The document discusses various aspects of controlling processes including establishing standards, measuring performance against standards, and correcting variations. It outlines different types of standards such as physical, cost, capital, revenue, program, intangible, and goals. Key controlling techniques involving budgets, statistical data, reports, audits, and modern techniques like PERT, CPM, and Gantt charts are also summarized. Information technology plays an important role in controlling through systems like MIS, intelligent services, computers, and digital technologies like e-commerce.

1. CONTROLLING

5. BASIC PROCESS IN CONTROLLING

6. CONTROLLING
The basic control process involves
three steps:
1. Establishing Standards
2. Measuring performance against
these standards
3. Correcting variations from
standards and plans

7. Critical Point Standards

8. Critical Point Standards
a. Physical Standards
where materials are used, labor is
employed, services are rendered &
goods are produced
– Labor hours per unit of output
– Pounds of fuel per horse power produced
– Ton-miles of freight traffic carried
– Units of production per machine hour
– Feet of wire per tone of copper

9. COST STANDARDS
• Direct & Indirect cost produced per
unit
• Labor cost per unit or per hour
• Material cost per unit, machine
hour cost
• Selling costs per rupee or unit of
sales

10. CAPITAL STANDARDS
The typical Balance sheet disclose
capital standards
o Standard for New Investment
o Standard for overall control
o Standard for ROI
o Standard for current Assets to current
liabilities
o Standard for debt to net worth
o Standard for fixed investment to total
Investment
Case receivables & payables, notes or
bonds to stock, size and turnover of
inventories

11. Revenue Standards
–Revenue per bus passenger – mile
–Average sale per customer
–Sales per capita in a given market
Program Standards
–To install a variable budget program
–A program for the development of new
products
–Program for improving the quality of
sales force

12. Intangible Standards
What standard can a manager use for
determining the competence of the
divisional purchasing agent or
personnel director?
– Whether public relation program is
successful
– Whether the advertising program meets
both short & Long term objectives
– Are supervisors loyal to company
objectives

13. Goal as standard
• Goals can be used as performance
standards

14. Real time Information and
Control
–Information about what is happening
while it is happening
–Vacant seat about airlines, super
markets (Sales – data, inventory,
gross profit), Production system
–Real time data is used to measure
performance

15. Future Directed Control
– Forecasts based on latest available
information
Ex. Sales forecast indicating that sales will
be lower than desirable, managers may
develop new plans for advertising, sales
promotion or the introduction of the new
products, in order to improve the sales
forecast.

16. Feed forward Vs Feedback
Control Systems

17. Requirements for feed
forward control
1. Make a through and careful analysis of
the Planning and control system, and
identify the more important input
variables
2. Develop a model of the system
3. Take care to keep the model up to data
4. Collect the data on input variables
regularly and put into the system
5. Regularly access the variations of actual
input data from planned for inputs

18. Systems of Inputs for Feed
Forward Control

19. Requirements for Effective
Controls
 Tailoring Controls to plans and Positions
(Control of sales department will defer for finance
department)
– Use budgets, standard hours & costs & Financial
ratios
 Tailoring controls to Individual Manager
 Designing controls to point up Exceptions at
critical points
 Seeking objectivity of controls
 Ensuring flexibility of controls
 Fitting the control system to the Organizational
Culture
 Achieving Economy of controls
 Establishing controls that lead to corrective action

20. Controlling Techniques :
BUDGET
Budget is the device for accomplishing
control
– Budget is the formulation of plans for a
given future period in numerical terms
– Budgets are statements of anticipated
results either in financial terms – Expense
& Capital budgets or nonfinancial terms -
labor hours, materials, physical sales
volume, units of Production

21. Types of Budgets

22. Types of Budgets
1. Revenue and expense budgets
2. Time, space, material and
product budgets
3. Capital Expenditure budgets
4. Cash budgets

23. Dangers in Budgeting

24. Dangers in Budgeting
oBudgets are used for planning and
control
oUnfortunately some budgetary
control programs are so complete
and detailed that they become
cumbersome, meaningless, and
unduly expensive.

