ppt for controlling

1. BY- S R TRIPATHI
Unit IV: Controlling
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2. Definition Controlling
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 Control is simply the process through which managers assure that
activities confirm to planned activities
 The managerial function of controlling is the measurement and
correction of performance in order to make sure that organization
objectives and plans devised to attain them are being accomplished
• Heinz Weihrich and Harold Koontz

3. Nature of Controlling
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 Control is forward looking
 Control is a pervasive function
 Control is a continuous process
 Control is action-oriented process
 Control is a dynamic process
 Control is a measurement process
 Control reviews past events
 Control is an integrated system
 Control is goal oriented

4. Integrated Control System (Process of Control)
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1. Establishment of performance standards
 Provided by the objectives of an enterprise and various components
 Also by strategies, policies, rules, procedures, methods, programs, projects and
budgets
 Types of standard
i. Tangible or objective standards: lend themselves to precise measurements in
terms of output, revenue, resources and time. There are mainly four type of
tangible standards
a. Cost standards: represents monetary value of resources expended in the
production and distribution of good and services
b. Revenue Standards: Monetary value of expected volume sales
c. Capital Standards: Capital invested in the enterprise
d. Program Standard: Formulated to undertake special activities time, quality and
cost

5. Process of Control
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ii. Intangible or subjective standards: Activities which cannot be measured by
objective or tangible standards
iii. Principles of establishing standards
a. Standard should be set for all employees
b. Standards should be set for strategic activities
c. Standards should be related to responsibility centre's: Responsible for the
performance of distinctive function responsibility standards may be:
• Expense Centre: Focus attention on expenditure of financial resources
• Profit Centre: For those segments where results in terms of profit can be
measured
• Investment Centre: Deals with acquisition, use and disposal of fixed assets
2. Measurement of performance against standard
 Traditionally used accounting
 Can be measured quantitatively and qualitatively

6. Process of Control
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 Quantitatively and qualitatively the standards can be measured in following
ways:
i. Sampling technique
ii. Personal observation and informal discussions
iii. Predictive measures
iv. Reports and summaries
v. Prior approval
3. Identification of deviation and analysis of causes:
 Pay attention to only exception
 Zone of difference
 Analyze underlying causes
 Find critical factors causing deviation

7. Process of Control
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4. Corrective Action: Managers can choose 2 possible courses of
action:
i. Do Nothing
ii. Correct the actual performance
 Regarding corrective action a manager has to take two decision
i. Immediate corrective action
ii. Basic corrective action
 Revise the standard: The variance may be due to unrealistic standard
ESTABLISHMENT OF
PERFORMANCE
STANDARD
MEASUREMENT OF
PERFORMANCE AGAINST
STANDARD
IDENTIFICATION OF
DEVIATION
CORRECTIVE
ACTION

8. Methods of Control
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 Feed forward
1. Prevents anticipated problems
2. Takes place in advance of actual activity
3. Problem in getting timely and accurate information
 Concurrent
1. Takes place while an activity is in progress
2. The best known form of this control is direct supervision
3. Technical equipments can also be designed
4. Helps in workers feedback
 Feedback
1. Takes place after the activity is done
2. In some activities it is the only option
3. Provides manager with meaningful information
4. Enhance employee motivation
5. Helps in new planning

9. Pre Control (or Feed Forward Control) of Inputs
 Attempts to monitor the quality or quantity of financial, physical, human
and information resources before they actually become part of the
system
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10. Control Tools and Techniques
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I. Information Control: Right information, at right time, in right place
A. Organizational Communication: The flow of information within the
organization is through various channels and networks
1. Formal Communication: Follows official authority and chain of command
2. Informal Communication: Not approved by management and not defined by
the structural hierarchy
i. Permits employees to satisfy social needs
ii. Also improves organizations performance
3. Direction of communication flow:
i. Downward
ii. Upward
iii. Lateral
iv. Diagonal

