Controlling
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Transcript of Controlling
The process of monitoring, comparing and correcting the work performance is called controlling.
It shows how to check the employees, their working capabilities, how they are performing better than their counterparts, and giving them the correct direction of the work performance is called controlling. It also covers the machinery part of the organization too. Whether its working well or not what are the problems and how to overcome them. This all is called controlling. If it is not performed well, the planning can’t work better in an organization.
PlanningGoalsObjectivesStrategiesPlans
OrganizingStructureHuman resourceManagement
LeadingMotivationLeadershipCommunicationIndividual andGroup behavior
ControllingStandardsMeasurementsComparisonsActions
A three step process of measuring the actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or inadequate standards.
Goals and objectives
OrganizationalDivisionalDepartmentalIndividual
Measuring actual
performance
comparing actual
performance against
standards
Taking managerial
actions
Step 1
Step 3
Step 2
There are three steps of control processMeasuring actual performanceComparing actual performance against standardsTaking managerial actions
1.Measuring actual performance
To measure the actual performance the manager must have the knowledge of the work done
It consists of two steps how we measure what we measure
Personal observation
Statistical reports
Oral reports
Written reports
Benefits• Get firsthand knowledge
• Information is not filtered
• Intensive coverage of work activities
• Easy to visualize
• Effective for showing relationship
• Fast way to get information
• Allow for verbal and non-verbal information
• Comprehensive
• Formal
• Easy to file and retrieve
Drawbacks
• Subject to personal biases
• Time consuming
• Obstructive
• Provide limited information
• Ignore subjective factors
• Information is filtered
• Information can’t be documented
• Take more time to prepare
Whatever is measured is probably more critical to the control process than how it is measured. Why? Because selecting the wrong criteria can create serious problems. Besides, what is measured often determines which employee will do it and what control criteria will manager use?
The comparing step determines the variation between the actual performance and the standards
Range of variation
The acceptable parameters of variance between actual performance and the standard id called range of variation
Managers can choose three possible courses of the action
Do nothing because it is self explanatory
Correct actual performance
It is of two steps
Immediate corrective action
To correct the problem at spot to get performance
Basic corrective action
To look how and why performance deviate before correcting the source of deviation
The deviation can be due to low or high goals. If there is such a situation the managers can revise the standard. If goal is easily obtainable, they can make higher standards. If it is tough to achieve, they can lower the standard.
compare actual performance with
standard
Is standa
rd being attain
ed
yes Do nothing
No
Is varian
ce acceptable
Do nothing
yes
no
Is standa
rd acceptable
yes
Identify cause of variationn
o
Revise standard
Correct performa
nce
Measure actual performance
objective
standard
Performance
The end result of an activity is called performance
Organizational performance
The accumulated results of all the organization’s work activities are called the organizational performance
Productivity
The amount of goal or services produced divided by the input needed to complete that output is called productivity.
A measure how appropriate organizational goals are and how well they are being met is called organizational effectiveness
TOPICSLEVELS OF CONTROLTYPE OF CONTROLCHARACTERISTICS OF ORGANATIONAL CONTROL SYSTEMCHARACTERISTICS OF DYSFUNCTIONAL CONTROL SYSTEMMANAGING FINANCIAL CONTROLRATIO ANALYSISBALANCE SCORECARD INFORMATIONAL CONTROL
LEVELS OF CONTROL
• Strategic control • Tactical control• Operational control
Assess and regulate how the organization fits its external environment and meets its long-range strategic plans.
Strategic control
Tactical control Assess and regulate successful
implementation of departmental level tactical plan, emphasizing specific internal and external forces affecting them
Strategic and tactical control
Time frame limited ObjectiveControls relate to specific,
functional area Type of comparisonComparisons made within
organization FocusImplementation of
strategy
Time frame Long
ObjectiveControls relate to organization
as a whole
Type of comparisonComparisons made to other
organization
FocusDetermination of overall
organizational strategy
Tactical control Strategic control
Operational control
Assess and regulate successful implementation of
day-to-day operational plans by monitoring focused
internal activities.
TYPE OF CONTROL
Preliminary Control
Concurrent Control
Post Action Control
Type of control PRELIMINARY CONTROL
Sometimes called the Feed Forward controls, they 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.
Type of control
CONCURRENT CONTROL
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
Type of control
POST ACTION CONTROL
Sometimes called Feedback control, they take place after an action is completed. They focus on end results, as opposed to inputs and activities.
CHARACTERISTICS OF ORGANATIONAL CONTROL SYSTEM
The management of any organization must develop a control system in order to achieve its organization's goals.
