Chapter 9

Controlling
Prepared by: Group 7 Members: Augie Laine E. Cabrejas Red Mariod A. Faronilo Radzquomar N. Maing Carl Harold San Juan

Controlling
o What is Controlling? o Importance of Controlling o Steps in Control Process o Types of Control o Components of Organizational Control System o Strategically 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 and implementing 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 inventory control system, for instance, minimize, if not totally eliminates losses in inventory.

Steps in the Control Process

The 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 be determined. 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 use some other tools like the market share approach and position in the industry.

Comparing Actual Performance to Objectives and Standards

Once actual performance has been determined, this will be compared with what organization seeks to achieve. Actual production output, for instance, will be compared with the target output.

Taking Necessary Action

The purpose of comparing actual performance with the desired result is to provide management with the opportunity to take corrective action when necessary.

1. 2. 3.

Hire additional personnel Use more equipment Require overtime

Steps in Control Process

Establish ` Performance Objectives and Standards Measure Actual Performance
Do nothing Does Actual Performance Match the Standards? No

Yes

Take ` Corrective Action

Types of Control
Control consists of three distinct types, namely:
1.

Feed forward control

2. Concurrent control 3. Feedback control

Feed forward Control

When 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 Control
When 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 improving future 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 are either 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 Reports
Statistical Reports pertain to those that contain data on various developments within the firm.

Policies and Procedures

Policies refer to the the framework within which the plan that objectives must be pursued . A procedures is a

describes the exact series of actions to be taken in a given situations .

Strategic Control System

To be able to assure the accomplishment of the strategic objectives of the company, strategic control systems become necessary. These systems consists of the following : 1. Financial analysis 2. Financial ratio analysis

Financial Analysis
The 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 Analysis

Financial 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

Identifying Control Problems

Recognition the need for the control is one thing, actually implementing it is another. When operations become complex, the engineer manager must consider useful steps in controlling. Kreitner mentions three approaches.
1. 2. 3.

Executive reality check Comprehensive internal audit General checklist of symptoms of inadequate control

Executive Reality Check

Employees 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 Inadequate Control

If 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