CONTROLLING

Organization
and
Management
Controlling
 a management function that
involves ensuring that the work
performance of the organization’s
members are aligned with the
organization’s values and standards
through monitoring, comparing,
and correcting their actions.
Importance of
Management Control
 that the firm’s operating cash flow is
sufficient, efficient, and, if possible,
profitable when invested
 that the decision to seek funds
should be appropriate, so as not to incur
expenses as well since borrowing
would be subjected to payment of
interest
 that there is a continuous monitoring
of the organization’s activities, followed
by corrective actions based on
previously planned programs of actions.
 that tasks are completed with less
errors by comparing these with
previously set standards or with
competitor’s standards or standards
prevailing in their particular industry
setting.
Control Process
1. Establishing standards
2. Measuring and Reporting actual
performance and Comparing it with
standards
3. Taking action
1. Establishing Standards
 setting criteria for performance
 Managers must be able to identify
priority activities that have to be
controlled, followed by determining
how these activities must be
properly sequenced.
2. Measuring and Reporting Actual
Performance and Comparing it with
standards
 Analyses of data/ information gathered
measure actual performance and
comparing it with set standards serves
as a means for detecting deviations
from what should be, hence, such
deviations must be revealed as early as
possible in order to correct them.
3. Taking Actions
 Involves the correction of deviations
from set standards
 Managers may rectify deviations by
modifying their plans and goals, by
improving training of employees,
by firing inefficient subordinates, or
by practicing more effective
leadership techniques
The Link between
Planning and Controlling
 On a periodic basis, it is useful to
create a pro forma financial
statement which serve as a forecast
of the balance sheet, income
statement, and cash flow statement
in order to make projections.
Short Term Planning Reports
 Product distribution by territory and
market, product line mix analysis,
warehouse handling, salesperson
performance, and logistics
Long Range Planning Reports
 Five to ten year projections for the
company and its major business
segments
Specialized Planning and
Control Reports
 Effects of cost-reduction programs,
Production issues in cost and quality
terms, contingency and downsizing
plans, appraisal of risk factors in
long-term contracts
Balance Sheet
 Is a financial statement which is
defined as “snapshot” of any
entity’s financial condition
 Also called as Statement of
Financial Position or Statement of
Financial Condition
 Is a summary of the financial
balances
Balance Sheet
A = L + C

A = Asset
L = Liabilities
C = Capital or Owner’s
Equity
Income Statement
 Also known as profit and loss
statement, revenue and expenses
statement, statement of financial
performance, or earnings statement
Cash Flow Statement
 Summarizes the inflow and outflow
of cash during a given period.
Organizational Performance
Control
1. Organizational Productivity
2. Organizational Effectiveness
3. Rankings in Industry
Other Performance Control in
Organizations
1. Computer-based control systems
2. Bureaucratic Control
3. Clan Control
Control Methods and Systems

1. Quantitative Methods
2. Non-quantitative Methods
Quantitative Methods
 Make use of data and different
quantitative tools for monitoring
and controlling production output

1. Chart
2. Budgets
3. Audits
Chart
 used as control tools normally
contrast time and performance.
Budgets
 An organization’s budget is an
expression in financial terms of a
plan for meeting the organization’s
goals for a specific period.

 It is an instrument of planning,
managing, and control
Budgets
 An organization’s budget is an
expression in financial terms of a
plan for meeting the organization’s
goals for a specific period.

 It is an instrument of planning,
managing, and control
Audits
 Internal auditing involves the
independent review and evaluation
of the organization’s non-tactical
operations such as accounting and
finances.
 It measures and evaluates the
effectiveness of management
controls.
Audits
 Audit service provides an
independent audit of programs,
activities, systems and procedure.
 It also provides an independent
audit of other operations which
involve the utilization of funds and
resources as well as the fulfilment
of management goals.
Non-Quantitative Methods
 Refer to the overall control of
performance instead of only those
specific organizational processes.
 These method use tools such as
Inspections, Reports, Direct
Supervision, on-the-spot checking,
performance evaluation or
counselling
Other control methods
1. Feedforward control
 Prevents problems because
managerial action is taken before
the actual problem occurs.
2. Concurrent Control
 Takes place while work activity is
happening.
Other control methods
3. Feedback Control
 Control that takes place after the
occurrence of the activity
4. Employee Discipline
 Concerns regarding this include
workplace privacy, employee theft,
and workplace violence among
others.
Other control methods
5. Project Management
 Ensures that the task of getting a
project’s activities done on time,
within the budget, and according to
specifications, is successfully
carried out.
Application of
Management Control in
Accounting and
Marketing Concepts
and Techniques
Management Control in
Accounting and Finance
 Control that make use of the balance
sheet, income statement, and cash
flow statement to analyze and
examine the company’s financial
soundness and viability, as well as
financial ratios to determine the
company’s stability.
Management Control in
Marketing
 Control that make use of projected
sales or forecasts, statistical models,
econometric modeling, surveys,
historical demand data, and actual
consumption of the product.
Liquidity Ratio
 Tests the organization’s ability to
meet short term obligations

Current Ratio = Current Assets

Current Liabilities
Leverage Ratio
 Determines if the organization is
technically insolvent, meaning that
the organization’s financing is
mainly coming from borrowed
money or from the owner’s
investment

Debt Ratio = Total Debt

Total Assets
Profitability Ratio
 Determines the profits that are begin
generated

Profitability = Net Profit after Taxes

Ratio Total Sales

Return on = Net Profit after Taxes

Investment Total Assets
Strategic Control
 A systematic monitoring at control
points that leads to change in the
organization’s strategies based on
the assessments done on the said
strategic plans
Benchmarking
 Is a approach or process of
measuring a company’s own
services and practices against those
of recognized leaders in the industry
in order to identify areas of
improvement.
Three types of Benchmarking
1. Strategic Benchmarking
 Compares various strategies and
identifies the key strategic elements
of success.

2. Operational Benchmarking
 Compares relative costs or
possibilities for product
differentiation
Three types of Benchmarking
3. Management Benchmarking
 Focuses on support functions such
as market planning and information
systems, logistics, human resource
management