controlling module 5- mbp
TRANSCRIPT
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CONTROLLING
Module 5
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Syllabus
Control function in management
The basic control process
Types of control- feed forward, concurrent andfeedback controls
Factors in controlling effectiveness
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Control function: Meaning
Regulation of organizational activities in suchway as to facilitate goal attainment
In simple terms, it is the process of monitoring,
comparing and correcting work performance In managerial context, controlling function refers
to the process of measuring the actualperformance against the established standardsand then correcting significant deviations
Control is used to check that everything is beingcarried out in accordance with the plan, orders
and principles
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Supervision and controlling are two differentconcepts;
Supervision is the part of controlling,
supervision is monitoring the performance toidentify deviations from established standards
Controlling activity starts much before
supervision and continues after supervision . Itestablishes standards for performance, plansexecutes actions to ensure that performance isin accordance with the standards
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Definition:
George Terry: controlling is determining whatis being accomplished that is evaluating theperformance, and if necessary, applying
correct measures so that the performancetakes place according toplans
Koontz & ODonnell, the measurement and
correction of the performance of activities ofsubordinates in order to make sure thatenterprise objectives and plans devised toattain them are beingaccomplished
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Purpose of control
Adapt toenvironmental change
Limit theaccumulation of error
Control helps the organization
Cope with organizationalcomplexity
Minimize costs
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Importance of control function
Bringing focus: through control function,organization will come to know about areaswhich need more or less focus or concern
Brings discipline and order in an organization Provides feedback on performance
Effective and efficient utilization of resources
Planning and controlling link: manager hasto follow up activities to ensure that everythingis going on as per the plan. Managing is anongoing process.
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Planning and controlling linkContd..
Controlling provides the critical link back to planning.If manager doesnt control, he cant know whethertheir plans and goals are on target or on track andwhat future actions to take
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Importance contd..
Empowering employees: Control systemsprovide managers with information andfeedback on employee performance
Protecting the workplace: Controlsenhance physical security and helpminimize workplace disruptions
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Basic Control Process
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Step 1. Establishing standards
Control standard is a target against whichsubsequent performance will be compared
Example of Taco Bell, a fast food restaurant hasfollowing service standards;
A minimum of 95% of all customers will begreeted within 3 minutes of their arrival
Preheated tortilla chips will not sit in the warmer
more than 30 minutes before they are served tocustomers or discarded
Empty tables will be cleaned within 5 minutesafter being vacated
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Contd..
Based on the example we can understand that;
Control standards should be measurable interms
It should be consistent with organizational goals.[ Taco Bells organizational goals involvescustomer service, food quality and restaurantcleanliness]
It should identify performance indicators.Standards should provide information aboutwhat is being controlled
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Step 2: Measuring performance
Performance measurement is a constant andongoing activity
Performance measures must be valid.
Daily, weekly and monthly sales numbersmeasure sales performance
Product quality or units produced or unit cost
measure production performance Quality or quantity of output measure
employees performance
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Measuring: How and What WeMeasure
Sources ofInformation (How)
Personalobservation
Statistical reports
Oral reports
Written reports
Control Criteria(What)
Employees
Satisfaction Turnover
Absenteeism
BudgetsCosts
Output
Sales
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Common Sources of Information forMeasuring Performance
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Step 3: Comparing performance
against standards
Measured performance will be compared againstestablished standards
Performance may be higher than, lower than oridentical [equal] to the standard
If performance is lower than expected managerhas to decide how much deviation from standardcan be allowed before taking remedial action
Comparison is mainly based on the importanceand complexity of the activity
For longer run and higher level standards annualcomparison can be done
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Step 4: Corrective action Courses of Action
Doing nothing maintaining status quo
Only if deviation is judged to be insignificant.
Correcting actual (current) performance or
deviation Immediate corrective action to correct the problem
at once.
Basic corrective action to locate and to correct the
source of the deviation.
Corrective Actions
Change strategy, structure, compensationscheme, or training programs; redesign jobs; orfire employees
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Contd..
Revising or change the standard
Examining the standard to ascertain whetheror not the standard is realistic, fair, andachievable.
Upholding the validity of the standard.
Resetting goals that were initially set toolow or too high
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Types of Control
Managers can implement controls before anactivity begins, during the activity is going on,and after the activity has been completed
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1. Feed forward Control
It prevents anticipated problems since it takesplace before the actual activity
Taking managerial action before a problem
occurs Ex: when McD opened its first branch in
Moscow, it sent its quality experts to Moscow,
to train farmers and bakers in producingquality potatoes and in baking high qualitybreads
Here, McD anticipated problem with quality
food, so to control that, it improved inputs itself
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Contd..
Merit of Feed forward Control:
It is desirable, because they allow managersto prevent the problem, before the actual
damage happens
Demerit of Feed forward Control:
Requires accurate and timely informationwhich is difficult to get
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2. Concurrent Control
Takes place while an activity is in progress
Best known form of this type is DIRECTSUPERVISION
When managers use management by walking
around, where they visit floor and contactemployees directly, they are using concurrentcontrol
Ex: while typing in a word document, miss spelt
words or grammar errors are highlighted in agreen or red color
Though delay in managerial response to problemis there, it is minimal
One can reduce the wastage because of
damages, as you are preventing major damages
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3. Feedback Control
Control takes place after the activity is done, orproblem occurs.
