Controlling the Organization

Principles of Management MGT101

Prepared by:

Prof. Ali Fallahchay

Controlling

• The measurement and correction of

performance in order to make sure that

enterprise objectives and the plans devised to

attain them are being accomplished.

The Basic Control Process

Control techniques and systems are essentially the

same for controlling cash, office procedures,

morale, product quality, and anything else. The

basic control process involves three steps:

1. Establishing standards,

2. Measuring performance against these

standards, and

3. Correcting variation from standards and plans.

• Standard – Criteria of performance.

Principles of Critical Point Control

• Effective control requires attention to factors

critical to evaluating performance against plans.

Different types of critical points standards:

1. Physical standards 5. Program standards

2. Cost standards 6. Intangible standards

3. Capital standards 7. Goals as standards

4. Revenue standards 8.Strategic plans as control points for strategic control

Benchmarking

• Benchmarking is an approach for setting goals

and productivity measures based on best

industry practices.

There are three types of benchmarking:

Strategic benchmarking

Operational benchmarking

Management benchmarking

Control as a Feedback System

• Many system control themselves through

information feedback, which shows deviations

from standards and initiates changes.

• System use some of their energy to feed back

information that compares performance with a

standard and initiates corrective action.

Management control

• Management control is usually perceived as a

feedback system similar to the common

household thermostat.

Desired Performance

Actual Performance

Measurement of actual

performanceComparison of

actual performance

against standards

Identification of deviations

Analysis of causes of deviations

Program of corrective

action

Implementation of corrections

Real-time information and Control – Information

about what is happening while it is happening.

Feed forward, or Preventive, Control –

Managers need for effective control a system that

will tell them potential problems, giving them time

to take corrective action before those problems

occur.

Feed-forward versus Feedback Systems

• Feedback systems measure outputs of a process

and feed into the system or the inputs of the system

corrective actions to obtain desired outputs.

• Feed-forward systems monitor inputs into a process

to ascertain if the inputs are as planned; if they are

not, the inputs or the process is changed in order to

obtain the desired result.

Requirements for Feed-Forward Control

1. Make a thorough and careful analysis of theplanning and control system, and identify themore important input variables.

2. Develop a model of the system.

3. Take care to keep the model up to date.

4. Collect data on input variables regularly, andput them into the system.

5. Regularly assess variation of actual input datafrom planned-for inputs, and evaluate theimpact on the expected end results.

6. Take action.

• Overall planning must apply to enterprise or

major division goals.

• Decentralization of authority-especially in

product of territorial divisions- creates semi-

independent units.

• Overall control permits the measurements of an

integrated area managers total effort.

Reasons for Control of Overall

Performance

Profit and Loss Control

• Income statement is useful for determining the

immediate revenue or cost factors that have

accounted for success or failure.

• The profit and Loss statement shows all revenues

and expenses for a given time, so it is a true

summary of the results of business operations.

Control through Return on Investments

ROI Control measures both the absolute and the

relative success of a company or company unit by

the ratio of earnings to investment of capital.

Bureaucratic and Clan Control

Bureaucratic Control is characterized by the wide

used of rules, regulations, policies, procedures and

formal authority.

Rules and standard operating procedures (SOPs) tell

the worker what to do.

Standardized actions so outcomes are predictable.

Still need output control to correct mistakes.

Clan Control is based on norms, shared vales,

expected behavior and other cultural variables.

Requirements for Effective Control

• Tailoring Controls to plans and positions

• Tailoring control to individual managers

• Designing controls to point up expectations at critical

points

• Seeking objectivity of controls

• Ensuring flexibility of controls

• Fitting the control system to the organization culture

• Achieving economy of control

• Establishing controls that lead to corrective actions

Operation Management

Production and Operations Management:

Manufacturing and Service

Production Management – deals with activities

necessary to manufacture products.

Operation Management – deals with activities

necessary to produce and deliver a service as well

as a physical product.

The operations Management System

• Inputs

- needs of customers

- Information

- Technology

- Management and labor

- Relatively permanent physical factors (land,

plant, site, buildings, machines, warehouses)

- Variable physical factors (materials, supplies)

The operations Management System

• Transformation process

- Planning

- Operating

- Controlling the system

• Outputs

- Products

- Services

- information

Planning Operations

• Objectives, premises, and strategies of an enterprise

determine the search for and the selection of a

product or service as its output.

• The design of an operations system requires

decisions concerning the location of facilities, the

process to be used, the quantity to be produced, and

the quality of the product.

Product and production design

Steps of Product designs and its productions:

• Create product ideas

• Select product on the basis of various

considerations, including data from market and

economic analysis, and make a general feasibility

study.

• Prepare a preliminary design by evaluating various

alternatives, taking into consideration reliability

quality, and maintenance requirements.

• Reach a final decision by developing, testing, and

simulating the process to see if they work.

• Decide whether the enterprises current facilities are

adequate or if new or modified facilities are required.

• Select the process for producing the product and

consider the technology and the methods available.

• After the product is designed, prepare the layout of

the facilities to be used, plan the system of

production, and schedule the various tasks that

must be done.

System Design

Basic kinds of production layouts:

• Production or assembly of a product

• Lay out the production system according to the

process employed

• Fixed position layout – the product stays in one

place for assembly.

• Nature of the project

• Facilitate the sale of the product

• Facilitates storage or movement of products

Requirements for Operating the system

• Setting-up an organization structure

• Staffing the positions

• Training people

Management Information System

Controlling Operations with Emphasis on Information System

• Systems are available for quickly and systematically

collecting data bearing on total operation, for keeping

these data readily available, and for reporting without

delay the status of any of a large number of projects at

any instant.

• The system use the technology of fast computation

clearly promise to hasten the day when planning of all

areas of production can be more precise and controlling

more effective.