11. Control Tools and Techniques
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4. Communication Network
i. Chain Network ii. Y Network iii. Wheel iv. Circle v. All
Channel
5. An Informal Network
i. Single Strand ii. Cluster iii. Gossip iv. Probability

12. Control Tools and Techniques
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I. B. Information Systems
B. Management Information System: A system used to provide management with
needed information on a regular basis. Can be manual or computer based
 The term system implies order, arrangement and purpose
 MIS has organized data in some meaningful way and can access information in
a reasonable amount of time
1. How are information systems used in controlling
2. Designing the MIS
i. Analyze the decision system:
 For what purpose information is needed
 Should encompass all functions within organization
 Also consider each decision is being taken by the right person

13. Control Tools and Techniques
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ii. Analyze information requirement
 Differs according to managerial function
iii. Aggregate the decision
 Overlapping information requirement should be located
 Redundancies often occur
iv. Design Information processing
 Internal specialists or outside consultant
 Detailed flowchart sources and types of data, location of users, storage, precise
hardware and software
v. Evaluation
3. Implementing the MIS
i. Pretest the system before installation
 Less costly
 If not possible run older one in parallel

14. Control Tools and Techniques
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ii. Prepare users with proper training
 Full capabilities for full potential
 Budget should include time and money for training
iii. Prepare for resistance
iv. Get users involved
v. Check for security
vi. Build in regular reviews
4. How MIS are changing managers jobs
i. Hands on involvement
ii. Decision making capability
iii. Organization design
iv. Power
5. How MIS is changing organizational communication
i. Patterns of communication flow will change
ii. Communication overload should be lessened
iii. Face to face communication will take on a more symbolic role

15. Control Tools and Techniques
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II. Financial Control: One of the primary purposes of every business firm is to earn
profit for this managers need financial control
A. Budgets
 By pointing out deviations between standard and actual consumption they
become control tool
III. Operations Control: The success of an organization largely depends on its
ability to produce goods and services effectively and efficiently
A. TQM Control Charts: One tool that organizations use to maintain quality are
 Control Charts: Are a management control tool that show results of
measurements over a period of time, with statistically determined upper and
lower limits
 In developing control charts there are two possible sources of process variability
1. One is by chance
2. Second is due to assignable causes

16. Control Tools and Techniques
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B. EOQ Model: Controlling Inventory: One of the best known techniques for
mathematically deriving the optimum quality for a purchase order is the EOQ
Model (Economic Order Quantity)
 EOQ model balances four costs associated with ordering and carrying inventory
1. Purchase Cost = Purchase Price + Delivery Charge – Any Discount
2. Ordering Cost = Paper Work, Follow Up, Inspection on Arrival and other
processing cost
3. Carrying Cost = Money tied up in inventory, storage, insurance, taxes etc
4. Stock Out Cost = Profits forgone from orders lost, cost of re-establishing goodwill,
additional expenses incurred due to late shipments
 The objective of EOQ Model is to reduce two of these four costs: Ordering Cost &
Carrying Cost
 The standard formula for finding optimal order quantity:
EOQ = √2*D*OC/V*CC (D=Demand, V=Value, CC=Carrying Cost, OC=

17. Control Tools and Techniques
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IV. Behavioral Control: Managers accomplish goals by working with other
people
1. Selection
2. Goals
3. Job Design
4. Direct Supervision
5. Training
6. Mentoring
8. Formalization
9. Organizational Culture
10. Discipline
11. Simulation

18. Concurrent Control of Operation
 Focus is on how inputs are being transformed into output
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19. Operational Planning tools and Major Control Systems
and Their Designing
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I. The Gantt Chart: Gantt Chart was developed during early 1900’s by
Henry Gantt.
 It is a bar graph with time on the horizontal axis and the activities to be
scheduled on the vertical axis
 The bars show output, both planned and actual
 The Gantt Chart visually shows when tasks are supposed to be done and
compares that to the actual progress on each
A. As Control Tool: can be used to assess whether an activity is ahead,
behind or on schedule

