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1. CONTROL
ESSENTIALS

2. • 90% of health-care
premiums for part-time
hourly employees
• Cutting turnover, boosting
sales, and improving
productivity
• “As soon as employees
realized the value of the
health-care benefit, they
started to work to win the
20 hours” –Jeff Harvey
CEO

3. CONTROL…
• ..aligns the action of workers with the interests of the firm.
• ..enable managers to gauge whether the firm is attaining its
goals.
• ..often makes an important contribution to employee motivation.

4. HENRY FAYOL
“Control of an undertaking
consists of seeing that
everything is being carried out
in accordance with the plan
which has been adopted, the
orders which have been given,
and the principles which have
been laid down. Its object is to
point out mistakes in order that
they may be rectified and
prevented from recurring.”

5. TYPES &
STRATEGIES OF
CONTROLS

6. THE TIME ELEMENT IN
CONTROLS

7. PREVENTIVE CONTROLS
• It take place prior to the performance of an activity
• Prevent problems that may occur

8. CONCURRENT CONTROLS
• Monitor activities while they are carried out.
Observation
of
Performance
Spotting for
deviation from
standard
Give constructive
suggestion

9. FEEDBACK CONTROLS
• Evaluate activity after it
is performed.

10. EXTERNAL VS. INTERNAL
CONTROLS

11. EXTERNAL CONTROL
Step 1
Objectives and performance standards must be difficult
Step 2
Objectives and measures must be firm
Step 3
Rewards must be directly and openly tied to the performance

12. Employees will
exert more efforts
into achieving
objectives
May reach the
standards but not
truly productive

13. INTERNAL CONTROL
Step 1
Group members must participate in setting goals
Step 2
Performance standards must be used for problem solving
rather than for punishment
Step 3
Rewards should not be tied to only 1 or 2 measures

14. Workers will enjoy
meeting the quality
standards imposed
by management

15. EXTERNAL CONTROL
• NOT EVERYBODY IS
CAPABLE OF CONTROLLING
THEIR OWN PERFORMANCE
OR COMITTED TO
ORGANIZATIONAL GOALS
INTERNAL CONTROL
• WORKS SATISFACTORILY
FOR A HIGH-CALIBER,
WELL-MOTIVATED
WORKFORCE

16. STEPS IN THE
CONTROL
PROCESS

17. STEPS IN THE
CONTROLLING
PROCESS

18. NON BUDGETARY
CONTROL
TECHNIQUES

19. QUALITATIVE CONTROL TECHNIQUES
QUANTITATIVE CONTROL TECHNIQUES

20. QUALITATIVE
CONTROL
TECHNIQUES
A method of controlling
based on human
judgments about
performance that
results in a verbal
rather than numerical
evaluation

21. QUANTITATIVE
CONTROL
TECHNIQUES
A method of controlling
based on numerical
measures of
performance

22. BUDGETS AND
BUDGETARY
CONTROL
TECHNIQUES

23. BUDGET IS A PLAN EXPRESSED IN MONEY. IT IS
PREPARED AND APPROVED PRIOR TO THE BUDGET
PERIOD AND MAY SHOW INCOME, EXPENDITURE AND THE
CAPITAL TO BE EMPLOYED. MAY BE DRAWN UP SHOWING
INCREMENTAL EFFECTS ON FORMER BUDGETED OR
ACTUAL FIGURES, OR BE COMPILED BY ZERO – BASED
BUDGETING

24. BUDGET IS A PLAN, EXPRESSED IN NUMERICAL TERMS
FOR A FUTURE PERIOD OF TIME

25. TYPES OF BUDGETS

27. FIXED BUDGET
• Allocates expenditures based on a one-time allocation of resources
FLEXILE BUDGET
• Allows for variation in the use of resources on the bases of activity

28. SUGGESTIONS FOR
PREPARING A BUDGET

29. LEAVE WIGGLE
ROOM
Budget conservatively for
income and liberally for
expenses

30. RESEARCH THE
COMPETITION
Do some fact-finding to
determine how your
competitors at other firms
arrive at their budget
estimates

31. EMBRACE
REALITY
Study the facts carefully,
and take historical
perspective in arriving at
the correct estimates for
any given financial period

32. DO NOT
NEGLECT
INTUITION
Estimates must be based
on reality and yet contain
little creativity and
optimism, if warranteed

33. BUDGETS AND FINANCIAL
RATIOS AS CONTROL DEVICES

34. BUDGETS AND
THE CONTROL
PROCESS
Entails measuring,
reporting, analyzing and
giving feedback on
budget performance

35. PROCESS IN BUDGETARY CONTROL
1 IDENTIFY VARIANCES
2 ANALYZE AND INVESTIGATE
VARIANCES
3 GIVE FEED BACK TO
OPERATORS
4 TAKE CORRECTIVE ACTION

