The Controlling Process

Ms. R. Senathiraja, Senior Lecturer, Department of Management and Organization

Studies, Faculty of Management and Finance,

University of Colombo

Management in Organization

Input from theEnvironment

Human ResourcesFinancial resourcesPhysical Resources

Information Resources

Planning and DecisionMaking

LeadingControlling

Organizing

Goals AttainedEfficientlyEffectively

What is control?

• The regulation of organizational activities in such a way to facilitate goal attainment.

• Monitoring organizational progress towards goal attainment

Purpose of control

Adapting to environmental change

Control help the organization

Cope with organizational complexity Minimize costs

Limit the accumulation of error

Steps in control process

EstablishStandards

Measure Performance

Compare performance

Against standards

Determine need For corrective

action

MaintainThe status quo

Correct the deviation

Change standards

In your work , determine which areas and levels of control exists for you on your job?

Types of control

Based on Areas

Control of physical resourcesControl of human resourcesControl of InformationControl of financial Resources

Based on the organizational Levels

Operational ControlFinancial controlStructural controlStrategic control

Control of physical resources

• Inventory Management

• Quality Control

• Equipment Control

Inventory Management

• Managing the organization’s raw materials, work-in-process, finished goods and products in transit.

• JIT-Just In Time

It is an inventory system that has necessary materials arriving as soon as they are needed so that production process is not interrupted

Quality ControlFeatures and characteristics of a product or service that bear on its ability to satisfy stated or implied needs.

Dimensions of Quality• Performance: A product primary operating characteristics.• Features: Supplements to a product’s basic functioning

characteristics.• Reliability : A Probability of not malfunctioning during a specific

period• Conformance: The degree to which a product design and

operating characteristics meet established standards. • Durability: A measure of product life• Serviceability: The speed and easy of repair• Aesthetics: How a product look, feels, tastes, and smells• Perceived quality: As seen by a customer

Total Quality Management (TQM)

• A strategic commitment by top management to change its whole approach to business in order to make quality a guiding factor in everything it does.

• Dimensions of TQM Strategic commitment Employee involvement Technology Materials Methods

Control of human resources

• Selection and placement• Training and development• Performance appraisal• Compensation

Control of Information

• Sales and marketing forecasting

• Environmental analysis

• Public relations

• Production scheduling and economic forecasting

Types of Control -based on Levels-

• Operational Control

• Financial control

• Structural control

• Strategic control

Operations controlFocuses on the processes the organization uses to transform resources into products or services

Preliminary controlFocus is on inputs

to the organizational system

Screening ControlFocus is on

how inputs are being transformed into outputs

Post action ControlFocus is on outputs

from the organizationalsystem

Inputs Transformation Outputs

Financial control

• It is the control of finance as they flow into the organization, are held by the organization, and flow out of the organization.

• Financial control tools -Budgetary control (A plan expressed in

numerical terms)There are three types of budgets-A financial budget-Operating budget-Non-monetary budget

Financial Budget

• It indicates where the organization expects to get its cash for the coming period and how it plan to use it.

• Sources and uses of cash

Cash budget: All sources of cash income and cash expenditures in monthly, weekly, or daily

Capital expenditure budget: Cost of major assets such as new plant, machinery or land

Balanced sheet Budget: Forecast of the organization's assets and liabilities

Operating Budget• It indicates what quantities of products or

services the organization expects to produce and what resources will be used to create them.

• Planned operation in financial terms

Sales or revenue budget: Income the organization expect to receive from normal operation

Expense budget: Anticipated expenses for the organization duringThe coming period

Profit Budget: Anticipated differences between sales or revenue and expenses

Non Monetary Budget• Planed operation in non financial terms

such as units of output, hours of direct labour, machine hours .

Labour budget: Hours of direct labour available for use Space budget: Square feet or meters of space available for various functions

Production budget: Number of units to be produced during the coming time period.

Other tools of financial controlFinancial Statement: A profile of some aspects of an

organization’s financial circumstances.Balance sheet: List of assets and liabilities of an

organization at a specific point of time. Income statement: A summary of financial

performance over a period of time.Ratio analysis: The calculation of one or more

financial ratios to assess some aspects of the organization financial health.

Financial Audit: An independent appraisal of an organization’s accounting, financial, and operating systems. External audit conducted by external accountants, an internal audit conducted by employees of the organization.

-Structural Control-It addresses how well an organization’s structural

elements serve their intended purpose.Bureaucratic Control Dimensions Decentralized Control

Employee compliance Goal of control approach Employee commitment

Strict rules, formal controls, rigid hierarchy

Group norms, culture self control

Directed towards minimum levels of acceptable performance

Directed toward enhanced performance above and beyond the minimum

Tall structure, Top-down influence

Flat structure, shared influence

Directed at individual performance

Directed at group performance

Limited and formal Extended and informal

Degree of formality

Organization Design

Reward system

Participation

Performance Expectations

Strategic Control• It aimed at ensuring that the organization is

maintaining an effective alignment with its environment and moving toward achieving its strategic goals.

• It focuses on the extent to which implemented strategy achieve the organization’s strategic goal

Alter

organizational structureLeadershipAdopt new TechnologyModify human resourcesChange its information And operational control system

How does manager determine whether his or her firm needs improvement in control?

How to increase the effective control system

1) Integration with planning

2) Flexibility

3) Accuracy

4) Timeliness

5) Objectivity

Why do employee resist organizational control?

• Over control: try to control too many things

• Inappropriate focus: Focus too much on quantifiable variables.

• Rewards for inefficiency

• Too much accountability