20. Operational Planning tools and Major Control Systems
and Their Designing
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Copy edit Manuscript
Design Sample Pages
Draw Artwork
Print Gallery Proofs
Print Page proofs
Design Cover
Activity
Months
I II III
IV
Actual
Progress
Reporting Date

21. Operational Planning tools and Major Control
Systems and Their Designing
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II. The Load Chart: It is a modified chart: instead of writing activities on the vertical
axis, load charts list either whole dept. or specific resources
A. As control tool: Checks whether full capacity is utilized or not. In other words load
chart schedule capacity by work station
1 2 3 4 5 6Editors
Anne
Lisa
Kim
Marry
Dev
Pinky
Work
Schedule
d
Months

22. Operational Planning tools and Major Control Systems
and Their Designing
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III. PERT Network Analysis: The program evaluation and review technique was
developed in late 1950’s used for scheduling complicated projects comprising
many activities some of which are interdependent
 PERT Network is a flowchart like diagram showing the sequence of activities
needed to complete a project and the time or cost associated with each
 Steps in developing a PERT Network:
1. Identify every significant activity that must be achieved for a project to be
completed
2. Determine the order in which these events must be completed
3. Diagram the flow of activities from start to finish, identifying each activity and its
relationship to all other activities
4. Compute a time estimate for completing each activity
te = to+4tm+tp/6
(te: estimated time, to: optimistic time, tm: most likely time, tp: pessimistic time

23. Operational Planning tools and Major Control Systems
and Their Designing
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5. Using the network diagram that contains time estimates for each activity, determine a
schedule for the start and finish dates of each activity for entire project.
 Events: End points representing completion of major activity
 Activities: Time or resources needed from one event to another
 Critical Path: The longest sequence of activities in PERT
A. As Operational Planning Tool: Helps in identifying key activities needed to complete a
project, rank them in order of dependence and estimating each activities completion
time
B. As Control Tool: identifies whether all activities are on time as scheduled or not
Start A C
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3 5
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24. Operational Planning tools and Major Control Systems
and Their Designing
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IV. Break Even Analysis: The technique for identifying the point at which
total revenue is just sufficient to cover total costs
BE = TFC/P-VC (TFC: Total Fixed Cost, VC: Variable Cost/Unit, P:
Product being sold)
100 200 300 40
0
500 600
9
0
8
0
7
0
6
0
5
0
4
0
3
Output (In
Thousands)
Revenue/Cost
(.000$)
Loss
Area
Fixed
Cost
Variable
Cost
Total
Cost
Profit
Total
RevenueBreak Even
Point

25. Operational Planning tools and Major Control Systems
and Their Designing
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A. As Control Tool: Taking decision regarding product and to decide
quantity to manufacture
V. Linear Programming: A mathematical technique that solves resource
allocation problem
 Can be used in selecting transportation route min shipping cost
 Allocating limited advertising budget among various products
 Making optimum assignment of personnel among project
 Determine how much to produce each product with limited number of
resources
A. As Control Tool: Whether to add one unit to production or not by using
transfer pricing

26. Operational Planning tools and Major Control Systems
and Their Designing
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VI. Queuing Theory: A technique that balances the cost of having a waiting
line against the cost of service to maintain that line
A. As Control Tool: Controls the cost of opening extra counters, queue size,
calls (waiting, dropped, received)
VII. Probability Theory: The use of statistics to analyze past predictable
patterns and to reduce risk in future plans
A. As Control Tool: Risk minimization is a control

27. Operational Planning tools and Major Control Systems
and Their Designing
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VIII.Marginal Analysis: The concept of marginal or incremental analysis
helps decision makers to optimize returns and minimize cost. Deals with
additional cost in a particular decision.
A. As Control Tool: Cost Control

