Controlling is one of the main functions of management aimed at determining if objectives were achieved. The controlling process consists of establishing objectives and standards, measuring actual performance, comparing actual performance to objectives, and taking necessary actions. There are different types of control including feedforward, concurrent, and feedback. Organizational control systems include strategic plans, budgets, policies and more. Means to identify control problems involve executive checks, internal audits, and symptom checklists.

1. CONTROLLING

2. LEARNING OUTCOMES
Define controlling;
01
Understand the importance of controlling in management;
02
Differentiate the types of control and control systems, and;
04
Identify Control Problems
05
Familiarize the steps in the control process;
03

3. A news report indicated that an Php 800 million
Superferry ship was destroyed by a fire caused by
illegal connectionsmade on its electrical system.
1
Customers showed dissatisfaction at a telephone
company for billing them for calls that they never
made. It turned out that the telephone company
could not stop the unauthorized use of lines
assigned to many of its subscribers.
2
CONTROLLING
situational examples

4. CONTROLLING
Refers to the “process of ascertaining whether
organizational objectives have been achieved;
if not, why not; and determining what activities
should then be taken to achieve objectives
better in the future”.
When expectations are not met at scheduled
dates, corrective measures are usually
undertaken.

5. IMPORTANCE OF CONTROLLING
When properly implemented,
controlling could help an
organization achieve its goal in
the most efficientand effective
manner possible.
Proper implementationof the
control functionis a must sinceit
minimizesthe ill effectsof
negativeoccurrences.
EXAMPLE
If the required daily output for
individualworkers is 100
pieces,all workers who do not
produce the requirement are
givensufficienttime to
improve. However, if no
improvements willbe seen on
the performance of the
workers, they willbe askedto
resign.

6. STEPS IN THE CONTROL PROCESS
The control process consists of four steps, namely:
ESTABLISHING
PERFORMANCE
OBJECTIVES &
STANDARDS
TAKING
NECESSARY
ACTIONS
COMPARING
ACTUAL
PERFORMANCE
TOOBJECTIVES
& STANDARDS
MEASURING
ACTUAL
PERFORMANCE

7. ESTABLISHING PERFORMANCE
OBJECTIVES & STANDARDS
 are expressed in quantity or monetary
terms
SALESTARGETS
 are expressed in terms of rate of absences
WORKER ATTENDANCE
 are expressed in quantity or quality
PRODUCTION TARGETS
 is expressedin number of accidents
for given periods
SAFETYRECORD
 are expressed in quantity or
monetaryterms for given periods
SUPPLIES USED
In controlling, what has to be achieved must first be determined. Examples of such objectives and standards are as follows:

8. MEASURING ACTUAL
PERFORMANCE
There is a need to measure actual
performance so that when shortcomings
occur, adjustments could be made.

9. COMPARING ACTUAL PERFORMANCE
TO OBJECTIVES AND STANDARDS
 Once actual performance has been determined, it will
be compared with what the organization seeks to
achieve. Here, an actual production output will be
compared with the target output.

10. TAKING NECESSARY ACTION
 The purpose of comparing the actual performance
with the desired result is to give an opportunity to the
management to take corrective actions when needed.
 Necessary actions taken are:
1 Hire additional personnel
2 Use more equipment 3 Require overtime

11. STEPS IN THE CONTROL PROCESS
Figure 1.1 Steps in the Control Process

12. Control consists of three distinct types, namely:
FEEDFORWARD
CONTROL
TYPES OF CONTROL
CONCURRENT
CONTROL
FEEDBACK
CONTROL

13. FEEDFORWARD CONTROL
 Undertaken when the management anticipates
and prevents problems.
 Provides the assurance that the required human
and nonhuman resources are in place before the
operation commence.

14. CONCURRENT CONTROL
 Undertaken when operations are already ongoing
and activities to detect variances are made.
 When deviations from the set standards will occur,
adjustments are made to ensure compliance with
requirements.

15. FEEDBACK CONTROL
 Undertaken when information is gathered about a
completed activity, and in order that evaluation and
steps for improvements are derived.
 Validates objectives and standards.
 Features corrective actions aimed at improving
future activities.

16. TYPES OF CONTROL AND THEIR
RELATION TO OPERATIONS
Figure 2. Types of Control and Their Relation to Operations

17. Organizational control systems consists of the following:
ORGANIZATIONAL CONTROL SYSTEMS
LONG-RANGE FINANCIAL PLAN
STRATEGIC PLAN
THE OPERATING BUDGET
POLICIES AND PROCEDURES
PERFORMANCE APPRAISALS
STATISTICAL REPORTS

18. STRATEGICPLAN
 A strategic plan provides the basic control
mechanism for the organization.
 Activities that do not facilitate the accomplishment of
strategic goals are often either set aside, modified or
expanded.

