1. Managing Organization
ABE Graduate Diploma (QCF Level -6)
Prepared & Presented
By
Pyi Kyaw Lynn
B.A (English), Yangon University
M.B.A (Finance), Assumption University of Thailand
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2. CHAPTER [VII] : THE ROLE OF MANAGEMENT
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TODAY’S AGENDA
 Principles of Control
 Control As An
Organizational Process
 Measuring Performance
 Benchmarking
 Techniques of Performance
Management
MBO OUTSOURCING
BENCHMARKING CONTROL
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3. [A] Principles of Control
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Control is the
means by which
the organization
ensures that the
plans which have
been made for its
operations are
effectively carried
out.
Control is about
reviewing all
aspects of the
operation &
performance of
the organization,
so that
management may
take appropriate
action.
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4. 5 Major Purposes of Management Control
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Identifying
Opportunities
Handling
Complex
Situations
Detecting
Irregularities
Coping with
Changes
Decentralizing
Authority
MANAGEMENT
CONTROL
Identifying
variations
from the
established
standards.
Identifying
changing
operational or
environmental
factors.
Assessing
successful
performance
as the basis for
expansion of
activities.
Ensuring
effective co-
ordination
of activities.
Ensuring the
effective
delegated
responsibilities
at the lowest
levels.
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5. Elements Of A Control System
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 After planning objectives & targets in the first stage.
 Standard of performance is to be established for the task.
 A standard is a given valued to measure the satisfactory
achievement of the operation . E.g., quality of goods produced.
 Monitor actual performance of operation & looking for variance
from the plan.
 The way in which actual performance is measured must be in the
same terms as the standard set.
 The information provided by the sensor is known as feedback.
 Device or person to compare the actual performance detected by
the sensor with the standard < planned target >.
 Information of any deviations to be passed to take actions.
SENSOR
COMPARATOR
 Machine or person for corrective action where necessary to
improve performance
 Integral part of the control process.
CORRECTOR
STANDARD
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6. Closed-Loop Control System
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ACTIVITY /PERFORMANCE
CORRECTOR SENSORCOMPARATOR
INPUTS OUTPUTS
CONTROL SYSTEM
 All elements of the control system are contained within the operating system.
 The system correct any deviation in performance standard as a normal part of operation
process. E.g., temperature /pressure, robotic, input of data into computer system.
 The system does not identify the cause of deviation from the standard. The sensor
monitor output regularly & corrector take actions if deviation found.
 E.g., In central heating system, the thermostat or sensor cuts of the power and maintain
the required temperature in case of overheating. E.g., water heater
error
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7. Closed – Loop Control System
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8. Open-Loop Control System
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ACTIVITY/PERFORMANCE
OPERATIONAL SYSTEM
CORRECTOR COMPARATOR SENSOR
INPUTS OUTPUTS
CONTROL SYSTEM
 The system analyze the causes of the deviation in addition to measurement &
correction, preventing not to happen again.
 The system is designed to analyze & detect which elements cause the deviation.
 E.g., In case of fall in production, the system review the possible causes such as physical
conditions of work, the psychological factors of work force & etc.
 If found the cause, corrective action is taken until performance is back to standard.
E.g., Traffic control system, Electric washing machine
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9. Techniques of Control System
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 The space which allows for minor deviations between the upper &
lower limits within which performance is allowed to fluctuate.
TOLERANCE
LIMITS
 Feedback Regularity : The regularity with which the sensor
monitors performance & provide feedback continually.
 Management by Exception : It means that only deviations outside
the tolerance limits are to be reported to management for action so
that management is not overloaded.
 Advantages : managers not overloaded with a mass of routine
information which may obscure important facts & figures.
FEEDBACK
SCREENING
 Negative feedback is when the correction it causes takes place the
opposite direction to the original divergence in order to offset the
error & return the system to equilibrium.
 Positive feedback is where the indications are that the organization
should take steps to push performance in the direction in which it is
already going. E.g., if production is rising.
TYPES OF
FEEDBACK
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10. Approaches to Control System
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 Takes place before operations begin and includes policies ,
procedures, and rules designed to ensure that planned activities are
carried out properly.
 E.g., Control of supply of materials and equipment before operation.
Feed-Forward
Controls
 Takes place while plans are being carried out. It includes directing,
monitoring, and fine-tuning activities as they are performed.
 E.g., In factory, monitoring systems that track errors per hour,
machine speeds, and other measures allow personnel to correct
production problems continuously before they become disasters.
Concurrent
(real-time)
Control
 Focuses on the use of information about results to correct deviations
from the acceptable standard after they arise.
 The problem is that, it takes place after an operation has been
completed.
