Controlling Module 5- MBP

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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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