19. LONG-RANGE FINANCIAL PLAN
 The planning horizon differs from company to company.
 Engineering firms require longer term financial plans
because of the long lead times needed for capital
projects.
 A financial plan recommends a direction for financial
activities.

20.  The operating budget indicates the
expenditures, revenues, or profits planned for
some future period regarding operations.
THE OPERATING BUDGET

21. PERFORMANCE APPRAISALS
 Performance appraisals measures employee
performance.
 It guides employees guide on how to do their jobs better
in the future.
 It also function as effective checks on new policies and
programs

22. STATISTICAL REPORTS
 Contains data on various developmentswithin the firm.
 Among the information found in a statistical report may
pertain to:
1 Laborefficiencyrates
2 Quality control rejects
3 Accounts receivable
4 Accounts payable
5 Sales report
6 Accidentreports
7 Power consumption report

23. POLICIES AND PROCEDURES
 Policies refer to “the framework within which
the objectives must be pursued.”
Example of a policy
“Whenever two or more activities complete for the
company’sattention,the clienttakes priority.”

24. POLICIES AND PROCEDURES
Example of a procedure
Procedure in the purchase of equipment:
 A procedure is “a plan that describes the exact series of actions to
be taken in a given situation.”
1 The concerned manager forwards a request for purchase to the purchasingofficer;
2 The purchasingofficerforwards the request to top management for approval
3 When approved, the purchasingofficer makes a canvassof the requested item; if di
sapproved, the purchasingofficerreturns the form to the requestingmanager;
4 The purchasingofficernegotiates with the lowest complying bidder.

25. STRATEGIC
CONTROL
SYSTEMS
FINANCIALANALYSIS
FINANCIAL
RATIOANALYSIS

26. A review of the financial statements will reveal
important detailsabout the company’sperformance.
FINANCIAL ANALYSIS
BALANCE SHEET
 Contains information about the company’s assets, liabilities, and capital
accounts.
INCOME STATEMENT
 Contains information about the company’s gross income, expenses, and
profits.

27.  A more elaborate approach used in controlling activities.
 Under this method, one account appearing in the financial
statement is paired with another to constitute a ratio.
 Financial ratios may be categorized into types:
FINANCIAL RATIO ANALYSIS
1 Liquidity
2 Efficiency
3 FinancialLeverage
4 Profitability

28. FINANCIAL RATIO ANALYSIS
1 Liquidity Ratios– assessthe ability of a company to meet it
s current obligations.
 Current Ratio – shows the extent to which current assets of the company can cover its
current liabilities.
c𝑢𝑟𝑟𝑒𝑛𝑡 𝑟𝑎𝑡𝑖𝑜 =
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
 Acid-test Ratio – measure of the firm’s ability to pay off short-term obligations with the
use of current assets and without relying on the sale of inventories.
𝑎𝑐𝑖𝑑 − 𝑡𝑒𝑠𝑡 𝑟𝑎𝑡𝑖𝑜 = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 −
𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑖𝑒𝑠
𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

29. FINANCIAL RATIO ANALYSIS
2 EfficiencyRatios – these ratios show how effectively certain a
ssets or liabilitiesare being used in the production of goods an
d services.
 Inventory Turnover Ratio – measures the number of times an inventory is turned over each
year.
𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 𝑟𝑎𝑡𝑖𝑜 =
𝑐𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑
𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
 Fixed Asset Turnover Ratio – is used to measure utilization of the company’s investments
in its fixed assets, such as its plantsand equipment.
𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 = 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑎𝑠𝑠𝑒𝑡𝑠 −
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
𝑛𝑒𝑡 𝑓𝑖𝑥𝑒𝑑 𝑎𝑠𝑠𝑒𝑡𝑠