 E.g., Actual spending is much higher compared to targeted quarterly
budget.
Feedback
Control
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11. 5 Stages of Organizational Control
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Objectives &
Targets
Deviations
Standards of
Performance
Actual
Performance
Corrective
Action
FeedbackMeasurement
4 Comparing
5 Rectifying
3 Monitoring2 Establishing1 Planning
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12. [B] Control As An Organizational Process
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Determination
of Areas to
Review
Establishment of
Standards of
Performance
 Identifying the key elements which are crucial to success in
the operation . Planning objectives & targets to be
achieved !!
 E.g., The objectives of a road building project is to
complete each stage on time & within budget. But the
control points with regards to ordering materials for the
next stage needs to be considered.
 Specifying targets control to measure the degree & quality
of achievement. Unless quantifiable targets or outputs,
there can be no way of deciding what the firm is trying to
achieve.
 Targets can be addressed by performance indicators & can
be expressed in quantitative terms.
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13. Cont’d
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Performance
Measurement
 Related to the means of monitoring actual performance
 Feedback & system of reporting information to be accurate,
relevant & timely
 Feedback to be related to desired end- results & designed
means to achieve targets.
 1st Aspect : Deciding the means of measurement –
Quantitative : accounting ratios, percentage & numerical data.
 Qualitative : face to face interviews, questionnaires for
customer satisfaction or staff’s motivation.
 2nd Aspect : Deciding the frequency of measurement.
 E.g., Running a nuclear power plant needs constant
monitoring.
 But over-frequent monitoring runs the risks of overlooking
significant items of detail.
 Frequent measurement of performance linked to the narrow
span of control. Small tolerance limits reduce the span of
control so that control to be ready for deviation.
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14. Cont’d
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Comparison of
Performance
Against
Standards
 Management techniques to be set up to identify variations
from the standards.
 Require means of interpreting & evaluating information to
provide details of progress, reveal deviation & identify causes.
 Computerized information or manual system can be applied for
detecting variations.
 E.g., budgeting control, management by exception, tolerance
limits, flexi time system <upper limit 10 hrs & lower limit 7 hrs>
 In case performance is not up to standard, corrective action is
to be taken , analyzing the reason for the shortfall in
performance that may lead to the failure of targeted objectives.
 To review the operation of the control system.
 Corrective action : recognition, rewards or bonuses in relation
to motivation.
 E.g. Employee’s fault or the equipment.
Taking
Appropriate
Action
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15. Effective Control Systems
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UNDERSTANDABLE
DESIGN
TIME
SELECTIVE
FLEXIBLE
 The control standards to be clearly stated & understandable to
all involved in the operation.
 Control scheme to be specifically designed for the functional
area & specific information to be supplied to the operation.
 Deviations from the planned objectives to be fed back to
management in good times for adjustments to be made.
 Selective information to be supplied to concentrate on key areas
critical to the operation.
 Control system not to be too rigid, to be flexible & capable of
taking into account changes in relevant circumstances.
ACTION
 Good control system has the ability to indicate suitable courses
of corrective action to improve performance.
ECONOMIC  The cost of the setting up & maintenance of the system to be
economic
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16. [C] Measuring Performance
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ECONOMY
EFFICIENCY EFFECTIVENESS
 The acquisition of inputs or
resources of a given quality at
the lowest cost. E.g.,
overstaffing, overpriced
facilities.
 Achieving the goals or
objectives of the organization
or operation.
 E.g., ratio of actual outputs to
planned outputs.
 Obtaining the maximum
possible output from a given
level of inputs or the use of the
minimum inputs to achieve
given output.
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17. Approaches to Measuring Performance
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System
Resource
Internal
Process
Goal
Stakeholder
View
Competing
Values
 View organization as a system & success is based on obtaining
resources or inputs.
 Concentrates on the internal efficiency rather than effectiveness,
drawback is lack of objectives & needs of customers. E.g., focus
only on input output ratio.
 Focuses effectiveness by comparing actual performance with the
planned objectives, drawback is not effective if inappropriate
measures are used.
 Focuses on the nature of the interest of the key stakeholders
which may be internal or external.
 Internal : job satisfaction & departmental efficiencies
 External : competitor’s performance, market share
 Stable : hierarchical structures & centralized decision.
 Flexible : greater empowerment & task-based.
 Focuses on the overall performance of the whole organization.
Balance Score
Card
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18. Balanced Scorecard Approach
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Customer Perspective
 Identifying customer’s
expectations.
 Setting objectives to meet the
expectations.
 e.g., customer prefer short lead
time on deliveries.
Internal Business Perspective
 Business processes & technologies
critical to success.
 Goals relating to manufacturing
capacity, quality, efficiencies,
performance measures against
objectives.