Effective control systems share several common characteristics. These characteristics are as follows:----
CHARACTERISTICS OF EFFECTIVE ORGANIZATIONAL CONTROL SYSTEMS
AVAILABILATY OF INFORMATION WHEN NEEDED
Control data should be provided to the responsible managers frequently enough to allow them to react to problems while there is still time to take decisive action. Without timely control information, problem situations turn in to major disasters.
COMPREHENSIBILITY
Controls must be simple and easy to understand.
FOCUS ON CRITICAL POINTS
controls are applied where failure cannot
be tolerated or where costs cannot exceed a certain amount. The critical points include all the areas of an organization's operations that directly affect the success of its key operations.
ACCURACY
Effective control systems provide factual information that's useful, reliable, valid, and consistent.
ECONOMIC FEASIBILITY
Effective control systems answer questions such as, “How much does it cost?” “What will it save?” or “What are the returns on the investment?” In short, comparison of the costs to the benefits ensures that the benefits of controls outweigh the costs.
ACCEPTANCE BY EMPLOYEES
Employee involvement in the design of controls can increase acceptance.
INTEGRATION INTO ESTABLISHED PROCESSES
Controls must function harmoniously within these processes or not.
CHARACTERISTICS OF DYSFUNCTIONAL CONTROL SYSTEM
Over ControlUnder Control
OVERCONTROL
Excessive regulation of work activities, restricting individual autonomy and causing ineffective organizational performance.
UNDER CONTROL
Unregulated work activities, granting employs too much individual autonomy and causing ineffective organizational planning
MANAGING FINANCIAL CONTROL
Balance sheetIncome statementRatio analysis
FINANCIAL CONTROLS
Financial control is a critically important activity to help the business ensure that the business is meeting its objectives.
Financial control provide managers and stakeholders to evaluate organization performance.
It shows the organization financial position and its financial performance and its Ratio analysis.
Balance sheet
A financial statement detailing an organization assets, liabilities, and shareholders equity at a specific point in time
Financial statement
A summary of the an organization's revenue, expenses and profits over a particular period of time.
Ratio analysis
A managerial process used to compare organizational performance with historical, competitive or industry performance
RATIOS ANALYSIS
There are four type of ratios
Liquidity ratios Leverage ratiosActivity ratios Profitability ratios
1) Liquidity ratios
Term liquidity refers to conversion of assets into cash.
Liquidity ratios are of two type Currents ratios Acid test
a) Current ratio
Determine the short term debt paying ability & is computed below.
Current ratio = Current assets/Current liabilities
b) Acid Test Ratio
It is also called the quick ratio. To determine the most immediate position than that indicate by the current ratio.
Acid test = Current assets – inventory current liabilities
2) Leverage ratio
These ratios are used to analyze an organization’s ability to meet its long term short term debt obligation
Leverage ratios are of two type
Debt to assets Time interest earned
a) Debt to assets
It indicates firms long term debt paying ability. It also helps how well creditors will be protected in case of insolvency
Debt to assets = Total debt/ Total assets
b) Time interest earned
It measures the firms ability to make contractual interest payment. The higher its value the better able is the firm to fulfill its interest obligation.
Time interest earned= earning before interest & tax/ interest charges
3) Activity ratios
Activity ratios are also called the assets utilization ratios , are analyze an organization's effectiveness in using its assets to generate sales
There are of two type Inventory turnover Total asset turnover
a) Inventory turnover
# of times inventory will be sold out in a years.
Increase in turnover of inventory is favorable, decrease in turnover take more time to be sold out.
Its ratios are, Inventory turnover= sales/ inventory
b) Total asset turnover
It indicate the efficiency with which the firm uses its assets to generate sales.
Its ratios are, Total assets turnover=sales/total
assets
4) Profitability ratios
Used to analyze an organization's effectiveness in earning a net return on sales and investment
There are of two type
Profit margin on sales Return on investment
a) Profit margin on sales
Identified the profit that are being generated.
Its ratio are, Profit margin on sales = net profit after
tax/ total assets
b) Return on investment
Measures the efficiency of assets to generate profits
Return on investment = net profit after tax/ total assets
Balance scorecard
A performance measurement tool that looks at more than just the financial perspective.
A balance scorecard typically looks at four areas that contribute to company performance: financial, customer, internal processes, and people/innovation/growth assets.
Informational Control
Managers deals with information controls in two ways:
How is information used in controlling? Controlling information.
How is information used in controlling? Managers need the right information at
the right time and in the right amount to monitor and measure organizational activities and performance
A management information system (MIS) Is a system used to provide managers with Needed information on a regular basis.
Controlling information
Managers should have to careful that its secret matters can't be move out of the organization.
Benchmarking of best practices
Benchmarking the search for practices among competitors or non competitors that lead to their superior performance.
Benchmark the standard of excellence against which to measure and compare.
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