What is controlling??
Why is control important??
Planning and controlling: Parallel Functions…
Tools for controlling organizational performance…
Contemporary issues in control!!!
A four-step process including establishment of objectives and
standards, measuring actual performance, comparing actual
performance against a standard, and taking managerial
action to correct deviations or inadequate standards.
1.Establishment of standards:
3 questions arises:
What are STANDARDS????
TYPES OF STANDARDS:
i) Measurable/ Tangible standards:
Eg. In the form of cost, output, expenditure, time, profit etc.
ii) Non Measurable/ Intangible standards:
Eg. Performance of a manager, deviation of workers, their attitude
towards a concern
2. Measuring actual performance:
2 questions arises:
⇒ How we measure??
⇒ What we measure??
i) HOW WE MEASURE ??
It can be done through various sources:
⇒ statistical reports,
⇒ oral reports,
⇒ written reports etc..
ii) WHAT WE MEASURE??
What people in the organization will attempt to excel at?
⇒ Tangible Standards: measurement is easy
⇒ Intangible Standards: measurement through subjective measures
Measurements must be accurate enough to spot deviations or variances
between what really occurs and what is most desired.
Without measurement, effective control is not possible.
3. Comparing actual performance
The comparison of actual performance with desired
performance establishes the need for action.
3 things need to be find out:
⇒ Range of variation
⇒ Extent of deviation
⇒ Cause of deviation
Range of variation :
Extent of Deviation :
iii) Cause of Deviation :
4. Taking managerial actions:
3 Courses of Action:
⇒ Doing Nothing
⇒ Correcting actual (current) performance
⇒ Revising the standard
i) Doing nothing
Only if deviation is judged to be insignificant.
ii) Correcting actual (current) performance
Immediate corrective action
Basic corrective action
iii) Revising the standard
Examining the standard to ascertain whether or not the standard is
realistic, fair, and achievable:
TOOLS FOR CONTROLLING
TYPES OF CONTROL:
TYPES OF CONTROL:
•Break even analysis
•Report and personal
•PERT & CPM methods
•Market value added(MVA)
A budget is a financially expressed statement of anticipated
results during a designated time period(usually 1 year).
It is a system of controlling costs which includes
the preparation of budgets, coordinating the
departmentsand establishing responsibility, comparing the
actual performance with budgeted and acting upon resultsto
achieve maximum profitability.
FINANCIAL RATIO ANALYSIS
It examines the relationship between specific figures on the
financial statements and helps explain the significance of those
LIQUIDITY RATIOS:It measure an organization's ability to
PROFITABILITY RATIOS:It measures an organization‘s
ability to generate profits.
DEBT RATIOS: It measure an organization's ability to pay its
ACTIVITY RATIOS: It measure an organization's efficiency in
operations and use of assets
PERT: PERT stands for Program Evaluation Review Technique. A PERT
chart is a project management tool used to schedule, organize, and
coordinate tasks within a project. A PERT chart presents a graphic
illustration of a project as a network diagram consisting of
numbered nodes (either circles or rectangles) representing events, or
milestones in the project linked by labeled vectors (directional lines)
representing tasks in the project. The direction of the arrows on the lines
indicates the sequence of tasks.
PERT identifies and controls the many separate events in complex projects.
CPM: The Critical Path Method (CPM) is one of several related
techniques for doing project planning. CPM is for projects that are
made up of a number of individual "activities." If some of the activities
require other activities to finish before they can start, then the project
becomes a complex web of activities.CPM can help you figure out:
i) how long your complex project will take to complete
ii) which activities are "critical," meaning that they have to be done on
time or else the whole project will take longer
HRA: Human Resource Accounting may be defined as the
measurement and reporting of the cost and value of people as
organizational resources. It involves accounting for investment in
people and their replacement costs, as well as accounting for the
economic values of people to an organization.
Economic Value Added (EVA): How much value is created by what a
company does with its assets, less any capital investments in those
assets: the rate of return earned over and above the cost of capital.
Market Value Added (MVA): The value that the stock market places
on a firm’s past and expected capital investment projects
Balanced Scorecard: A measurement tool that uses goals set by
managers in four areas to measure a company’s performance:
Financial, customer, internal processes, and
Benchmarking: The search for the best practices among competitors or
non competitors that lead to their superior performance.
Information Controls: Management Information Systems (MIS) : A
system used to provide management with needed information on a
Connection between Employees and Customers
Importance of controlling these interactions:
Ques > How to control this interaction??
Answer > Service profit chain
The service sequence from employees to customers to profit:
service capability affects service value which impacts on
customer satisfaction that, in turn, leads to customer loyalty in
the form of repeat business (profit).
1.Workplace privacy versus workplace
Not to read Personal or Confidential e-mails
Not to tap telephone
Not to monitor an employee in dressing room
Employees are hired to work (productivity)
To avoid risk of hostile workplace environment
To maintain secrecy of company
intellectual property protection
2. Employee Theft
The unauthorized taking of company property by employees for their
3. Workplace violence
Anger, rage, and violence in the workplace is affecting employee
Factors contributing to workplace violence:
4. Corporate Governance
The system used to govern a corporation so that the interests of
the corporate owners are protected.