PRINCIPLES OF MANAGEMENT

MBA (EVENING), B.320

CHAPTER NO: 18

THE SYSTEM AND PROCESS OF

CONTROLLING
BY
Dr. Muhammad Azizullah Khan
Dated: 20-01-2021
1
 OUTLINE OF CHAPTER NO: 18

 Controlling
 The Basic Control process and its various steps.
 Critical control points, standards, benchmarking.
 Application of feedback control system.
 Feed forward control system.
 Real time information.
 Requirements for effective control.
 Techniques of overall control.
 Problem management audits.
 Bureaucratic and clan control.
2
 CONTROLLING

 PLANNING sets forth objectives for manager

to pursue.
 ORGANIZING provides structure & resources
to attain them.
 DIRECTING provides leadership to motivate
employees.
 CONTROL provides:

 Knowledge of deviation from plans, and

correction for assurance of conforming to
plans.
3
 …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.
 Planning and controlling although separate
functions of management, are very closely related.
 They are two blades of scissors.
 The scissors can't work unless having two blades.
 Thus without objectives and plans control is not
possible, and without control, plans and objectives
can’t be fixed, for the desired standards.
4
THE BASIC CONTROL PROCESS

 Control techniques and systems are essentially

the same whether, controlling cash, office
procedure, product, or anything else.

 The basic control process involves the

following three steps:
 Establishing Standards.

 Measuring Performance against these

standards.
 Correcting variations from the standards and

plans.
5
…THE BASIC CONTROL PROCESS
ESTABLISHING STANDARDS:

The first step in control process is to establish

plans.
Since plans vary in detail & complexity
therefore, special standards are established.
Standards are desired levels of performance.
Standards constitute foundation of control
process.
With standards managers receive signals about
how things are going, and thus they do not need
to watch every step in the execution of plans.
6
…THE BASIC CONTROL PROCESS
ESTABLISHING STANDARDS:

The commonly used standards are:

 Quantity. Like production of “100-

115” units/day.
 Quality. Like rejection no more than
“2 or 2-3%”.
 Time. Like completion within “10-12”
days
 Cost. It should not exceed for Rs. “4-
4.75/unit”. 7
…THE BASIC CONTROL PROCESS
MEASURING PERFORMANCE:

Standards make measurement easy.

The basic aim is to check actual input, and
quantity of output.
Performance measurement should be done on
forward looking basis, so that:

 deviations from standards are detected in

advance.
 the occurrences of such deviations are
avoided.
8
…THE BASIC CONTROL PROCESS
CORRECTION OF DEVIATION:

Correction of deviation is a point at which control can be

seen as a part of the whole management system, and
related to the managerial functions.
Managers may correct deviation by:
 Redrawing plans by modifying goals.
 Correcting deviations by exercising organizing
function through reassignment or clarification of
duties.
 Correcting by additional staffing better selection
and training of subordinates or firing them.
 Through better leading, fuller explanation of job,
and any other effective leadership techniques.
9
 CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING
 Standards are yardsticks against which actual
or expected performance is measured.
 In simple operations a manager may control
through personal observation of work being
done.
 In vast & dispersed operations however, it is
not possible due to complexity of matter.
 Manager must therefore, choose points for
special attention to ensure that operations go
as planned.

10
 …CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING
PRINCIPLES OF CRITICAL POINT CONTROL:

The point selected for control should be critical.

With such standards managers can control a
larger group of subordinates.
The principles of critical point control states
that effective control requires attention to factors,
critical to evaluating performance against plans.

11
 …CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING
TYPES OF CRITICAL POINT STANDARD:
Standards tend to be of the following types:
 Physical standards.
 Cost standards.
 Capital standards.
 Revenue standards.
 Program standards.
 Intangible standards.
 Goals as standards.
 Strategic plans as control points for
strategic control.
 Benchmarking. 12
 …CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING
TYPES OF CRITICAL POINT STANDARD:

Physical Standards. Non monetary

measurements, which are common at the
operating level, where materials are used, labor
employed, services rendered, and goods
produced.

