week 9 the importance of control, the controlling process and control types & techniques 1

Week 9

The importance of Control, the Controlling Process and Control Types & Techniques

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Controlling as a Management Function

ControllingA process of monitoring performance

and taking action to ensure desired results.

It sees to it that the right things happen, in the right ways, and at the right time.

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Controlling as a Management Function

If done well, it ensures that the overall directions of individuals and groups are consistent with short and long range plans, It helps ensure that objectives and accomplishments are consistent with one another throughout an organization. It also helps maintain compliance with essential organizational rules and policies.

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Controlling as a Management Function

Cybernetic Control System One that is self-contained in its

performance monitoring and correction capabilities. (thermostat)

The control process practiced in organizations is not cybernetic, but it does follow similar principles.

Three types of Control

Feed forward Control: Prevents “anticipated” problems, Built in at the start (or before)

Concurrent Control: Occurs while activity in progress, Ensures standards being met, Correct before they become too

Feedback Control: Control after action has occurred, Good feedback on effectiveness of planning, Most popular

Which is the best?

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The Control Process

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Establish Objectives and Standards

The control process begins with planning and the establishment of performance objectives and standards.

Organizational standards and objectives are important elements in any business plan, as these principles guide the decision making of the company's management.

Establish Objectives and Standards

To create reachable objectives, an organization needs to understand where they are, where they want to go, and who they need to compete against. A company's standards define how the business should act, while its objectives define what actions the company needs to take .

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Establish Objectives and Standards

There are two types of standards: Output Standards - measures performance

results in terms of quantity, quality, cost, or time.

Input Standards - measures work efforts that go into a performance task.

Establish Objectives and Standards

When creating standards, it is important to consider the company's values, vision, and mission.

When creating a set of objectives, it is important for the organization to complete a self-evaluation through a SWOT analysis.

It is important to create milestones for the objectives and identify what departments within the organization will be responsible for each one.

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Measuring Actual Performance

Without measuring performance, an organization cannot place a value on employee activities and management activities.

Measuring performance is important for comparing a company to competitors in its industry.

In terms of employee performance, there need to be standards in place that outline expected performance and the corrective action that will take place if an employee does not perform to those specifications.

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Measuring Actual Performance (Measuring Tools)

Organizational Evaluations:

Effectiveness: Determined by outcomes, did the organization produce the required results?

Cost-effective: When outcomes are divided by input, how efficient was the organization's performance?

Impact: What value did the organization provide?

Best practices: Evaluating internal operations (comparing core processes to effectiveness and efficiency standards), how does actual performance compare to benchmarks of past performance, performance in the industry, and political expectations?

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Measuring Actual Performance (Measuring Tools)

Employee Evaluations:

Employee performance evaluations should be done on a quarterly, semi-annual, or annual basis. This allows everyone in the organization to understand when the next evaluation will take place and it gives the company a comparable history to measure performance.

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Measuring Actual Performance (Measuring Tools)

If it is a management evaluation, will teams need to be reorganized? Should the company use more resources to increase performance, or move the resources that are there to a department where they will be more effective? In terms of employee performance, there need to be standards in place that outline expected performance and the corrective action that will take place if an employee does not perform to those specifications.

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Comparing Results with Objectives and Standards

When comparing results it is important for an organization to look inward against historical trends and outward against competitive trends.

When comparing results, the company should have a history of similar trends so that there is a basis for the analysis.

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Comparing Results with Objectives and Standards

If the performance measurement is for a new undertaking by the company, then management should conduct research in order to determine what the industry standard may be for the process.

If the results far exceeded expectations, than the goals or standards may be set too low.

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Taking Corrective Action

Taking corrective action first requires identifying the problem, and then implementing a potential solution.

A manager needs to be able to understand the contributing factors of a problem, how they impact key processes, and how to find a workable solution.

Taking Corrective Action

Attempts at corrective action are often unsuccessful due to failures in the problem-solving process. This can be because not all of the information is available for the decision maker to ascertain the true problem. Another reason why an error can occur in the decision-making process is that the decision maker has a stake in the process and may not want to admit an error in his or her department.

A third reason why a decision-making process may result in an incorrect solution is that the decision maker was never properly trained in how to analyze a problem.

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Taking Corrective Action

Once a method of corrective action is determined, it needs to be implemented as soon as possible. Then an analysis of the effectiveness of the solution should be scheduled.

