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The controlling process
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The controlling process

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  • 1. 20 Ready Notes The Controlling Process For in-class note taking, choose Handouts or Notes Pages from the print options, with three slides per page. Slide content created by Joseph B. Mosca, Monmouth University. Copyright © Houghton Mifflin Company. All rights reserved.
  • 2. Why Control? • Control is an issue every manager faces. • How does control help the manager? – Control is a process to regulate organizational activities to make them consistent with established: • Plans • Targets • Standards Copyright © Houghton Mifflin 20 - 2
  • 3. What Is the Purpose of Control? • It is one of the four basic management functions and has four basic functions. What are the functions? – Adapts to change. – Limits accumulation of error. – Helps coping with complexity. – Helps minimize costs. Copyright © Houghton Mifflin 20 - 3
  • 4. The Purpose of Control Adapt to environmental change Limit the accumulation of error Control helps the organization Cope with organizational complexity Copyright © Houghton Mifflin Minimize costs 20 - 4
  • 5. Name the Levels of Control? • Operational control: – Focuses on the processes used to transform resources into products or services. • Financial control: – Concerned with financial resources. • Structural control: – How the elements of structure are serving the intended purposes. • Strategic control: – How effective are the functional strategies helping the organization meet its goals. Copyright © Houghton Mifflin 20 - 5
  • 6. Figure 20.2: Levels of Control Copyright © Houghton Mifflin 20 - 6
  • 7. Who Is Responsible for Control? • Control rests with all managers. • Large corporations have a controller. • What does a controller do? – Helps line managers with their control activities. Copyright © Houghton Mifflin 20 - 7
  • 8. What Are the Steps in the Control Process? • Establish standards. • Measure performance. • Compare performance against standards. • Determine need for corrective action. • The sub-steps: – Maintain status quo. – Correct deviation. – Change standards. Copyright © Houghton Mifflin 20 - 8
  • 9. Figure 20.3: Steps in the Control Process Copyright © Houghton Mifflin 20 - 9
  • 10. What Does Preliminary Control Monitor? • It attempts to monitor quality and quantity of: – Financial resources. – Material resources. – Human resources. – Information resources. • Why? – Before they become part of the system. Copyright © Houghton Mifflin 20 - 10
  • 11. What Is the Purpose of Screening Controls? • They focus on how inputs are being transformed into outputs. • They also rely heavily on feedback processes during the transformation process. Copyright © Houghton Mifflin 20 - 11
  • 12. What Do Postaction Controls Focus On? • Focus is on outputs from the organizational system. • What do they monitor? – They monitor the output results of the organization after the transformation process is complete. – (see Figure 20.4 illustration) Copyright © Houghton Mifflin 20 - 12
  • 13. Figure 20.4: Forms of Operational Control Copyright © Houghton Mifflin 20 - 13
  • 14. What Are the Reasons for Financial Controls? • They control the financial resources as they flow into the organization. • Then they are held by the organization. • Then they flow out of the organization. • Businesses must manage their finances so that revenues are sufficient to cover expenses and still return a profit. Copyright © Houghton Mifflin 20 - 14
  • 15. What Is a Budget? • It is a plan expressed in numerical terms. • What is the time frame for a budget? – Usually a year, but sometimes broken down into quarters and months. • Budgets are quantitative in nature and provide yardsticks for measuring performance and facilitating comparisons. Copyright © Houghton Mifflin 20 - 15
  • 16. What Are the Types of Budgets? • Types of budget: – Financial – Operating – Non-monetary Copyright © Houghton Mifflin • What the budget shows: – Sources and use of cash. – Operations in financial terms. – Operations in nonfinancial terms. 20 - 16
  • 17. Copyright © Houghton Mifflin 20 - 17
  • 18. Developing Budgets Operating Unit Budget Request Division Budget Request Copyright © Houghton Mifflin Organizational Budget Prepared by Budget Committee Approved by Budget Committee 20 - 18
  • 19. Figure 20.5: Developing Budgets in Organizations Copyright © Houghton Mifflin 20 - 19
  • 20. Other Tools for Financial Control Financial Statement: A profile of some aspect of an organization’s financial circumstances. Income Statement: A summary of financial performance over a period of time, usually one year. Balance Sheet: List of assets and liabilities of an organization at a specific point in time, usually the last day of the fiscal year. Ratio Analysis: The calculation of one or more financial ratios to assess some aspect of the organization’s financial health. Audit: An independent appraisal of an organization’s accounting, financial, and operational system. Copyright © Houghton Mifflin 20 - 20
  • 21. What Is Bureaucratic Control? • A form of organizational control characterized by formal and mechanistic structural arrangements. • What is clan control? – An approach to organizational control characterized by informal and organic structural arrangements. Copyright © Houghton Mifflin 20 - 21
  • 22. Figure 20.6: Organizational Control Copyright © Houghton Mifflin 20 - 22
  • 23. What Is Meant by Strategic Control • Control aimed at ensuring that the organization is maintaining an effective alignment with its environment and moving toward achieving its strategic goals. Copyright © Houghton Mifflin 20 - 23
  • 24. Characteristics of Effective Control • Integration with planning • Flexibility • Accuracy • Timeliness • Objectivity Copyright © Houghton Mifflin 20 - 24
  • 25. What Influences Resistance to Control? • Over-control • Inappropriate focus • Rewards for inefficiency • Too much accountability Copyright © Houghton Mifflin 20 - 25
  • 26. How Can Resistance to Control Be Overcome? • When employees are involved with planning and implementing the control system, they are less likely to resist. • Verification procedures need to be developed to provide checks and balances in order for managers to verify the accuracy of performance indicators. Copyright © Houghton Mifflin 20 - 26