System & process 0 f contrilling (chpt 18)

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WACE PRINCIPLES OF MANAGEMENT LECTURES 2010

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System & process 0 f contrilling (chpt 18)

  1. 1. SEWP ZC 241: PRINCIPLES OF MANAGEMENT SYSTEM & PROCESS OF CONTROLLING
  2. 2. After studying this chapter, you should understand: <ul><li>1. The steps in the basic control process. </li></ul><ul><li>2. The importance of critical control points, standards, and benchmarking. </li></ul><ul><li>3. Control as a feedback system. </li></ul><ul><li>4. That real-time information will not solve all the problems of management control. </li></ul><ul><li>5.   Th at feedforward control systems can make management control more effective. </li></ul><ul><li>6. The requirements for effective controls </li></ul>
  3. 3. What is Controlling? <ul><li>Controlling is the measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are being accomplished </li></ul><ul><li>Planning and controlling are closely related </li></ul>
  4. 4. The Basic Control Process <ul><li>The basic control process involves three steps: </li></ul><ul><ul><li>establishing standards, </li></ul></ul><ul><ul><li>measuring performance against these standards, and </li></ul></ul><ul><ul><li>correcting variations from standards and plans </li></ul></ul>Standards are criteria of performance
  5. 5. Principle of Critical-Point Control <ul><li>Effective control requires attention to those factors critical to evaluating performance against plans </li></ul>
  6. 6. Critical-Point Control
  7. 7. Examples of Critical-Point Control <ul><li>Examples of critical-point standards </li></ul><ul><ul><li>(1) physical standards, </li></ul></ul><ul><ul><li>(2) cost standards, </li></ul></ul><ul><ul><li>(3) capital standards, </li></ul></ul><ul><ul><li>(4) revenue standards, </li></ul></ul>
  8. 8. Examples of Critical-Point Control : PHYSICAL STANDARDS <ul><li>Non monetary Standards. </li></ul><ul><li>May reflect QUANTITY </li></ul><ul><ul><li>Units of production per machine hour </li></ul></ul><ul><ul><li>Labour hours </li></ul></ul><ul><ul><li>per unit of </li></ul></ul><ul><ul><li>output </li></ul></ul>
  9. 9. Examples of Critical-Point Control : PHYSICAL STANDARDS <ul><li>Non monetary Standards. </li></ul><ul><li>May reflect QUALITY </li></ul><ul><ul><li>Tolerance </li></ul></ul><ul><ul><li>Strength </li></ul></ul><ul><ul><li>Resistance </li></ul></ul>
  10. 10. Examples of Critical-Point Control : COST STANDARDS <ul><li>Monetary measurement. </li></ul><ul><li>Attaches monetary value to specific operations </li></ul><ul><ul><li>Direct & </li></ul></ul><ul><ul><li>Indirect cost </li></ul></ul><ul><ul><li>Labour cost </li></ul></ul><ul><ul><li>Selling cost </li></ul></ul>
  11. 11. Examples of Critical-Point Control : CAPITAL STANDARDS <ul><li>Monetary measurement of physical items. </li></ul><ul><li>Concerned with Capital </li></ul><ul><li>invested </li></ul><ul><li>ROI (Return </li></ul><ul><li>On Investment </li></ul><ul><li>most common. </li></ul>
  12. 12. Examples of Critical-Point Control : REVENUE STANDARDS <ul><li>Attaching monetary value to Sales. </li></ul><ul><ul><li>Average sales per customer . </li></ul></ul><ul><ul><li>Average </li></ul></ul><ul><ul><li>sales per region </li></ul></ul>
  13. 13. Examples of Critical-Point Control <ul><li>Examples of critical-point standards </li></ul><ul><ul><li>(5) program standards, </li></ul></ul><ul><ul><li>(6) intangible standards, </li></ul></ul><ul><ul><li>(7) goals as standards </li></ul></ul><ul><ul><li>(8) strategic plans as control points for strategic control </li></ul></ul>