 They reflect quantities such as: labor hours,

units produced, feet of wire per ton of copper,
complaints handled, etc.
13
 …CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING

TYPES OF CRITICAL POINT STANDARD:

Cost Standards. Monetary measurements, which

are very common at the operating level. They
attach monetary values to certain operations, like:
 Direct / indirect cost per unit produced.
 Labor cost per unit or per hour.
 Material cost per unit.
 Machine-hour cost.
 Unit of sale.
14
 …CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING

TYPES OF CRITICAL POINT STANDARD:

Capital Standards. Capital standards are based

on the capital invested rather than the operating
costs. Therefore, they are concerned with the
balance sheet rather than the income statement.
The most widely used standard for new
investment, as well as for overall control is, return
on investment (ROI).

15
 …CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING

TYPES OF CRITICAL POINT STANDARD:

Revenue Standards. Revenue standards arise

from attaching monetary values to sales. They
include standards like average sale per customer,
sales per capita, etc.
Program Standards. This is like variable budget
program, to follow development of new products
or a program to impress quality of a sales force. It
is based on appraising program performance,
timings and other factors.
16
 …CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING
TYPES OF CRITICAL POINT STANDARD:

Intangible Standards. Not expressed in physical

or monetary measurements. What standards a
manager use to determine the competence of
personnel Director, competence of Divisional
purchase agent, loyalty of supervisor to
company’s objectives, and alertness of office
staff.
Goals as Standards. To use goals as
performance standards and for the purpose
assign qualitative or quantitative goals at every
level of management.
17
 …CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING
TYPES OF CRITICAL POINT STANDARD:

Strategic plans as control points for strategic

control. Strategic control requires systematic
monitoring at strategic control points and
modifying the organization’s strategy based on
this evaluation. Since planning and controlling
are closely related therefore, strategic plans
require strategic control. Through the use of
strategic control, one gains insights not only
about organizational performance but also about
the ever-changing environment by monitoring it.

18
 …CRITICAL CONTROL POINTS,
STANDARDS, AND BENCHMARKING
TYPES OF CRITICAL POINT STANDARD:

Benchmarking. An approach for setting

goals and productivity measures based on
best industry practices.
For example company A fills customer
order in 5 days, whereas company B takes
6 days in filling the orders, so the criterion
for standard must be 4 days, which
become benchmark
19
 CONTROL AS A FEEDBACK SYSTEM
 Managerial control is the same control process found in all
biological and social systems. Many systems through information
feedback shows deviations from standards and initiate changes.
A simple feedback system works as follow:

Comparison
Actual Measurement of actual
Desired
performance of actual Performance
performance Against
performance
standards

Implementation Program of Analysis of

Identification
of correction corrective causes of of deviation
action deviation 20
REAL TIME INFORMATION AND CONTROL

 Real time information means to know that

what is happening while, it is happening?
 It is technically possible now with the
invention of advance computer technology, to
get real time information on many operations.
 Many Superstores and other business centers
transmit data on every sale to a central data
storage facility, to serve as source for
collecting data on trends, timings etc.
 The sooner the managers know the activities
are not proceeding as per plans, the faster
corrective actions they can take. 21
 FEED FORWARD CONTROL
 For effective control managers need a system
that will tell them in time to take corrective
measures, that certain problems will occur if
they do not do something.

 Feed forward system monitors inputs into a

process, to ascertain if the inputs are as
planned, and if they are not, the inputs or the
process is changed, in order to achieve the
desired results.

22
 …FEED FORWARD CONTROL: Desired
FEED FORWARD VS FEEDBACK Values of
Outputs
Many system control themselves through (Standards)
information feedback, which shows deviations from
standards and initiate changes.

Inputs Process Outputs

Feed Simple
Forward feedback

With feed forward control, the System monitors inputs into a process
to ascertain if they are as planned, and if not, the inputs or process
are changed to obtain desired results.
 OTHER CONTROLS
Control of overall performance.
Profit & loss control.
Control through return on
investment (ROI).
Management audit and accounting
firms.
Bureaucratic and clan control.

24
 REQUIREMENTS FOR EFFECTIVE
CONTROL
 Tailoring controls to plans and positions.
 Tailoring controls to individual managers.
 Designing control to point out exceptions at
critical points.
 Seeking objectivity of controls.
 Ensuring flexibility of controls.
 Fitting the control system to the organization
culture.
 Achieving economy of controls.
 Establishing controls that lead to corrective
action. 25
THANK YOU
20-01-2021
26