25. BUDGETRY CONTROL

27. Zero – Base Budgeting

28. Zero – Base Budgeting
–It is also a type of budgeting
–The idea is divide the enterprise into
“Packages” composed of goals,
activities and needed resources and
then to calculate costs for each
package from the group up.
–It is useful for support areas rather
than to production areas

29. Traditional Non budgetary
control Devices
Statistical data of operations
Special reports analysis of specific
areas
Operational audit
Independent appraisal by a staff of
internal or external auditors
Personal observation such as
managing by walking around
Break even analysis

30. MODERN TECHNIQUES
• Program Evaluation & Review Techniques
(PERT)
• Critical path method(CPM)
• Gantt chart
• benchmarking

31. Program Evaluation & Review
Techniques (PERT)

33. MAJOR CHARACTERISTICS
• Optimistic time
• Pessimistic time
• Most likely time

35. GANTT CHART

38. Information Technology
• MIS provides the communication link
that makes managing possible
• MIS is defined as a formal system of
gathering, integrating, comparing,
analyzing and dispersing information
internal and external to the enterprise
in a timely, effective and efficient.
• Electronic equipment permits fast and
economical processing of huge
amounts of data

39. Expansion of basic data
• In traditional accounting information,
aimed at calculation of profits, has
been of limited value for control
• Managers need all kinds of non
accounting information above the
external environmental such as social,
economic, political and technical
developments

40. Intelligent Services
–To solve the problem of
information overhead, the
establishment of intelligent
services and the development of a
new profession of intelligence
experts.

41. The use of Computers in
Handling Information
• Mainframe Computer
• Mini Computer
• Micro Computer

42. Business Applications
 Material Requirements Planning
 Manufacturing Resource Planning
 Computer – aided control of Manufacturing
machinery
 Project costing
 Inventory control
 Purchasing
 Design and Engineering (U.S.Space
Program)
 A/Cs receivable & Payable
 Pay roll
 Capital Budgeting
 Financial Planning

43. Supervisory Level  Scheduling, daily
Planning & Controlling
Middle level Managers  Plant
Managers Administration &
Co-ordination
Too Level Managers  Strategy &
Overall policy (Interaction between
enterprise and environment)

44. Applications and Impacts of
Microcomputers
• Budget Preparation
• Graphic Presentation
• Electronic Spread Sheets
• Financial Analyses
• Word Processing
• Simulation Models
• Forecasting
• Electronic Mail
• Tapping into databases
• Time - sharing

45. Challenges created by IT
–Resistance to Computer
Applications
–Speech Recognition Devices (then,
than-to, too & two)
–Telecommuting
–Computer Networks
–Internet

46. Digital Economy
–The internet changing how
business is conducted
• e-mail, e- commerce, e-business,
e-cash, e-travel, e-finance, e-
loan, e-music, e-books & many e-
activities. (Deleting
intermediaries, reducing
distribution costs)

47. 1. Consumer to Business (C2B)
– Flyers can bid for airline tickets through
priceline.com
2. Business to Consumers (B2C)
– One can order books or other items from
amazon.com
3. Consumer to Consumer (C2C)
– Individual can sell items over the web
through eBay
4. Business to Business (B2B)
– These transactions are probably going to
have the greatest impact on the economy
– Ex. G.M & Ford plan to transfer all
purchasing to the web with in next few years

48. M- Commerce
• Development of WAP
(Devices like cell phone, Personal
Digital Assistance)( Palm Pilot)

49. Productivity
–It is the input –output ratio
with in a time period with
due consideration for quality

50. Production Management
– It is used to refer to those activities
necessary to manufacture products.
[purchasing, warehousing, transportation]
Operations Management refers to activities
necessary to produce and deliver a service
as well as a physical product.

51. FACTORS AFFECTING PRODUCTIVITY
• Technology
• Human resources
• Government policy
• Machinery and equipment design
• Skill of the workers
• Capital
• Research and development
• Trade unions
• Raw materials
• Job layout

52. PRODUCTIVITY MEASURES
• Physical productivity
• Functional productivity
• Economic productivity

53. PROBLEMS IN MEASUREMENT OF
PRODUCTIVITY
• Difficulty in measuring output
• Difficulty in measuring inputs
• Factorial productivity
• Changing conditions
• Service sector
• Different periods
• Difficulty in measuring man hours
• Technological change

54. Operations Management System

55. Product and Production
Design

56. Product and Production
Design
• Create product ideas by searching for
consumer needs and searching the
various alternatives
• Select the product on the basis of
various considerations including data
from market and economic analyses
and make a general feasibility study
• Prepare a preliminary design by
evaluating various alternatives, taking
into consideration reliability, quality
and maintenance requirements.

57. • Reach a final decision by developing,
testing and simulating the process to see
if they work
• Decide whether the enterprise’s current
facilities are adequate or if new or
modified facilities are required
• Select the process for producing the
product, consider the technology and the
methods available
• After the product is designed, prepare the
layout of the facilities to be used, plan the
system of production, and schedule the
various things that must be done.

58. System Design
1. Layout in the order in which the product
is produced or assembled
2. Layout according to the process
employed (E.g. Clinic)
3. Fixed Position layout Ex. Printing Press,
Ships
4. According to the nature of the project Ex.
Bridge – Building or Tunnel
5. Arranged to facilitate the sale of
products Ex. Super market
6. Layout facilitates storage or movement
of products

59. PRODUCTION CONTROL
• Process that keeps an eye on the production
flow and size of resources along with the
location of any deviation from the present
action and to arrange for the prompt
adjustment.