28. Post Control of Outputs
 Focus is on outputs from the organizational system
 Marketing
1. Customer Feedback
2. Sales Report
 Human Resource Management
1. Performance Appraisals
2. Organizational Rewards
 Production
1. Quality Control
 Finance
1. Balance Sheet
2. Profit and Loss accounts
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29. Post Control of Outputs
Ratio Analysis:
 Liquidity ratio measures organizations ability to meet its current debt
obligations
 Operations ratio measure how effectively and efficiently the firm is
using its assets
 Profitability ratio measure how effectively and efficiently the firm is
using its assets to generate profit
 Leverage ratio examines organizations use of debt to finance its
assets
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30. Input
Transformatio
n
Output
Preliminary
Control
Focus is on input
to the
organizational
system
Post Control
Focus is on
outputs from the
organizational
system
Concurrent
Control
Focus is on how
inputs are being
transformed into
outputs
Feedback
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31. The Quality Concept
 Definition: The totality of features and characteristics of a product or
service that bear on its ability to satisfy stated or implied needs.
 Factors effecting quality
1. Man, Materials and Machines
2. Manufacturing Conditions
3. Market research in demand of purchases
4. Money in capability to invest
5. Management policy or quality level
6. Production method or product design
7. Packaging and transportation
8. After Sales Service
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32. Developing a quality control system
 A Quality Control System (QCS) supports effective quality control requirements,
quality customer services and the efficiency of internal management systems.
 A QCS is an important tool for integrating best practices for profitability and
compliance with external QA requirements.
 The essential requirements for success are:
1. Management commitment
2. Identification of practices that are essential to both quality and efficiency
3. Quantified goals and processes for measurement
4. Assigned QCS responsibilities
5. Employee training and communication
6. A regular process for evaluating how QCS-related practices are being
implemented
7. Documentation of need for improvement and
8. Documentation of improvements.
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33. Developing a quality control system
Five Steps for QCS Development
 Step 1:
 Identify the quality mission and objectives of your organization.
 These may include, for example, corporate quality goals, customer
satisfaction objectives, and compliance with external quality
requirements.
 Step 2:
 Assign responsibilities for development of a QCS plan.
 Step 3:
 Develop information that will provide the foundation for the QCS plan:
1. The most important quality-related activities
2. Goals for managing and improving quality-related activitiesS R TRIPAHI33

34. Developing a quality control system
 Existing or needed processes for measuring and improving quality-related
activities:
1. Fact-based measurement
2. Needs for corrective action
3. Resolution of corrective action requirements
 Management and staff implementation responsibilities, and
 Processes for feedback to improve processes based on experience.
 Step 4:
 Based on assessment of material developed in Step 3, create a written plan
for a process-based and consistent quality improvement system.
 Ensure that the plan assigns responsibilities for implementation. Create a
plan that is easy for managers and employees to understand; that provides
clear measurable objectives; that clearly identifies responsibilities, and that
describes processes for meeting objectives.
 Step 5:
 Consistently implement the QCS plan. The plan should establish a system
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35. Total Quality Control
 Definition: A strategic commitment by top management to change its
whole approach to business in order to make quality a guiding factor in
everything it does
 Major ingredients of TQM:
1. Strategic commitment
2. Employee Involvement
3. Technology
4. Materials
5. Methods
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36. Total Quality Control
 TQM tools and techniques
1. Value added analysis: Evaluation of all work activities, materials flow
and paper work
2. Benchmarking: Competitor analysis
3. Outsourcing: Subcontracting services and operations
4. Reducing cycle time: Input process and output
5. ISO 9000:2000 and ISO 14000: Certification
6. Statistical Quality Control: Acceptance sampling and in process
sampling
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37. Types of Control
 Controls used to standardize performance in order to increase efficiency,
lower cost and optimize performance: standard of performance set by using
time and motion study
 Controls devised to safeguard company assets: reduces losses due to waste
and misuse of raw material
 Controls used to standardize quality: setting quality standards
 Controls used to set limits for the delegated authority: centralization and
decentralization
 Controls designed to measure workers performance: setting performance
standard
 Controls designed to measure and enhance workers attitude: Friendly
supervision and participative leadership
 Controls used to monitor total performance and operations: overall control of
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