Controlling MRK151 Chapter 6

Controlling

Detecting and correcting significant variations in the results obtained from planned activities.

Controlling and planning :

A plan should identify and specify the controls needed, otherwise it is not a viable plan.

Control Process

1 -measuring performance : is the determination of the quantity or capacity of a well-defined entity.

2 -comparing performance with standard : when there is different between the performance and the standard, judgment is frequently required to assess its significance.

3 -correcting deviations: this step ensure that operations are adjusted and efforts are made to achieve the results initially planned.

Types of Control

1 -preliminary control : takes place before operation begin and includes the development of policies , procedures, and rules that are designed to ensure that planned activities will be carried out properly.

2 -concurrent control: takes place during the “action” phase of carrying out the plans and includes directing , monitoring , and fine-tuning of activities as they occur.

3 -feedback control: focuses on the use of information about previous results to correct possible future deviations from the acceptable standard.

Control of Organization Levels Top management : is most concerned with preliminary control and with obtaining feedback to indicate the degree to which long-range plans are being successfully carried out.

Middle level management : is concerned with preliminary control in the form of operating policies and procedures. They are also charged with the responsibility of developing and justifying requests for new products, capital investment programs , and productivity improvement projects and of reporting on progress and controlling.

First line management (operation): is concerned with immediate event and typically deals with a short time horizon.

Information and Control

Without accurate and timely information that can be used easily for decision –making , a control system will fall apart.

Data sources for Performance Measurement 1 -personal observations:

Means going to the area of activities and taking notice of what is being done .

The methods :

_the quality and quantity of work.

_the attitudes of employees.

_the general operation are the types of things that might be observed.

Disadvantages:

_not provide accurate quantitative values, and information.

Data sources for Performance Measurement

_it is time consuming, and take the executive away from other tasks.

_direct contact is limited to a few employees and happenings.

2 -oral reports:

The practice of sales people reporting personally to their immediate manager at the close of each business day.

3 -writing reports:

These reports lend themselves to comprehensive data and are adaptable for statistics that are somewhat involved and detailed.

Anticipatory Controlling

Any activities can be controlled with respect to any or all of the following :

1 -quality

2 -quantity

3 -time use

4 -cost

For example: sales control is accomplished by controlling the quantity of sales and the cost of sales.

Management Audit

Developed over the years as a way to evaluate the effectiveness and efficiency of various systems within an organization.

External Audit

An external audit is directed towards the evaluation of firms outside the corporation.

It is beneficially in situations:

1 -investigate other firms for possible merger or acquisition.

2 -determine the soundness of the firm to be used as a major supplier.

3 -find out strengths and weaknesses of a competing firms.

Internal Audit

Used to improve the planning process as well as internal control system. The periodic assessment of a company's managerial planning, organizing, actuating, and controlling.

Merits of AuditingCannot be conducted until the company has been operation for a sufficient time to establish its behavior pattern.

A company goes in favor of a management audit for the following reasons:

_to check on new policies and practices.

_to identify areas that needs shoring up.

_to ensure better use of organizational units.

_to have an improved communication on sate of the company.

_to measure the effectiveness of current managerial controls.

_to determine the reliability of data developed within the organization.

Identifying Area for Audit

A management audit should uncover the performance of unnecessary work:

duplication of work, poor inventory control , use of an improper number of

employees for specific quantity, quality.

Techniques for Identifying Audit Areas

First : review the internal reports of managers.

Second : select key systems or procedures used by the company and follow them from start to finish.

Interviews with managers and nonmanagers are important sources of valuable information.

Attributes Used in Auditing

Draw up a list of qualifications desired and attach a credit valuation to each.

These include attributes dealing with financial stability, production efficiency , sales effectiveness , economic and social affluence, personnel development , earning growth, public relations , and a civic responsibility.

Area of Overall Controlling _market standing of the enterprise

_innovation

_profitability

_materials acquisition and use

_employee performance

_capital or financial resource

_productivity

_physical resources

_public responsibility

Overall Control Reports

1 -comparative balance sheet:

Showing the financial pictures of a company at a given moment. Contain three elements: assets, liabilities , shareholder's equity.

2 -profit and lose statement:

it is a financial statement of the income and expenses resulting from the company's operation during a stated or accounting period of time.

Principle of Preventive Control

The higher the quality of managers and their subordinates, the less will be the need for direct controls.

Reset on three assumptions:

1 -qualified managers make a minimum of errors.

2 -managerial performance can be measured.

3 -the application of management fundamentals can be evaluated.

Advantages of Preventive Control

1 -greater accuracy is achieved in assigning personal responsibility.

2 -preventive control hastens corrective action and make it more effective.

3 -preventive control may lighten the managerial burden caused by direct controls.

4 -the psychological advantages: avoided the subordinators feelings that superiors do not rate fairly.