Controlling

Controlling

• 1.
  The process ofmonitoring, 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.
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  Planning Goals Objectives Strategies Plans Organizing Structure Human resource Management Leading Motivation Leadership Communication Individual and Groupbehavior Controlling Standards Measurements Comparisons Actions
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  A three stepprocess of measuring the actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or inadequate standards. Goals and objectives Organizational Divisional Departmental Individual Measuring actual performan ce comparing actual performance against standards Taking managerial actions Step 1 Step 3 Step 2
• 4.
  There are threesteps of control process Measuring actual performance Comparing actual performance against standards Taking 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
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  Personal observatio n Statistical reports Oral reports Written reports Benefits • Get firsthandknowledge • 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
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  Whatever is measuredis 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?
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  The comparing stepdetermines 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
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  Managers can choosethree 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
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  The deviation canbe 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.
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  compare actual performance with standard Is standar dbeing attaine d yes Do nothing No Is varianc e accepta ble Do nothing yes no Is standar d accepta ble yes Identify cause of variation no Revise standard Correct performanc e Measure actual performance objective standard
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  Performance The end resultof 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.
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  A measure howappropriate organizational goals are and how well they are being met is called organizational effectiveness
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  TOPICS LEVELS OF CONTROL TYPEOF CONTROL CHARACTERISTICS OF ORGANATIONAL CONTROL SYSTEM CHARACTERISTICS OF DYSFUNCTIONAL CONTROL SYSTEM MANAGING FINANCIAL CONTROL RATIO ANALYSIS BALANCE SCORECARD INFORMATIONAL CONTROL
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  LEVELS OF CONTROL •Strategic control • Tactical control • Operational control
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   Assess andregulate 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
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  Strategic and tacticalcontrol  Time frame limited  Objective Controls relate to specific, functional area  Type of comparison Comparisons made within organization  Focus Implementation of strategy  Time frame Long  Objective Controls relate to organization as a whole  Type of comparison Comparisons made to other organization  Focus Determination of overall organizational strategy Tactical control Strategic control
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  Operational control  Assessand regulate successful implementation of day-to-day operational plans by monitoring focused internal activities.
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  TYPE OF CONTROL PreliminaryControl Concurrent Control Post Action Control
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  Type of control PRELIMINARYCONTROL  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.
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  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
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  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.
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  CHARACTERISTICS OF ORGANATIONALCONTROL 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:----
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  CHARACTERISTICS OF EFFECTIVEORGANIZATIONAL CONTROL SYSTEMS
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  AVAILABILATY OF INFORMATIONWHEN 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.
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  FOCUS ON CRITICALPOINTS 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.
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  ACCURACY Effective control systemsprovide factual information that's useful, reliable, valid, and consistent.
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  ECONOMIC FEASIBILITY Effective controlsystems 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.
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  ACCEPTANCE BY EMPLOYEES Employee involvement in the design of controls can increase acceptance.
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  INTEGRATION INTO ESTABLISHEDPROCESSES  Controls must function harmoniously within these processes or not.
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  CHARACTERISTICS OF DYSFUNCTIONAL CONTROLSYSTEM Over Control Under Control
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  OVERCONTROL Excessive regulation ofwork activities, restricting individual autonomy and causing ineffective organizational performance.
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  UNDER CONTROL  Unregulatedwork activities, granting employs too much individual autonomy and causing ineffective organizational planning
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  MANAGING FINANCIAL CONTROL Balancesheet Income statement Ratio analysis
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  FINANCIAL CONTROLS  Financialcontrol 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.
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  Balance sheet  Afinancial statement detailing an organization assets, liabilities, and shareholders equity at a specific point in time
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  Financial statement  Asummary of the an organization's revenue, expenses and profits over a particular period of time.
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  Ratio analysis  Amanagerial process used to compare organizational performance with historical, competitive or industry performance
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  RATIOS ANALYSIS There arefour type of ratios Liquidity ratios Leverage ratios Activity ratios Profitability ratios
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  1) Liquidity ratios Term liquidity refers to conversion of assets into cash.  Liquidity ratios are of two type  Currents ratios  Acid test
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  a) Current ratio Determine the short term debt paying ability & is computed below.  Current ratio = Current assets/Current liabilities
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  b) Acid TestRatio  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
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  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
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  a) Debt toassets  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
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  b) Time interestearned  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
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  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
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  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
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  b) Total assetturnover  It indicate the efficiency with which the firm uses its assets to generate sales.  Its ratios are,  Total assets turnover=sales/total assets
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  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
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  a) Profit marginon sales  Identified the profit that are being generated.  Its ratio are,  Profit margin on sales = net profit after tax/ total assets
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  b) Return oninvestment  Measures the efficiency of assets to generate profits  Return on investment = net profit after tax/ total assets
• 51.
  Balance scorecard  Aperformance 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.
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  Informational Control  Managersdeals with information controls in two ways:  How is information used in controlling?  Controlling information.
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  How is informationused 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.
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  Controlling information  Managersshould have to careful that its secret matters can't be move out of the organization.
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  Benchmarking of bestpractices  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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