60. REASONS
• Increasing production
• Coordinating plant activity
• Cost control
• Rationalization of production activities.

61. Tools and Techniques for
improving Productivity
a) Inventory Planning and Control
= EoQ
D = Demand Per year
S = Setup Costs
H = Inventory holding cost per item, per year
Goal: Optimal Total cost for purchasing or
manufacturing, inventory holding and
shortages
e
Q
H
DS
Qe
2


66. Purchasing /
manufacturing
cost per unit
Inventory cost per
unit
Demand for
product
Distribution of
product
Reorder lead time
Shipping costs
and lead time
Inventory
Model
Purchasing /
manufacturing
Schedule
Shipping Schedule
Inventory
Schedule
Shortage
probabilities
Inputs
Outputs (Planned
events)
Goal Inputs Feedback
measures

67. b) Just – in – Time Inventory System
(Japan)
– Zero Inventory & stockless Production
Requirements
• The quality of the parts must be very
high
• Dependable relationship & smooth
cooperation with suppliers
• Supplier should be located near the
company

68. c) Outsourcing  USA & Europe
–Products and operations are
contracted to outside vendors
that have expertise in a particular
area

69. d) Operations Research
It is the application of scientific
methods to the study of
alternatives in a problem situation,
with a view to obtaining a
quantitative basis for arriving at a
best solution

70. e) Value Engineering
Analyzing the operations of the
product/ service, estimating the value of
each operation, and attempting to
improve that operation by trying to keep
costs low at each step or part

71. f) Work Simplification
Process of obtaining the participation
of workers in simplifying their work
Training sessions are conducted to
teach
 Time & motion studies
 Work flow analyses
 Layout of workstation

72. g) Quality Circles
It is a group of people from the
same organizational area, who
meet regularly to solve problems
they experience at work

73. h) Total Quality Management
TQM involves the organization’s long
term commitment to the continuous
improvement of quality – throughout the
organization, and with the active
participation of all members at all levels-
to meet and exceed customers’
expectations.
i) Learn Manufacturing Kaizen, Zero
defects, JIT, Team Management
j) Computer Aided Techniques – CAD,
CAM

74. k) Break Even Analysis
It is a graphical method of analyzing
and understand the relationships
among sales volume, costs and
revenues in any organization.

75. BEP :-
– The level of sales volume to which TR=TC
– After the BEP, the organization begins to
make profits
Margin of safety = Actual Sales – Sales at
BEP
– Large angle of incidence means higher
profits

76. Scope of BEA
1. It shows profit & losses at various
levels of production
2. It gives relationship between revenue
and output
3. Helps in budgeting and profit planning
4. It is a decision making tool in the
hands of Management

77. Productivity
It measures how well an organization is
using its resources in producing its
goods and services
– It is defined as the ratio of output to input
– Greater Productivity leads to greater
profitability
y
Techno
Material
Money
Labour
produced
services
and
Goods
oductivity
log
Pr





78. Productivity Problems
Causes of low productivity
1. Less skilled labor force
2. Less importance to R & D
3. Less ambitious workers
4. Worker’s attitude and loyalty
5. Government policies and
regulation

79. Approaches to improve
Productivity
1. Formulation of objectives
2. Performance against these objective
3. Effective reporting system
4. Reinforcing good performance
5. Knowledge workers
6. Principles and guidelines
7. Recognition of good performance
8. Preparing work modules
9. Emphasizing goals
10.Developing ability to work with people

80. Cost Control
• Cost control can bring immediate savings
and ensure that business remain
competitive in the long term
• Cost control is a continuous process that
begins with the proposed annual budget.
The budget helps
• To organize and coordinate production
and the selling, distribution, service and
administrative functions
• To take maximum advantage of available
opportunities

81. For effective cost control, most
organizations use standard
cost systems, in which the
actual costs are compared
against standard cost for
performance evaluation and the
deviations are investigated for
remedial actions.

82. Steps involved in cost
control
• Investigate procedures to detect
variance of actual costs from budgeted
costs
• Diagnostic procedures to ascertain the
causes of variance
• Corrective procedures to effect
realignment between actual and
budgeted costs

94. Purchase Control
–It provides link between inventory
control system and the accounts
payable system
–It provides a means of recording
purchase orders placed with the
vendors and tracking the orders
through the different phases of the
receiving the product, back ordering
and invoicing

95. Quality Control
• It is concerned with checking and
reviewing work that has been done
• The basic goal of quality control is
to ensure that the products,
services or processes provided
meet specific requirements and are
dependable, satisfactory and
fiscally sound.

