Managerial Control Session 8

8/10/2019 Managerial Control Session 8

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Essentials of Management

Session 8

Managerial and quality control techniques

Dilipchandra S [email protected]


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Session Overview

Why

What

Who Levels

Steps & Types of Control.


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Why Control?

How does control help the

manager?

Regulates organizational

activities to make themconsistent with

established:

Plans

Targets

Standards


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The Purpose of Control

Adapt to

environmental change

Limit the

accumulation of error

Control helps the organization

Cope with organizational

complexityMinimize costs


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Figure 20.2: Levels of Control


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Who Is Responsible for Control?

Control rests with all

managers.

Large corporations

have a controller.

What does a

controller do?

Helps line managerswith their control

activities.


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What are the steps in the Control Process


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Forms of Operational Control


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Organizational Control Focus

FeedforwardControl AnticipatesProblems

Examples

Pre-employment

drug testing

Inspect raw materials

Hire only college

graduates

Focu

sis

on

Inputs

Concurrent ControlSolve Problems as

They Happen

Examples

Adaptive culture

Total quality

management

Employee

self-control

Focus

is

on

Ongoing

Processes

Feedback ControlSolves Problems

After They Occur

Examples

Analyze sales per

employee

Final quality

inspection

Survey customers

Focusison

Outputs

Exhibit 19.1


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What Does Preliminary Control Monitor?

It attempts to monitor quality and quantity of:

Financial resources.

Material resources.

Human resources.

Information resources.

Why?

Before they become part of the system.

Attempts to identify and prevent deviations


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What does Concurrent Control Monitor?

Focus on how inputs are being

transformed into outputs

Monitors ongoing activities toensure consistency with

performance standards

Assesses

Current work activities Relies on performance standards

Includes rules and regulations

Includes self-control on behavior personal values & attitudes


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What does Feedback Control Monitor ?

Focuses on organizations

outputs

Sometimes called

postaction or output

control


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What Are the Reasons for Financial Controls?

They control the financial resources as they

flow into the organization.

Then they are held by the organization.

Then they flow out of the organization. Businesses must manage their finances so

that revenues are sufficient to cover expenses

and still return a profit.


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What Is a Budget?

It is a plan expressed in numerical terms.

What is the time frame for a budget?

Usually a year, but sometimes broken down

into quarters and months.

Budgets are quantitative in nature and

provide yardsticks for measuring

performance and facilitating comparisons.


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What Are the Types of Budgets?

Types of budget:

Financial

Operating

Non-monetary

What the budget

shows:

Sources and use of

cash.

Operations in

financial terms.

Operations in non-

financial terms.


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Developing Budgets

Operating

UnitBudget

Request

Division

BudgetRequest

Organizational

Budget Prepared

by BudgetCommittee

Approved by

Budget

Committee


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Figure 20.5: Developing Budgets in

Organizations


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Financial StatementA profile of

some aspect of an

organizations financial

circumstances.

Balance SheetList of assets and liabilities of

an organization at a specific

point in time, usually the last

day of the fiscal year.

Income Statement

A summary of financial

performance over a period of

time or time interval, usually

one year.

Ratio Analysis

The calculation of one or more

financial ratios to assess some

aspect of the organizations

financial health.

Audit: An independent appraisal of an organizations

accounting, financial, and operational system.

Other Tools for Financial Control


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Financial Statements

Balance sheet

Assets what company owns fixed &current

Liabilities what company owescurrent &long-term

Owners equity

Difference between assets and liabilitiesand

Is the companys net worth in stock and

retained earnings

For specific point in time


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Copyright Houghton Mifflin Company. All rights reserved. 20 - 21

Financial Statements

1. Income statement-

Shows revenues coming into the

organization from all sources

Subtracts all expenses, including

cost of goods sold, interest, taxes,

and depreciation

Bottom line indicates the net income

(profit or loss)

For given time interval usually one year


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Financial Analysis

Managers need to be able to evaluatefinancial reports that compare the

organizations performance with earlier

data or industry norms Liquidity ratios Debt ratio

Activity ratios Inventory turnover, Conversion ratio

Profitability ratios Profit margin on sales, grossmargin, ROA

Leverage ratios Debt ratio


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What Is Bureaucratic Control?

A form of organizational

control characterized by

formal and mechanistic

structural

arrangements. What is clan control?

An approach to

organizational control

characterized by informal

and organic structural

arrangements.


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Figure 20.6: Organizational Control


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What Is Meant by Strategic Control

Control aimed at

ensuring that the

organization is

maintaining aneffective alignment

with its environment

and moving toward

achieving itsstrategic goals.


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TQM Success Factors

TQM does not always workSix sigma principles might not be

appropriate for all organizational

problems

Many contingencies can influence the

success of TQM program

Quality circles = more beneficial when

challenging jobs

TQM more successful = enriches jobs +

improves motivation


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Trends in Quality and Financial Control

International Quality Standards

ISO 9000


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Control Systems for Turbulent Times

Open-Book Management = sharing financial

information and results with all employees in the

organization

Balanced scorecard = comprehensivemanagement control system that balances

traditional financial measures with measures of

customer service, internal business processes,

and the organizations capacity for learning andgrowth


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The Balanced Scorecard

Financial

Internal Business

processes

Learning and Growth

Customers

How well do we

serve our

customers?

Are we learning,

changing, and

improving?

Do internal activities

and processes add

value for customersand shareholders?

Do actions contribute

to improving financial

performance?

Mission

& Goals

Exhibit 19.10 Adapted

Managerial Control Session 8

Documents

Transcript of Managerial Control Session 8