Innovation & Learning Perspective
 Focuses on the development of the
capacity of the organization.
 Improving staff morale, encouraging
participation, personal
development & training.
 New products development.
Financial Perspective
 Focuses on the financial health
of the business.
 Focuses on the financiers such as
shareholders , tax payers.
 Focuses on cash flows & Return
on Investments.
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19. 1/3/2015 19
Balanced Scorecard Example
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20. Relationships in the Balance Scorecard
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21. Measures of Performance [General approach]
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DEFINITION
 Measures of performance imply that what is to be assessed is
capable of being measured. So they must be quantitative.
Measures of
Efficiency
 Are concerned with the way in which inputs are converted into
outputs through the activities of the organization. It includes –
 activity counts & throughput in relation to time
 productivity & utilization rated compared to inputs
 quality in relation to number of rejected items
 costs & expenditures levels compared to budgets
 profitability
Measures of
Effectiveness
 Are concerned with the outputs of the organization. It includes
 Sales or volume of output units compared to market shares.
 Revenue from outputs compared to products or markets.
 Quality of goods or services delivered compared to complaints &
returns.
Types of Performance Measures
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22. Measures of Performance [Specific approach]
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 To measure overhead cost & utilization
 To measure machine efficiency & production time
 To measure adequacy of lighting, heating, etc [qualitative ]
 To measure the number of customer rejects or sales returns
 To measure the number of people served or the speed of service.
 To measure the level of customer satisfaction
 To measure the standard costs for materials & stock turnover.
 To measure the packaging material performance [no of reported
breakages on arrival]
Performance
Measure for
Overheads
Performance
Measures for
Sales
Performance
Measures for
Materials
 To measure sales per individual employee
 To measure the units of production per production operative.
 To measure the number of invoices posted per data-entry clerk.
Performance
Measures for
People
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23. Measuring Brand Performance
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24. [D] Benchmarking
Main business functions subject to benchmarking
- Customer service
- Manufacturing
- Human resources
- Information services
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DEFINITION
FUNCTIONAL
BENCHMARKING
PROCESS
BENCHMARKING
MAIN BUSINESS
FUNCTIONS
An organization’s assessment of the performance & practices of
other organizations & competitors in an effort to analyze and
compare its own performance.
Comparing performance relating to a single business function.
Comparing performance relating to a structured set of activities
designed to produce a specified output for a particular customer or
market. This type looks at the activities of competitors supplying the
same customer or market.
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25. Purposes, Benefits & Limitations of Benchmarking
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PURPOSES
BENEFITS LIMITATIONS
BENCHMARKING
 To understand your organization
compared with similar others.
 To determine the gap between your
organization with those with others.
 To ascertain the best practices must be
introduced to close the gap.
 It enables realistic targets
 It increases motivation of staff
 It provide early warning of
competitive disadvantage.
 It promotes teamwork & cross
functional learning.
 Selection of an inappropriate set of
measures.
 Selection of a benchmarking partner not
representing good practice.
 Inability to gain suitable benchmarking data.
 Insufficient knowledge of the data collected.
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26. Benchmarking Process
26
CSF AREAS PARTNER DATA ANALYSIS
Understand
ing &
measuring
critical
success
factors
To focus on
core areas
& factors
that
determine
the success
Selecting the
areas of
performance
to be
benchmarke
d by
determining
the activities.
Selecting
the
benchmark
partner
using
appropriate
criteria.
Assessing
competitor
(local,
national,
internation
al) in other
industries.
Collecting
data in
partner
organization
s using
techniques
similar to
those
employed in
organization
.
Currying out
a
comparative
analysis of
data.
Identifying
areas of
differences
& finding
root causes
in terms of
activities,
decision-
making, etc.
Positive
benchmark:
the
organization
is ahead of
its
competitors.
Negative
benchmark:
the
organization
behind its
competitors.
FEEDBACK
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27. [E] Techniques of Performance Management
27
MBO OUTSOURCING
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28. Management By Objectives
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DEFINITION
 Management by objectives is a process of positive action for results,
comprising the setting of objectives, planning of work for their
achievement & monitoring results.
BENEFITS
 Individual objectives are integrated with the objectives of the
organization.
 The emphasis on planning for results helps to establish priorities for
the organization and individual jobs.
 The review process facilitates communication with a positive outlook.
 The involvement of job holders contribute to enhancing employee
motivation.
PROBLEMS
 The tendency of over bureaucratic, time consuming & costly
 Lack of commitment & understanding by management
 The potential conflict between personal & organizational goals.
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29. MBO Process
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30. 1/3/2015 30
MBO Process
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31. MBO by Peter Drucker
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32. Outsourcing
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DEFINITION
 Contracting with an external organization for the provision of
particular services , if not outsources, have to be provided directly
by the organization.