96. QC system is designed to
–Provide routine and consistent
checks to ensure data integrity,
correctness and completeness
–Identify and address errors and
omissions
–Document and archive inventory
material and record all QC
activities

97. QC Tools

98. QC Tools
– To improve the quality of the product
a. Check Sheet : It is used to easily
collect data. Decision making and actions
are taken from the data
b. Pareto Chart : It is used to define
problems, to set their priority, to illustrate
the problems detected and determine
their frequency in process
c. Cause & Effect Diagram : (Fishbone
diagram) is used to figure out any
possible causes of a problem. After the
major causes are known, we can solve
the problem accurately.

99. d) Histogram :
Shows a bar chart of
accumulated data and provides
the easiest way to evaluate the
distribution of data
e) Scatter Diagram :
Is a graphical tool that plots
many data points and shows a
pattern of correlation between
two variables

100. f) Flow Chart :
shows the process step by
step and can sometimes identify
an unnecessary procedure
g) Control Chart :
provides control limits
which are generally three standard
deviations above and below
average, whether or not our
process is in control

101. International
Management
–International business engage in
transactions across national boundaries
–These transactions include transfer of
goods, services, technology, managerial
knowledge and capital to other
countries
–[Exportation, Licensing Agreement,
Management Contracts, Joint Ventures
and strategic alliances & subsidiaries]

102. Advantages of MNC
• Advantages of business opportunities
in many countries
• Raise money for its operations,
throughout the world
• Better access to national resources and
materials may not be available to
domestic firms
• Recruit managers & other personnel
from a world wide labor pool.

103. Challenges in
Multinationals
– Increasing nationalism in many
countries
– Years ago, developing countries lacked
managerial marketing & technical
skills. Now people in developing
countries acquiring those skills
– Government frequently change &
corporations must deal with and adapt
to these changes

104. France
• Government planning on a national
scale i.e helps coordinate the plans of
individual industries and companies
• The government aim is to utilize most
effectively the country’s resources and
to avoid expansion in uneconomic
areas
• At times, the plan becomes a global
strategy helping specific
industries(Electronic)

105. Germany (Authority &
Codetermination)
• In the past  benevolent
authoritarianism
• Codetermination  which require labor
membership in the supervisory board
and the executive committee of certain
large corporations
• Labor director is elected as a member
of the executive committee

106. Korean Management
– It is simply an extension of Japanese
Management
– Korean Organizations are quite hierarchical, with
family members occupying key positions
– Beyond blood relationships the factors affecting
hiring decisions often include the school
attended it being from the same geographic
region as the top person
– The lead ship style can best be described as top-
down, or autocratic/ Paternalistic
– So the firm adjust quickly to the demands in the
environment
– Life time employment does not prevail
– Labor turnover rates are high

107. Japanese Management
• Life time Employment
• Consensus decision making
(Change & new ideas come primarily from
below)
• Theory X
– Emphasis on interpersonal skills needed for
group interaction
– Emphasis on group decision making,
responsibility remains with the individual
– Emphasis on informal and democratic
relationships based on trust.
– (Now IBM, HP, Dayton – Hudon followed this)

108. Porter’s competitive
advantages of Nations
– He suggests four sets of factors that
contribute to a nation’s well being
First Set :
Nation’s resources, its labor costs & the
skills and education of its people
Second set :
Demand conditions of a nation
• Market size, the way product may be advertized
• Degree of consumer sophistication

109. Third Set :
–Concern for suppliers
– A company prospers when
supporting companies are located in
the same area
Fourth Set :
– Firm’s strategy and structure as well
as rivalry among the competitors

110. Australia
 Country’s moralistic stance
and its emphasis on political
and social values, achievement
& risk taking Italians
Italians
• In the environment of low
tolerance for risks
• Very competitive & group decision
making

111. Austria
• Self realization and leadership
• Independence & competitiveness
are valued
• Tolerance for risk taking is low
Britain
 Security, resourcefulness,
adaptability and logic

112. Control of overall
Performance
– Profit and loss control
– Control through ROI
Direct Control
To compare the actual output of
goods or services in terms of
quantity, quality, time & cost with
plans

113. Cause of Negative
Deviations from standards
• Uncertainty
• Lack of knowledge, experience or
judgment
Preventive Control
The higher the quality of
managers and their subordinates,
the less will be the need for direct
controls

114. Developing Excellent
Managers
Instilling a willingness to learn
Accelerating Management Development
Planning for Innovation
Measuring and Rewarding Management
Tailoring Information
Expanding Research & Development in
Tools & Techniques
Developing more Managerial Inventions
Creating strong Intellectual leadership