30. FINANCIAL RATIO ANALYSIS
3 FinancialLeverage Ratios – a group of ratios designedto assessth
e balance of financingobtained through debt andequity sourc
es.
 Debt to Total Assets Ratio – shows how much of the firm’s assetsare financedby debt.
𝑑𝑒𝑏𝑡 𝑡𝑜 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 𝑟𝑎𝑡𝑖𝑜 =
𝑡𝑜𝑡𝑎𝑙 𝑑𝑒𝑏𝑡
𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠
 Times Interest Earned Ratio –measures the number of times that earnings before interest
and taxes cover or exceed the company’s interestexpense.
𝑡𝑖𝑚𝑒𝑠 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑎𝑟𝑛𝑒𝑑 𝑟𝑎𝑡𝑖𝑜 =
𝑝𝑟𝑜𝑓𝑖𝑡 𝑏𝑒𝑓𝑜𝑟𝑒 𝑡𝑎𝑥 + 𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒
𝑖𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑒𝑥𝑝𝑒𝑛𝑠𝑒

31. FINANCIAL RATIO ANALYSIS
4 Profitability Ratios – measure how much operating income or net in
come a company is able to generate in relation to its assets, owne
r’s equity, andsales.
 Profit Margin Ratio – compares net profit to the level of sales.
𝑝𝑟𝑜𝑓𝑖𝑡 𝑚𝑎𝑟𝑔𝑖𝑛 𝑟𝑎𝑡𝑖𝑜 =
𝑛𝑒𝑡 𝑝𝑟𝑜𝑓𝑖𝑡
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
 Return on Assets Ratio – shows how much income the company produces for every peso
invented in assets.
𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑎𝑠𝑠𝑒𝑡𝑠 𝑟𝑎𝑡𝑖𝑜 =
𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝑎𝑠𝑠𝑒𝑡𝑠
 Return on Equity Ratio – measures the returns on the owner’s investment.
𝑟𝑒𝑡𝑢𝑟𝑛 𝑜𝑛 𝑒𝑞𝑢𝑖𝑡𝑦 𝑟𝑎𝑡𝑖𝑜 =
𝑛𝑒𝑡 𝑖𝑛𝑐𝑜𝑚𝑒
𝑒𝑞𝑢𝑖𝑡𝑦

32. EXECUTIVE
REALITYCHECK
IDENTIFYING
CONTROL
PROBLEMS
COMPREHENSIVE
INTERNALAUDIT
GENERAL
CHECKLISTOF
SYMPTOMS OF
INADEQUATE
CONTROL

33. EXECUTIVE REALITY CHECK
Employees at the frontline often complain that management
imposes certain unrealistic requirements.
For instance, in a certain state college, requests for purchase
of classroom materials and supplies take last priority. This is irregular
because requests as such should be of the highest priority considering
that the organization is an educational institution.

34. COMPREHENSIVE INTERNAL AUDIT
An internal audit is one undertaken to determine the efficiency
and effectivity of the activities of an organization. Among the many
aspects of operations within the organization, a small activity that is
not done right may continue to be unnoticed until it escalates into a
more complicated problem.
A comprehensive internal audit aims to detect dysfunctions in
the organization before they escalate into bigger problems to the
management.

35. GENERAL CHECKLIST OF SYMPTOMS OF
INADEQUATE CONTROL
If a comprehensive internal audit cannot be availed of for some reason, the
use of a checklist for symptoms of inadequate control may be used.
Kreitner has listed some of the common symptoms as follows:
 An unexplaineddeclinein revenues and profits.
 A degradation of service (customer complaints).
 Employee dissatisfaction(complaints, grievances, turnover).
 Cash shortages causedby bloated inventoriesor delinquentaccounts receivable.
 Idlefacilitiesor personnel.
 Disorganizedoperations (work flow bottlenecks,excessive paperwork).
 Excessive cost.
 Evidence of waste and inefficiency(scrap, rework).

36. SUMMARY
 Controlling is one of the main functions of management. It is aimed at
determining whether objectives were realized or not, and if not, by
providing means for achievement.
 Controlling complements the other management functions.
 Controlling is a process consisting of various steps, namely;
• Establishing performance objectives and standards
• Measuring actual performance
• Comparing actual performance with objectives and standards
• Taking necessary actions based on the results of the comparison

37. SUMMARY
TYPES OF
CONTROL
ORGANIZATIONAL
CONTROL SYSTEMS
STRATEGIC
CONTROL
SYSTEMS
MEANS TO IDENTIFY
CONTROL
PROBLEMS
 Feedforward
 Concurrent
 Feedback
 Strategic Plan
 Long-range
Financial Plan
 Operating Budget
 Performance
Appraisals
 Statistical Report
 Policies and
Procedures
 Financial
Analysis
 FinancialRatio
Analysis
 Executive Reality
Check
 Comprehensive
Internal Audit
 GeneralChecklist

38. THANK YOU!