ADVANTAGES
 Effective form of cost control as the cost of providing is borne by
the contractor in case of cost increase.
 Cheaper option as the contractor is able to apply economies of
scale.
 The contractor can employ expertise staff , benefiting organization
without having to employ its own staff.
 Suitable for small organizations due to saving in staff, time &
expertise.
DIS
ADVANTAGES
 Some functions are not appropriate to be outsources. E.g., legal
work or information management.
 Once outsourced for a particular function, it is quite difficult to
reverse the decision.
 Conflict of interest between the firm & contractor
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33. Reasons for Outsourcing
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34. Reasons for Outsourcing
 Lower Wages : Lower operational and labor costs are among the primary reasons
why companies choose to outsource. When properly executed it has a defining
impact on a company's revenue and can deliver significant savings
 Focusing on Core Business : Companies also choose to outsource or offshore so
that they may continue focusing on their core business processes while delegating
mundane time consuming processes to external agencies
 Global knowledge: Outsourcing and off-shoring also enable companies to tap in to
and leverage a global knowledge base, having access to world class capabilities
 Freeing Up Internal Resources: That could be put in to effective use for other
purposes is also one of the primary benefits realized when companies outsource
or offshore
 Improved Service: Outsourcing can help improve service. Why waste time and
valuable resources training an in-house customer service team when there are
professionals to be hired that can usually do the same task for less money? IT , HR
functions and financial services . Having an offshore company handle non-core
business activities usually leads to better service.
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35. The Advantages of Outsourcing
 Swiftness and Expertise: Most of the times tasks are outsourced to vendors who
specialize in their field. The outsourced vendors also have specific equipment and
technical expertise. Effectively the tasks can be completed faster and with better
quality output.
 Concentrating on core process rather than the supporting ones: Outsourcing the
supporting processes gives the organization more time to strengthen their core
business process
 Risk-sharing: one of the most crucial factors determining the outcome of a
campaign is risk-analysis. Outsourcing certain components of your business
process helps the organization to shift certain responsibilities to the outsourced
vendor. Since the outsourced vendor is a specialist, they plan your risk-mitigating
factors better.
 Reduced Operational and Recruitment costs: Outsourcing eludes the need to hire
individuals in-house; hence recruitment and operational costs can be minimized to
a great extent. This is one of the prime advantages of offshore outsourcing
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36. The Disadvantages of Outsourcing
 Risk of exposing confidential data: When an organization outsources HR, Payroll
and Recruitment services, it involves a risk if exposing confidential company
information to a third-party.
 Synchronizing the deliverables: In case you do not choose a right partner for
outsourcing, some of the common problem areas include stretched delivery time
frames, sub-standard quality output and inappropriate categorization of
responsibilities. At times it is easier to regulate these factors inside an organization
rather than with an outsourced partner
 Hidden costs: Although outsourcing most of the times is cost-effective at times the
hidden costs involved in signing a contract while signing a contract across
international boundaries may pose a serious threat.
 Lack of customer focus: An outsourced vendor may be catering to the expertise-
needs of multiple organizations at a time. In such situations vendors may lack
complete focus on your organization’s tasks.
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37. Example
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38. 1/3/2015 38
Thank You !!
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39. Q & A
 1. “Managers must understand what they need to do, and then learn
better ways of doing it from others”.
Explain the main functions of management. [10 marks]
Discuss the usefulness of ‘benchmarking’ to managers. [15 marks]
 2. Organizations need clear guidance on how to achieve a balance
between financial and non-financial measure of performance. Such
guidance already exists in the form of the “Balanced Scorecard
Approach”.
Explain the Balanced Scorecard Approach to measuring organizational
performance. [10 marks]
 3. Evaluate the contribution that internal benchmarking can make to
organizational performance. [ 15 marks]
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40.  4. Organizational controls are part of a systematic process through which
managers regulate activity to meet planned goals and performance
standards.
Explain the main elements of an organizational control system.
[10 marks]
Discuss the factors that are likely to influence the effectiveness of an
organizational control system. [15 marks]
 5. The managerial function of control is an effective way of monitoring an
organization’s performance.
With the aid of examples, explain the difference between a “closed-loop and
opened-loop” control system. [10 marks]
Using a company of your choice, discuss how a manager can use control as a
measure of performance. [15 marks]
 6. (a) “Control” is crucial to management. Explain the main purposes of a
management control system. [10 marks]
(b) Critically analyze the ways in which an organization can implement
control mechanisms, indicating the likely problems. Use examples from the
workplace to support your answer. [15 marks]
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Q & A
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