance with these predetermined standards, to
determine whether there are any deviations and to measure
their significance, and to take any action required to assure
that all corporate resources are being used in the most
effective and efficient way possible in achieving corporate
objectives.
- Robert J
Mockler

Importance
Coping with Uncertainty
Detecting internal irregularities
Identifying opportunities
Handling complex situations
Decentralising authority
Minimising costs

Basic Control Process

Determining Areas to control
Establishing standards
Measuring performance
Comparing performance against standards
Recognising good or positive performance
Taking corrective action when necessary
Adjusting standards and Measures when necessary

Types of Control
Controls based on Timing
Stages of production

Type of

Description

Control
Capital
RM
Input Mkt Info
Equiptment
for

Feed forward
Control

Inputs are montiored

to ensure that they
meet the stds necessary
transformation process

Stages of production

Planning
Organising

ongoing
Transformation
Process
Staffing
transf process to
that they conform to
organisational stds
Leading
Controlling

Type of
Control

Description

Regulates
activities that are a part
Concurrent
of the
Control
ensure

Stages of production
Control

Type of

Description

Goods
Exercised after a product or service has been
produced to ensure that the
Services
Feedback
Control final output meets quality
standards and goals
Output
Profits
Waste materials

Cybernetic & NonCybernetic Control

Degree of human discretion required
Cybernetic control system

Step 1 : Define precisely what characteristics are to be controlled

Step 2 : Standards set for each characteristics
Step 3 : Sensor built to measure characteristics
Step 4 : Measurements trnsformd to a signal to be compared to std
Step 5 : Difference is sent to decision maker
Step 6 : If diff is significant trnsmted to effector that causes system
to counteract deviation

Step 7 : Often system may allow effector to take one of many

actions

 Non-Cybernetic control System

Control Techniques
Major Control Systems

Financial Control
Budgetory Control
Quality Control
Inventory Control
Operations Management
Computer-based information systems

 Managerial levels and Control

System

Financial Control
Liquidity
General financial conditions
Profitability

 Balance sheets
A balance sheet shows the financial condition
of a business at a given point of time.

Income Statement
An Income Statement is a brief presentation
of the financial results of a companys
operations over a specified time period.
Shows revenues & expenses & profit earned
by the company.

 Cash Fund flow statement

Summarises the financial performance
of an organisation in terms of the
sources of origin of cash or funds
during the yr and the areas where they
were utilised.

 Ratio Analysis

Current Ratio
Inventory turnover ratio
Debt ratio
Net profit ratio
Return on investment

Budgetory Control
Budgets are formal quantitative
statements of the resources set
aside for carrying out planned
activities over given periods of time
and include figures such as
projected income, expenditure and
profits.

Quality Control
Quality Circles
TQM

Inventory Control
Raw material
Work-in-progress
Finished products

 Modern Control techniques

PERT
CPM
Human resources Accounting

 MIS

Requirements for effective

controls
Control should reflect plans, positions and structures
They should be understandable
They should be cost-effective
Controls should identify only important/major
exceptions
Control systems should be flexible
Control systems should provide accurate information