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Effective Controls

The Best Controls in Organizations

are

Strategic and results oriented Understandable Encourage self-control

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Effective Controls

Timely and exception oriented Positive in nature Fair and objective Flexible

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Types of Control

Feedforward Are accomplished before a work activity

begins.

They make sure that proper directions are set and that the right resources are available to accomplish them.

Types of Controls

Feedforward is a management and communication term that refers to giving a control impact to a subordinate, a person, or an organization from which you are expecting an output. Feedforward usually involves giving a document for review and giving an ex post information on that document that has not already been given.

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Types of Control

Concurrent Focus on what happens during the work

process. Sometimes called steering controls, they monitor ongoing operations and activities to make sure that things are being done correctly.

Types of Controls

Concurrent control is control that happens at the same time as a project is occurring. This monitoring and controlling consists of the processes that observe project execution so that potential problems can be identified in a timely manner and corrective action can be taken, when necessary, to control the execution of the project.

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Types of Control

Postaction Often called Feedback controls, they take place

after an action is completed. They focus on end results, as opposed to inputs and activities. As an organization seeks to improve its performance, feedback helps it make required adjustments. Feedback serves as motivation for many people in the workplace. When one receives either negative or positive feedback, one decides how to apply it to his or her job.

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Types of Controls

Managers have two broad options with respect to control.

Types of Controls

Control built within a process is internal in nature. It takes place with a combination of interrelated components - such as the social environment affecting the behavior of employees, information necessary in control, and policies and procedures.

Business managers must consider not only the short-term and long-term implications of decisions made within the firm, but also various external constraints that may limit the firm's ability to achieve its organizational goals.

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Types of Controls

Internal:

Concerned with the non-public affairs of a company or other organization.

External:

Concerned with the public affairs of a company or other organization.

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Control Techniques

Managers use a series of control methods and systems to deal with the various problems of their organizations. The major control systems that assist a manager in exercising control are financial control, budgetary control, quality control, inventory control and operations management.

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Control Techniques

Financial control is control of financial resources as they flow into the organization (i.e., revenues, shareholders investments), are held by organization (i.e., working capital, retained earnings), and flow out by the organization (i.e., expenses). This type of control method aid managers in acquiring, allocating, and evaluating the use of financial resource, such as: cash, accounts receivable, accounts payable, inventories, and long-term debt. These methods also enable managers to achieve acceptable liquidity, solvency, and profitability standards.

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Control Techniques

The Budgetary ControlBudgets are the most widely used control system, because the plan and control resources and revenues are essential to the firm's health and survival.

Budgeting is the formulation of plans for a given future period in numerical terms. By stating plans in terms of numbers and breaking them into parts of an organization, budgets correlate planning and allow authority to be delegated without loss of control.

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Control Techniques

Quality ControlThere are eight dimensions of quality that are important from a strategic point of view:Performance: Performance involves a product's primary operating characteristics. Features: Features are supplements to the basic functioning characteristics of the product or service. Examples include free drinks on a plane.Reliability: Reliability addresses the probability of a product or service. Among the most common measures of reliability are the mean time to first failures, and the failure rate per unit time.

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Control Techniques

Conformance: Conformance refers to the degree to which a product's design or operating characteristics meet established standards.

Durability: Durability is a measure of how much use a person gets from a product before it deteriorates or breaks down.

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Control Techniques

Serviceability: Serviceability refers to the promptness, proficiency and ease of repair.

Aesthetics: How a product looks, feels, sounds, tastes, or smells - is clearly a matter of personal judgment and a reflection of individual preferences.

Perceived: Perceived quality refers to individuals' subjective assessments of product's or service's attributes;

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Control Techniques

Inventory ControlAnother major type of control system found in most organizations is inventory control. Inventory refers to the goods or materials that are available for use by a business.

There are three major types of inventory: raw materials, work in process, and finished goods.

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Control Techniques

Raw materials inventory is the stock of parts, ingredients, and other basic inputs to a production or services process. Work-in-process inventory is the stock of items currently being transformed into a final product or service. Finished-goods inventory is the stock of items that have been produced and are awaiting sale or transit to a customer.

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Control Techniques

The Operations Management ProcessThe outputs are obtained by transforming certain basic inputs - raw materials, human resources, capital, information and technology - through production, or operations, processes. Such transformation processes involve several major elements: operating strategy, operating systems, facilities, process technology.

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