Controlling

by Brett Gerard Sabug

What is the definition of Controlling???

It is the monitoring the progress of the organization as it works toward its goal to ensure that it is effectively and efficiently achieving these goals.

 A process of monitoring performance and taking action to ensure desired results. It sees to it that the right things happen, in the right ways, and at the right time.

Basic Characteristics of Control

Control- is a combination of knowledge with power-the knowledge that ones plans and directions are not being followed, and the power to compel compliance with orders and instructions. For effective control, the executive must posses:

Authority and knowledge Exercise guidance Direction Constraint and restraint He must know exactly: what work is to be done, what sources are available, what the situation is, what it ought to be in order to undertake necessary and appropriate actions.

Types of Control

Based on the book Constructive Control by William Newman, there are four basic types of control: 1.Pre-action controls. These require the proper allocation or budgeting productive resources prior to the activity. When the activity begins, all the required resources are made available.

2.Sheering Control. These are intended to detect deviations from the established standards or objectives. Such controls allow corrective actions before the activity is completed. 3.Screening controls. These provide the conditions to be met before operations continue.

4.Post-action controls. These measure the results of a completed activity. Causes deviations are analyzed and the findings are used in similar future activities. Thus, deviations may not occur anymore in such activities.

The Control Process

The definition of Mockler indicates the three basic steps in the control process:

1.Establish standards of performance. Standards or objectives must be clear, specific, measurable, and acceptable by workers or employees involved. For example in planning sales targets for college textbooks, both the sale manager and the sales representatives should plan together the standards of performance.

2.Measure the performance. If the results are equal to the standards, there are no problems. This means that the sales targets have been achieved by all sales representatives. If the performance is below standard, then the sale manager has to find out the possible deviations, and then take corrective action.

3.Take corrective action. This is to be done to stop deviations. However, the action to be taken depends on three factors: the standards, the accuracy in measuring deviation and the analysis made by the person or device investigating the cause or causes for deviations. Standards can be low or high. Measurements can be defective or inaccurate. Managers or supervisors could use poor judgment in determining the corrective actions to be done.

Types of Control Methods

1.Pre-action controls (sometimes called pre controls) ensure that before an action is undertaken the necessary human, material, and financial resources have been budgeted. When the time for action occurs, budgets make sure that requisite resources will be available in the types, quality, quantities, and locations needed.

2.Steering controls. Steering controls, or feed forward, is designed to detect deviations from some standards or goal to allow corrections to be made before a particular sequence of action is complete. The term steering controls is derived from the driving of an automobile.

3.Yes/No Screening Controls provides a screening process in which a specific aspect of a procedure must be approved or specific conditions met before operations may continue. 4.Post-Action Controls measures the result of a completed action. It is used as a basis for rewarding or encouraging.

5.Feedback System provides information about past performance to permit corrective action. 6.Management Information System design to provide management with accurate and timely information needed for decision making.

Characteristics of Effective System Control

Accurate Timely Objective and Comprehensive Focused on Strategic Control Points Economically Realistic Organizational Realistic Coordinate with Organizations Work Flow Flexible Prescriptive and Operational Accepted by the Organization Members

FINANCIAL CONTROLS
Financial Statements indicate the flow of goods and services to, within, and from the organization. Such flow is analyzed in terms of money. - prepared by accountants and the accounting records of the organization provide control on its profitability, liquidity, and general financial conditions.

Financial Statements are composed of: Balance Sheet these show the assets, liabilities and net worth of the organization. Income Statement records the incomes and expenses of the organization. Profit or loss is obtained by comparing incomes and expenses.

Ratio Analysis relationship between two numbers. - Ratios provide information needed to measure progress towards objectives, and to evaluate the financial performance or condition of the organization. - Ratios are compared in two ways: past performances of the organization; and performances of other similar organizations or with the same industry as a whole.

The ratios most commonly used are:

Profitability ratio Liquidity ratio Activity ratio Leverage ratio

BREAK-EVEN ANALYSIS
-shows relationship between total revenue (price x quantity) and total cost (fixed cost + variable cost). Such relationships are illustrated by means of a graph. Managers can precisely determine the point where TR = TC. This is a break-even point which means incomes from sales are equal to fixed and variable costs.

Budgets primary financial controls for every organization. - a statement of sources of funds and the corresponding planned activities to be funded in a given specific period. - serves both as a plan and a control. - Through the concept of responsibility centers, top management can control specific activities of the organization. Among these financial responsibility centers are:

a. Revenue centers organizational units responsible for maximizing sales revenue. b. Cost center labor and materials needed for each unit of output are specified. The responsibility of the production manager is to minimize the difference between budgeted and actual assets. c. Profit centers profit is the difference between revenues and expenditures. The manager in charge is responsible for maximizing profit.

d. Expense centers these apply to most administrative departments. There is no practical way to determine the responsibility between inputs and outputs. e. Investments centers these are organizational units that measure the monetary value of inputs, and compare outputs with assests used in producing.

Audits theres a need to check the accuracy of the data being used in the control system. Audits are formal investigations which are intended to verify if records, reports, statements, and other relevant information are correct.

PRODUCTION CONTROLS

1.Gantt Chart developed by Henry Gantt for planning and controlling time schedule of projects.
2.Network Techniques apply to projects whose activities are interrelated. Such techniques for scheduling and controlling productions use events represented by circles, and activities represented by arrows.

BREAK-EVEN ANALYSIS

BREAK-EVEN ANALYSIS

Two Major Network Techniques Program Evaluation Review Technique (PERT) uses estimates of the time required to complete tasks. It schedules and controls projects whose task completion times cannot be fairly predicted with precision. Critical Path Method (CPM) used to schedule and control projects whose task completion times can be fairly predicted with precision.

Quality Control defects or deviations are corrected early in each stage of production. is no longer a mere inspection work but an integral part of company strategy. usually the methods used by most organizations for quality control are:

a. Inspection products are checked to determine conformity to require standards. - done by individuals, machines, or a combination of both. b. Testing material are tested on the basis of their strength, durability and suitability. c. Sampling Techniques only a percentage of the number of products are checked. The samples taken (2 to 5 percent) represent possible defects.

GENERAL MANAGEMENT CONTROL

Management Techniques System (MIS) a computer-based information system Useful for effective planning, decisionmaking, and control. According to William Sihler, it is important that MIS as a control instrument should: a.Meet organizational objectives; b.Provide information flow; c. Deliver the right quality and quantity of information; and d.Supply timely information

Inventory control system this ensures the orderly flow of supplies, raw materials, or finished products in an office, factory, or shop. Demand for products should match supply of products.

THE END!!!