  14. 14. Examples of Critical-Point Control : PROGRAM STANDARDS <ul><li>Subjective considerations along with objective standards. </li></ul><ul><ul><li>New product </li></ul></ul><ul><ul><li>development . </li></ul></ul><ul><ul><li>Improving sales </li></ul></ul><ul><ul><li>force quality . </li></ul></ul>
  15. 15. Examples of Critical-Point Control : INTANGIBLE STANDARDS <ul><li>Not expressed in physical or monetary terms. </li></ul><ul><ul><li>Effectiveness of advertising campaigns . </li></ul></ul><ul><ul><li>Effectiveness of </li></ul></ul><ul><ul><li>PR activities . </li></ul></ul><ul><ul><li>Company’s </li></ul></ul><ul><ul><li>goodwill </li></ul></ul>
  16. 16. What is Strategic Control? <ul><li>Strategic control comprises systematic monitoring at strategic control points as well as modifying the organization's strategy on the basis of this evaluation </li></ul>
  17. 17. What is Benchmarking? <ul><li>Benchmarking is an approach for setting goals and productivity measures based on best-industry practices </li></ul><ul><li>Three types of benchmarking: </li></ul><ul><ul><li>strategic, </li></ul></ul><ul><ul><li>operational, and </li></ul></ul><ul><ul><li>management </li></ul></ul>
  18. 18. Control as a Feedback System <ul><li>Management control is usually perceived as a feedback system similar to that which operates in the common household thermostat </li></ul>
  19. 19. DFF DESIRED IMPLEMENTATION OF CORRECTIONS ACTUAL PERFORMANCE MEASUREMENT OF ACTUAL PERFORMANCE COMPARISON OF ACTUAL PERFORMANCE AGAINST STANDARDS IDENTIFICATION OF DEVIATIONS ANANLYSIS OF CAUSES OF DEVATION PROGRAM OF CORRECTIVE ACTIONS FEEDBACK LOOP AFFDSSS
  20. 20. Real‑Time Information and Control <ul><li>Real‑time information is information about what is happening while it is happening </li></ul>
  21. 21. Feedforward Control <ul><li>What managers need for effective control a system that will tell them potential problems , giving them time to take corrective action before problems occur </li></ul>
  22. 22. Feedforward Control <ul><li>Feedforward systems monitor inputs into a process to ascertain if the inputs are as planned; if they are not, the inputs or the process is changed in order to obtain the desired results </li></ul>
  23. 23. Comparison of Simple Feedback and Feedforward Systems.
  24. 24. Requirements for Feedforward Control <ul><li>1. Make a thorough and careful analysis of the planning and control system, and identify the more important input variables </li></ul><ul><li>2. Develop a model of the system </li></ul><ul><li>3. Take care to keep the model up to date; in other words, the model should be reviewed regularly to see whether the input variables identified and their interrelationships continue to represent realities </li></ul><ul><li>4. Collect data on input variables regularly, and put them into the system </li></ul><ul><li>5. Regularly assess the variations of actual input data from planned‑for inputs, and evaluate the impact on the expected end result </li></ul><ul><li>6.   Take action </li></ul>
  25. 25. Requirements for Effective Controls <ul><li>Tailoring Controls to Plans and Positions </li></ul><ul><li>Tailoring Controls to Individual Managers </li></ul><ul><li>Making Sure That Controls Point Up Exceptions at Critical Points </li></ul><ul><li>Seeking Objectivity of Controls </li></ul><ul><li>Ensuring Flexibility of Controls </li></ul><ul><li>Fitting the Control System to the Organization Culture </li></ul><ul><li>Achieving Economy of Controls </li></ul><ul><li>Establishing Controls that Lead to Corrective Action </li></ul>Chapter 18. The System and Process of Controlling
  26. 26. THANK YOU!!! HAVE A GREAT WEEKEND

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