Organisational Control

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Thulasi ManiSelvin


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SasidharanSivakumar

Naveen


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y Organizational Controly Managers monitor and regulate how efficiently and

effectively an organization and its members areperforming the activities necessary to achieveorganizational goals


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Managers must monitor and evaluate:y Is the firm efficiently converting inputs into outputs?

yAre units of inputs and outputs measuredaccurately?

y Is product quality improving?y Is the firms quality competitive with other firms?

y Are employees responsive to customers?yAre customers satisfied with the services offered?

y Are our managers innovative in outlook?y Does the control system encourage risk-taking?


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y Control Systemsy Formal, target-setting, monitoring, evaluation and

feedback systems that provide managers withinformation about whether the organizationsstrategy and structure are working efficiently andeffectively.


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y A good control system should:

y be flexible so managers can respond as needed.

y provide accurate information about the organization.

y

provide information in a timely manner.


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y Feed forward Controlsy Used to anticipate problems before they arise so that

problems do not occur later during the conversionprocess

y Giving stringent product specifications to suppliers inadvance

y IT can be used to keep in contact with suppliers and tomonitor their progress


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y Concurrent Controlsy Give managers immediate feedback on how efficiently

inputs are being transformed into outputsy Allows managers to correct problems as they arise


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y Feedback Controlsy Used to provide information at the output stage about

customers reactions to goods and services so that

corrective action can be taken if necessary


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1. Establish standards of performance, goals, ortargets against which performance is to beevaluated.y Managers at each organizational level need to set

their own standards.


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2. Measure actual performance

y Managers can measure outputs resulting fromworker behavior or they can measure the behavior

themselves.

y The more non-routine the task, the harder it is tomeasure behavior or outputs


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3. Compare actual performance against chosenstandards of performancey Managers evaluate whether and to what extent

performance deviates from the standards ofperformancechosen in step 1


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4. Evaluate result and initiate corrective action if thestandard is not being achieved

y

If managers decide that the level of performance isunacceptable, they must try to change the way workactivities are performed to solve the problem


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BUDGETING:

*INTRODUCTION

*TYPES

* METHODS

*Capital Budgeting

*Working Capital Management


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INTRODUCTION:

For effective running of a business, management must know:

where it intends to go i.e. organizational objectives

How it intends to accomplish its objective i.e. plans

whether individual plans fit in the overall organizational objective.i.e. coordination

whether operations conform to the plan of operations relating tothat period i.e. control

Budgetary control is the device that a company uses for all thesepurposes.


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WHAT IS ABUDGET? A plan expressed in money. It is prepared and approved prior to thebudget period and may show income, expenditure and the capital to

be employed.


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WHATIS BUDGETARYCONTROL?

Budgetary control is the use of the comprehensive system of budgeting toaid management in carrying out its functions like planning, coordinationand control.

This system involves:

Division of organization on functional basis into different sectionsknown as a budget centre.

Preparation of separate budgets for each budget centre.

Consolidation of all functional budgets to present overallorganizational objectives during the forthcoming budget period.

Comparison of actual level of performance against budgets.

Reporting the variances with proper analysis to provide basis forfuture course of action.


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ACCORDING TO A CCORDING TO A CCORDING TO

TIME FUNCTION FLEXIBILITY

1.Long term budget 1. SalesBudget 1.Fixed Budget

2. Short term Budget 2. Production Budget 2.Flexible budget

3.Current Budget 3.Cost of production Budget

4. Rolling Budget 4. Purchase Budget

5. Personnel Budget6. R & D Budget

7.Capital expenditureBudget

8.Cash Budget

9. Master Budget


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3. COSTOF PRODUCTION BUDGET:

This budget is an estimate of cost of output planned for a budgetperiod and may be classified into

MaterialCost Budget

Labour Cost Budget

Overhead Cost Budget

4. PURCHASE BUDGET:

This budget provides information about the materials to be

acquired from the market during the budget period.


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5. PERSONNELBUDGET:

This budget gives an estimate of the requirements of direct labouressential to meet the production target.

This budget may be classified into

a. Labour requirement budget

b. Labour recruitment budget

6. RESEARCHANDDEVELOPMENTBUDGET:

This budget provides an estimate of expenditure to be incurred onR& Dduring the budget period.

A R&D budget is prepared taking into consideration the researchprojects in hand and newR& D projects to be taken up.


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7. CAPITALEXPENDITURE BUDGET:

This is an important budget providing for acquisition of assetsnecessitated by the following factors:

a. Replacement of existing assets.

b. Purchase of additional assets to meet increased production

c. Installation of improved type of machinery to reduce costs.

8. CASH BUDGET:

This budget gives an estimate of the anticipated receipts andpayments of cash during the budget period.

Cash budget makes the provision for minimum cash balance to bemaintained at all times.


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9. MASTERBUDGET:

CIMAdefines this budget as The summary budget incorporating itscomponent functional budget and which is finally approved, adopted andemployed.

Thus master budget is a summary of all functional budgets in capsule form

available in one report.

10. FIXED BUDGET:

This is defined as a budget which is designed to remain unchanged

irrespective of the volume of output or turnover attained.This budget will, therefore, be useful only when the actual level of activitycorresponds to the budgeted level of activity.


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13. ZERO

BASE

BUDGETING

:The zero base budgeting is not based on the incremental approachand previous figures are not adopted as the base.

Zero is taken as the base and a budget is developed on the basis oflikely activities for the future period.

A unique feature of ZBB is that it tries to help management answer thequestion, Suppose we are to start our business from scratch, on what

activities would we spent out money and to what activities would wegive the highest priority?


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14. RESPONSIBILITYACCOUNTING:

Responsibility accounting fixes responsibility for cost control purposes byestablishing responsibility centres namely

a. Cost centre

b. Profit centre

c. Investment centre

Principles of responsibility accounting are as follows:

1. Fixation of targets for each responsibility centre

2.A

ctual performance is compared with the target3. The variances therein are analyzed so as to fix theresponsibility of centres.

4. Taking corrective action.


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Organisational Control

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