Merit : 1]feedback provides managers withmeaningful information on how effective theirplanning efforts were. Feedback can be littlevariance between standards and actualperformance or significant variance between
standards and actual performance 2] It can enhance employee motivation.
Employee can get information or feedbackon how well they have performed
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Contd
Demerit: After the activity, manager isgoing to control it, where it is of no use asproblem or damage already happened,wastages already occurred
Factors in control effectiveness/
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Factors in control effectiveness/guidelines to create effective controlsystem
Make control system objective or planningoriented: control should be linked to planning.Once the goals are set during planning
process, develop standards that will reflecthow well the plan is realized
Make control process simple and achievable
Accuracy: Be accurate in measuring theperformance and have reliable informationsources
Flexibility: control system should be flexible to
adapt any environmental changes
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Contd
Corrective action should not be delayed
Standards should be measurable
Consider human element Over and under control are not good
Timeliness: control system should provide
information or feedback whenever it isnecessary
T h i l f
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Techniques or tools ofcontrolling
Levels of control:
Managers use control at several levels. Themost basic levels of control in organizations
are strategic, structural, operating and financialcontrol.
Each level must be managed properly if
control is to be most effective
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1. Operations control
Focuses on the processes the organizationuses to transform resources into products orservices
3 forms of operations control:preliminary control
screening control
post action control
O
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1. Operations control contd..
Preliminary control
Concentrates on the resources [human,financial, material, information] organizationbrings in from the environment
Attempts to monitor the inputs before theybecome part of the organization system.
Ex: hiring qualified man power, acquiring
advanced machineries, good quality rawmaterials, required amount of funds andinformation.
C d
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Contd..
Screening control;
Focuses on meeting standards of quality andquantity of products or services during actualtransformation process
Focus is on how input are being transformedinto outputs
It relies heavily on feedback processes
Periodic quality checks provide feedback to
employees, so that they can take correctiveactions if required
This promotes employee participation andcatches problems early in the overall
transformation process
C d
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Contd..
Post action control
Monitors outputs or results after thetransformation process is complete
If product can be produced only in one or two
steps or services are simple and routine, thistechnique can be effective
Provides meaningful information about future
planning
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Forms of operational control
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2. Financial control
Technique concerned with controlling financialresources, as they
Flow into organization [revenues, shareholdersinvestments]
Held by organization [working capital, retainedearnings]
Flow out of the organization [expenses,
payments]Financial resources should be managed in such
way that revenues are sufficient to cover costsand still return a profit toorganizations owner
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Various financial control tools
1. Budgets / budgetary control:
It is a plan expressed in numerical terms.
What is the time frame for a budget?
Usually a year, but sometimes broken down intoquarters and months.
Budgets are quantitative in nature and provide
yardsticks for measuring performance andfacilitating comparisons.
Organizations establish budgets for work groups,departments, divisions and for the wholeorganization
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Developing budgets
Contd Other tools of financial
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Contd.. Other tools of financial
control
Financial Statement:A profile of an
organizations financialcircumstances. 2 Basic
statements are Balance sheet
And income statement
Balance Sheet: List of assetsand liabilities of an organization
at a specific point in time,usually the last day of the fiscal
year. Reflects snapshot oforganizations financial position
Income Statement: Asummary of financial
performance over a period of
time, usually one year.
Ratio Analysis: assessorganizations financial
health. Uses information from
financial statements
Audit: An independent appraisal of an organizationsaccounting, financial, and operational system. Can be conductedby internal or external experts
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Contd..
Ratio analysis tells
How many liquid assets are available inorganization?
Organizations ability to meet long termfinancial obligations
Ability to cover interest expenses for borrowed
loans etc..
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3. Structural control
Organizations design may result in different
approaches to control. Two major forms ofstructural control are
Bureaucratic control: characterized by formalstructural arrangements
Decentralized Control: characterized by
informal structural arrangements These two control tools adopt 6 dimensions or
perspectives
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4. Strategic Control
No doubt that organizations strategy
plays a very important role in its success.It is also important to assess the
effectiveness of these strategies to ensurethat strategies are helping organization tomeet its goals
Control aimed at ensuring that theorganization is maintaining an effectivealignment with its environment and
moving toward achieving its strategic
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Contd..
It generally focuses on 5 aspects oforganization:
Structure
Leadership
Technology
Human resources
Information and operating systems
Ex: moving from functional structure to divisionalstructure
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Sample questions
What do you mean by Control Function? [3marks]
List steps in control process. [3 Marks]
Explain control process. [7 and 10 marks]
Explain the types of Controls. [7 and 10 marks]
Explain the various factors in control
effectiveness. [7 and 10 marks] Explain various tools to control or Explain
various techniques of control.[7 and 10 marks]
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