37. FINANCIAL
RATIOS AND
THE CONTROL
PROCESS
Is a relative magnitude of
two selected numerical
values taken from a
financial statement

38. GROSS PROFIT MARGIN
• A measure of the gross profit earned on sales

39. PROFIT MARGIN
• An accounting measure designed to gauge the
financial health of a business or industry

40. RETURN ON EQUITY
• An indicator of how much a firm in earning on its
investment

41. REVENUE PER EMPLOYEE
• An important ratio that looks at a company’s sales in
relation to the number of employees they have

42. ECONOMIC VALUE ADDED
• A financial statement that excludes write-downs or
goodwill and other one-time charges not relevant to
future earnings

43. EARNINGS BEFORE INTEREST, TAXES,
DEPRECIATION, AND AMORTIZATION
• A measure of a company’s financial performance based on
the residual wealth

44. NET DEBT
• A metric that shows a company’s overall debt
situation

45. MANAGING
CASH FLOW AND
COST CUTTING

46. MANAGING CASH FLOW

47. CASH FLOW IS THE MOVEMENT OF MONEY INTO
OR OUT OF A BUSINESS, PROJECT, OR FINANCIAL
PRODUCT DURING A SPECIFIC PERIOD OF TIME

48. 4 TYPES OF CASH FLOW

49. CASH PROVIDED BY (OR USED IN)
OPERATING ACTIVITIES
• It indicates how much cash a business uses (a loss), thereby
containing clues to the health of earnings

50. CASH PROVIDED BY (OR USED IN)
FINANCING ACTIVITIES
• Records cash from or paid to outsiders such as banks or
stock holders

51. CASH PROVIDED BY (OR USED IN)
INVESTING ACTIVITIES
• Recorded here is the cash used to buy or received from selling
stock, assets, and businesses, plus capital expenditures

52. SUMMARY
• This revealing section lists cash at the beginning and end of
the specific period, plus the change in cash position

53. FREE CASH FLOW IS THE REFINEMENT OF CASH
FLOW THAT MEASURES THE CASH FROM
OPERATIONS MINUS CAPITAL EXPENDITURES

55. COST CUTTING
TO IMPROVE
FINANCIAL
HEALTH
Generate more revenue
than expenses

56. INVESTING IN
POSITIVE
APPROACHES
TO COST
REDUCTION
Investment of money in
the right process or
equipment

57. POTENTIAL
HAZARDS OF
COST
REDUCTION
A caution about cost
cutting is that it can lead
to low morale and lower
– quality goods and
services

58. NONTRADITIONAL
MEASURES OF
FINANCIAL
PERFORMANCE

59. BALANCED
SCORECARD
A set of measures to
provide a quick but
comprehensive view of
the business

60. ACTIVITY –
BASED
COSTING
A set of measures to
provide a quick but
comprehensive view of
the business

61. MEASUREMENT
OF
INTELLECTUAL
CAPITAL
The value of useful ideas
and the people who
generate the

62. RELATIVE
STANDING
AGAINST THE
COMPETITION
Performance is often
measured by comparing
the year’s result with
those attained the
previous years

63. INFORMATION
SYSTEMS AND
CONTROL
A formal system for
providing management
with information useful or
necessary for making
decisions

64. INFORMATION
SYSTEMS AND
CONTROL

65. CONTROL INFORMATION SUPPLIED BY AN
INFORMATION SYSTEM
• A computer – based system to monitor the work habits and
productivity of employees

66. CONCERNS
ABOUT
ELECTRONIC
MONITORING
SYSTEMS
WORKERS
MOST LIKELY
TO BE
MONITORED
GAINING
ACCEPTANCE
FOR
COMPUTER –
AIDED
MONITORING

67. CHARACTERISTIC
S OF EFFECTIVE
CONTROLS

68. THE CONTROLS MUST BE ACCEPTED

69. THE CONTROL MEASURES MUST BE
APPROPRIATE AND MEANINGFUL

70. AN EFFECTIVE CONTROL MEASURE
PROVIDES DIAGNOSTIC INFORMATION

71. EFFECTIVE CONTROLS ALLOW FOR SELF –
FEEDBACK AND SELF - CONTROL

72. EFFECTIVE CONTROL SYSTEMS
PROVIDE TIMELY INFORMATION

73. CONTROL MEASURES ARE MORE
EFFECTIVE WHEN EMPLOYEES HAVE
CONTROL OVER THE RESULTS MEASURED

74. EFFECTIVE CONTROL MEASURES DO
NOT CONTRADICT EACH OTHER

75. EFFECTIVE CONTROLS ALLOW FOR
RANDOM VARIATIONS FROM STANDARD

76. EFFECTIVE CONTROLS ARE COST -
EFFECTIVE

77. THE CONTROLS DO NOT LIMIT
INNOVATION