Control Process The process of measuring actual performance, comparing it against a standard, and taking managerial action to correct deviation or inadequate standard

Expected performance Measuring actual performance Corrective action

Expected performance

Measuring actual performance

Corrective action

Control Process-Steps Establish Standards - Standard: criteria of performance Comparing Actual Performance -Range of variation Taking Managerial Action -Immediate corrective action -Basic corrective action Revise the standards -Unrealistic standard -Goal too high

Control Process-Steps

Establish Standards

- Standard: criteria of performance

Comparing Actual Performance

-Range of variation

Taking Managerial Action

-Immediate corrective action

-Basic corrective action

Revise the standards

-Unrealistic standard

-Goal too high

Types of control Feedforward - Most desirable Concurrent -Direct supervision Feedback - Most popular

Types of control

Feedforward

- Most desirable

Concurrent

-Direct supervision

Feedback

- Most popular

Feed forward control Control that focuses on human, material, and financial resources flowing into the organization also called pre-action or preventive control

Control that focuses on human, material, and financial resources flowing into the organization also called pre-action or preventive control

Feed back Control Control that focuses on the organization’s output also called post-action or output control

Control that focuses on the organization’s output also called post-action or output control

Concurrent Control Control that consists of monitoring ongoing employee activities to ensure their consistency with established standards

Control that consists of monitoring ongoing employee activities to ensure their consistency with established standards

Approaches to control Market Bureaucratic Clan Organizational

Approaches to control

Market

Bureaucratic

Clan

Organizational

Market control Control systems that emphasize the use of external market mechanisms to establish the standards used for controlling

Market control

Control systems that emphasize the use of external market mechanisms to establish the standards used for controlling

Bureaucratic Control The use of rules, policies-hierarchy of authority, rewards systems, and other formal devices to influence employee behavior and assess performance

The use of rules, policies-hierarchy of authority, rewards systems, and other formal devices to influence employee behavior and assess performance

Clan Control The use of social values, traditions, common beliefs, and trust to generate compliance with organization standards

The use of social values, traditions, common beliefs, and trust to generate compliance with organization standards

Organizational Control The systematic process through which managers regulate organizational activities to make them consistent with expectations established in plans, targets and standard of performance.

Standards Standards are yardsticks against which actual or expected performance in measured

Standards are yardsticks against which actual or expected performance in measured

Types of Standards Physical Capital Cost Revenue Intangible Goals Strategic

Physical

Capital

Cost

Revenue

Intangible

Goals

Strategic

Physical Standards They reflect quantities such as labour hours per unit of production, units of production per machine-hour, durability of a fabric, fastness of colour, rate of climb of an airplane etc

They reflect quantities such as labour hours per unit of production, units of production per machine-hour, durability of a fabric, fastness of colour, rate of climb of an airplane etc

Cost Standards Cost Standards are monetary measurements such as cost per unit produced, labour cost per hour, material cost per unit, machine operating cost per hour, cost of per foot of of well drilled etc.

Cost Standards are monetary measurements such as cost per unit produced, labour cost per hour, material cost per unit, machine operating cost per hour, cost of per foot of of well drilled etc.

Capital Standards Reflect Capital invested in the factory rather than operating costs and reflect ratios of current assets to current Liabilities, debt to net worth, cash & receivables to payables, the size and turnover of inventous.

Reflect Capital invested in the factory rather than operating costs and reflect ratios of current assets to current Liabilities, debt to net worth, cash & receivables to payables, the size and turnover of inventous.

Revenue Standards Revenue standards reflect monetary values of sales, such as revenue per passenger-mile, average sale per customer, sales per capital in given market area.

Revenue standards reflect monetary values of sales, such as revenue per passenger-mile, average sale per customer, sales per capital in given market area.

Intangible Standard Standards not expressed in either physical or monetary measurements such as competence of sales manager, effectiveness of advertising campaign, success of public relations department, morale of employees etc

Standards not expressed in either physical or monetary measurements such as competence of sales manager, effectiveness of advertising campaign, success of public relations department, morale of employees etc

Goal Standards Reflects performance or output (production) against targets such as production of cars against a target of 300 cars per month, actual production of cloth against a target of 15,000 yards per month, actual visits to clients by sales people against a target of 10 per week etc

Reflects performance or output (production) against targets such as production of cars against a target of 300 cars per month, actual production of cloth against a target of 15,000 yards per month, actual visits to clients by sales people against a target of 10 per week etc

Strategic Standards Comprises of comparison of actual performances & results against overall objectives of an organization over a period of time (usually one year), such as annual profits, growth, market share, stock value, etc

Comprises of comparison of actual performances & results against overall objectives of an organization over a period of time (usually one year), such as annual profits, growth, market share, stock value, etc

Requirements of Effective Control Tailoring controls to plans and position Tailoring controls to individual Managers Provisions for exceptions Seeking objectivity Ensuring flexibility Matching with Organizational Culture Achieving economy

Tailoring controls to plans and position

Tailoring controls to individual Managers

Provisions for exceptions

Seeking objectivity

Ensuring flexibility

Matching with Organizational Culture

Achieving economy

Qualities of Effective Control System Accuracy Reasonable Criteria Timeliness Economy Flexibility Understandability Emphasis on Exception Multiple Criteria Corrective action

Accuracy

Reasonable Criteria

Timeliness

Economy

Flexibility

Understandability

Emphasis on Exception

Multiple Criteria

Corrective action

Dysfunctional Control Regulation Fixation System Imperfections Emphasis of Procedures Rigid Control Techniques

Regulation Fixation

System Imperfections

Emphasis of Procedures

Rigid Control Techniques

Control Tools & Techniques Information Tools Financial Tools Analytical Tools Traditional Tools

Information Tools

Financial Tools

Analytical Tools

Traditional Tools

Information Tools Organizational Communication MIS

Organizational Communication

MIS

Financial Tools Budget Ratio analyses

Budget

Ratio analyses

Analytical Tools Gnatt Chart PERT Milestone budgeting

Gnatt Chart

PERT

Milestone budgeting

Traditional Tools Statistical data Special reports & analysis Operational data Personal observations

Statistical data

Special reports & analysis

Operational data

Personal observations

Budget A numerical plan for allocating resources to specific activities

A numerical plan for allocating resources to specific activities

Types of Budgets Revenue Expense Time, space, material & product Capital expenditure Cash

Revenue

Expense

Time, space, material & product

Capital expenditure

Cash

Popular Financial Ratios Objective Ratio Calculation Liquidity Test Current Ration Current Assets Current Liabilities Acid Test Current assets less inventories Current Liabilities Operation Test Inventory turnover Sales Inventory Total asset turnover Sales Total assets Profitability Profit margin Net profit after Taxes Total Sales Return on Investment Net profit after taxes Total assets

Objective Ratio Calculation

Liquidity Test Current Ration Current Assets

Current Liabilities

Acid Test Current assets less inventories

Current Liabilities

Operation Test Inventory turnover Sales

Inventory

Total asset turnover Sales

Total assets

Profitability Profit margin Net profit after Taxes

Total Sales

Return on Investment Net profit after taxes

Total assets