Unit 5 Control

Unit 5
Controlling
CONTROLLING
 The process of measuring performance and taking

action to ensure desired results
 Has a positive and necessary role in the management
process
 Ensures that the right things happen, in the right way,
at the right time
 Benefit: Organizational learning (Example: After-
action review)
THE ROLE OF CONTROLLING IN THE
MANAGEMENT PROCESS
FEEDFORWARD CONTROLS
 Employed before a work activity begins

 Ensures that:
 Objectives are clear
 Proper directions are established
 Right resources are available
 Goal is to solve problems before they occur

CONCURRENT CONTROLS
 Focus on what happens during work process

 Monitor ongoing operations to make sure they are
being done according to plan
 Goal is to solve problems as they occur
FEEDBACK CONTROLS
 Take place after work is completed

 Focus on quality of end results
 Goal is to solve problems after they occur and prevent future
ones
FIGURE 9.2 FEEDFORWARD, CONCURRENT,
AND FEEDBACK CONTROLS.
INTERNAL AND EXTERNAL CONTROL
 Internal control
 Allows motivated individuals and groups to
exercise self-discipline in fulfilling job expectations
 External control
 Occurs through personal supervision and the use of
formal administrative systems
THE CONTROL PROCESS
THE CONTROL PROCESS
 Step 1 — establishing objectives and standards

 Output standards
 Measure performance results in terms of quantity,
quality, cost, or time
 Input standards
 Measure effort in terms of amount of work
expended in task performance
THE CONTROL PROCESS
 Step 2 — measuring actual performance

 Goal is accurate measurement of actual performance results
and/or performance efforts
 Must identify significant differences between actual results
and original plan
 Effective control requires measurement
THE CONTROL PROCESS
 Step 3 — comparing results with objectives and

standards
 Need for action = Desired Performance –
Actual Performance
 Comparison methods:
 Historical comparison
 Relative comparison
 Engineering comparison
THE CONTROL PROCESS
 Step 4 — taking corrective action

 Taking action when a discrepancy exists between desired and
actual performance
 Management by exception
 Giving attention to situations showing the greatest

need for action
 Types of exceptions
 Problem situation
 Opportunity situation
CONTROL TOOLS AND TECHNIQUES
 Project Management
 Overall planning, supervision, and control of projects
 Projects – unique one-time events that occur within
a defined time period
 Gantt chart – graphic display of scheduled tasks
required to complete a project

 CPM/PERT – combination of the critical path
method and program evaluation and review

technique
GANTT CHART
CPM/PERT CHART
 Inventory control
 Ensures that inventory is only big enough to meet
immediate needs
 Economic order quantity
 Places new orders when inventory levels fall to predetermined
points
 Just-in-time scheduling
 Routes materials to workstations just in time for use
 Breakeven analysis
 Breakeven point
 Occurs where revenues just equal costs
 Breakeven analysis
 Performs what-if calculations under different revenue and
cost conditions
A BALANCE SHEET AND INCOME
STATEMENT
 Basic Financial Ratios

 Liquidity
 The ability to generate cash to pay bills
 Leverage
 The ability to earn more in returns than the cost of debt
 Asset management
 The ability to use resources efficiently and operate at
minimum cost
 Profitability
 The ability to earn revenues greater than costs
THE BALANCED SCORECARD
WHAT IS IT?
Definition:
The Balanced Scorecard is a management tool that

provides stakeholders with a comprehensive measure of
how the organization is progressing towards the
achievement of its strategic goals.
BALANCING PERSPECTIVES
 Too often bad strategic decisions are made in an effort to
increase the “bottom line” at the expense of other
institutional goals. The BSC suggests that financial
performance should not be viewed as the focus, but as
the natural outcome of balancing other important goals.
FOUR STRATEGIC ISSUES
 Customer
 Internal business process
 Financial
 Innovation and learning

CUSTOMER PERSPECTIVE
responsiveness,
 “How do
customers see timeliness
product/service
us?”
quality and cost
meet client needs
INTERNAL BUSINESS PROCESS
PERSPECTIVE
 “At what must accurate and timely

we excel?” delivery of services
effective systems
and processes
environmental
sustainability
FINANCIAL PERSPECTIVE
 “How do we look to budgets

our key revenue
stakeholders?” capital
expenditures
debt to asset ratio
INNOVATION AND LEARNING
PERSPECTIVE
employee skills and

 “Can we continue
to improve and training
use of technology
create value?”
encouragement of
innovation
continuous
improvement
ULTIMATE BALANCING ACT
The ultimate balancing act in any organization is
the one whereby the needs and requirements of
multiple stakeholders are reconciled and
integrated.
Financial Perspective
Goals Measures
Customer Perspective Internal Business

Goals Measures Perspective
Vision
Goals Measures
Innovation and
Learning Perspective
Goals Measures
BENCHMARKING
 Benchmarking is an analysis and planning tool, which
allows an individual company to be compared with the
best of its competitors.
 Comparisons can be made with the best practices
demonstrated by companies in a different industry.
 It is therefore a process which compares the methods,
operations and results of business functions with one or
more other enterprises in order to discover opportunities
for rationalisation or for improving quality and
performance.

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Unit 5

 The process of measuring performance and taking

 Employed before a work activity begins

 Right resources are available

 Goal is to solve problems before they occur

 Focus on what happens during work process

 Take place after work is completed

 Step 1 — establishing objectives and standards

 Step 2 — measuring actual performance

 Step 3 — comparing results with objectives and

 Step 4 — taking corrective action

 Giving attention to situations showing the greatest

required to complete a project

method and program evaluation and review

 Basic Financial Ratios

The Balanced Scorecard is a management tool that

 Innovation and learning

 “At what must accurate and timely

 “How do we look to budgets

employee skills and

Customer Perspective Internal Business

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