The System and Process of Controlling MBA 11

8/3/2019 The System and Process of Controlling MBA 11

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The System And Process Of

CONTROLLING


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The interactive nature of Management process

Planning

Use logic &methods to think through

goals & actions

ControllingMake sure the

organization is moving

towards its objectives

OrganizingAllocate work,

authority & resources

to achieve organizational

goals

LeadingDirect, influence & motivate

employees to perform

essential tasks


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The Basic Control Process

The managerial function of CONTROLLING is themeasurement and correction of performance in order to make

sure that enterprise objectives and plans devised to attain them

are being accomplished. This involved three processes:

Establishing standardscriteria of performance Measurement of Performance -- to be done on forward

looking basis so as to anticipate and preventive actions taken

Correction of Deviationto be seen as a part of the whole

management system and can be effected by (1) redrawing ofthe goals (2) reassignment or clarification of duties (3)

additional staffing & retraining (4) provide better leadership etc


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Why Control Is Needed ?

Control helps managers monitor environmental changes(nature of competition, speeding up the order-delivery cycle,

value added products and services to enhance demands,

changes in work and organizational culture, need for

delegation) and their effects on the organizational processes. The way control is exercised differs in different countries. In

the US attempts are made to pinpoint responsibility for

deviations; in Asian countries peer pressure is used for

effective control and attempt is made that the individual doesnot lose face publicly.


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Designing Control System

Managers face a number of challenges in designing theControl System that provide accurate feed back in a

timely and economical fashion that is acceptable to the

organization members. Trying to control too many

elements of operations too strictly can annoy anddemoralize employees, frustrate their managers and waste

valuable time, energy and money. Furthermore, managers

may focus on easy to measure factors such as number of

diners on a particular day and ignore hard to measure

factors as Dinner Satisfaction.

Two areas are important (a) Key performance areas and

(b) strategic control points.


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Identifying Control points

Key Performance or Key Result Areas: Are those areasof the organization that must function effectively for the

entire unit or the organization to succeed. In todays

organization KRAs are cross functional

Strategic Control Points: Critical points in a system atwhich monitoring and collection of information should

occur. The most important and useful method of selecting

strategic control points is to focus on the most significant

elements in a given operation.


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Types of Critical Point Standards

Every objective, every goal, every activity etc can be astandard against which the performance is measured.However, traditionally they are of the following types:

Physical standards

Cost standards Capital standards

Revenue standards

Program standards

Intangible standards Goals as standards

Strategic plans as standards- modification of strategy basedon evaluation


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Benchmarking

This is an approach for setting goals and productivitymeasures based on best industry practices. Three types of

Benchmarking:

Strategic: compares various strategies and identifies the

key strategic elements of success Operational: compares the relative costs or possibilities for

product differentiation

Management: focuses on support function such as

marketing, logistics, HRM and information system


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Desired

performance

Actual

performance

Measurement

of actual

performance

Comparison of

actual

performance with

standards

Implementation

Of

correction

Program of

corrective action

Analysis of

causes

of deviation

Identification

of deviation

Control as Feed Back System

Management control is usually perceived as a feedback

system similar to the common household thermostat. However,

such information are distressingly historical facts.

Feed back loop of Management Control


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Objectives StandardsMeasure actual

performance

Compare actual

performance

with

standard

Is standard

being

attained

Is

variance

acceptable

Is standard

acceptable

Revise

standards

NO

No

No

Do nothing

Do nothing

Identify

cause of

variation

Correct

performance

Yes

Yes

Yes

Managerial interventionIn the Control Process

Managerial action


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Real Time Information Control &

Feedforward Control

One of the interesting advances arising from the use of

electronic system is the gathering, processing and storing of

data / information on real time basis (applicable in quality

control, airlines reservation, flight scheduling, inventory and

supply linksWalmart) Managers need effective control system that will tell them

potential problems, giving them time to take corrective

actions before the problems occur.

Feedforward systems monitor inputs into a process toascertain if the inputs are as planned; if they are not, the input

or the process is changed in order to obtain the desired results


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Concurrent Control

This takes place while the activity is in progress. Whencontrol is enacted when the work is being performed,management can correct problems before they become toocostly.

Technical equipment can be designed to include concurrentcontrol. Most computers, for instance, are programmed toprovide the operators with immediate responseif an error ismade.

Many organizational quality programs rely on concurrent

controls to inform their workers if their performanceoutput and levels are of sufficient quality and to ensure thatquality standards are met


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INPUT PROCESSES OUTPUT

Feedforward

control

Concurrent

control

Feedback

control

Anticipates

problems

Corrects problems

as they occur

Corrects problems

after they occur

Types of Control and their operation


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Desired values

of outputs

(Standards)

Comparison of simple feedback and

feedforward systems

Inputs Process Outputs

Feedforward Simple feedback

Information

Corrective action


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Control Tools and Techniques 1

Although the basic nature and purpose of management

control does not change, a variety of tools and

techniques have been used over the years to help the

managers control: Budgets are used for planning and control; unfortunately some

budgetary control programs are so complete and cumbersome,

meaningless and unduly expensive.

Traditional non-budgetary control devices are the use of statisticaldata of operations, special reports and analyses of specific areas,

operational audit (both internal or external) and personal

observation by MBWA


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Control Tools and Techniques 2 Auditing

The term Auditing is colloquially associated with thedetection of fraud. Although, discovery of fraud is an importantfunction of auditing, it is far from being the only one. Itvalidates the honesty and fairness of financial statementsproviding a critical basis for management decisions. Two types

of auditing:

Internal auditing: Audit performed by the organization to ensurethe assets are properly safeguarded and its financial records arereliably kept.

External auditing: Verification process involving theindependent (outsider) appraisal of financial accounts andstatements to ensure that the company has correctly followedaccepted accounting principles in preparing the statements


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Time event net-work analysis would include Gnatt Charts: a bar chart that shows the time relationships

between the events of a production program

Milestone Budgeting: as a sequel to Gnatt charts, milestones /

mileposts were integrated to the bar charts to make analysismore meaningful

PERT (program evaluation and review technique): A timeevent network analysis system in which the various events in aprogram or project are identified, with a planned time

established for each; this also brought the concept of CriticalPath in ensuring timely delivery of them output. Typical PERTevents include too many events and would require the help of acomputer


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Operations control: The success of an organization depends

to a large extent on its ability to produce goods and services

effectively and efficiently. Operations control techniques are

designed to assess how effectively and efficiently an

organizations transformation process are working. Two

important operations control tools deserve mention; TQMcontrol charts and EOQ model

TQM control charts provide a visual means of determining

whether a specific process is staying within predefined limits.

EOQ (economic order quantity model) seeks to balance fourcosts associated with ordering and carrying inventory-- the

purchase costs, ordering costs, carrying costs and stock out

costs


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Information technology and use of computers in

handling data / information have greatly facilitatedorganizational control at a relative low cost

MIS (Management Information System) is a formal system ofgathering, processing, and dispensing information internal and

external to the enterprise in a timely, effective and efficientmanner to support managers in their jobs.However, it may leadto information indigestion / overload. One attempt at solving theproblem is the establishment of of intelligence services anddevelopment of expertise who would know what kind of

information is required by the managers for their managerial use. The information needs at the various levels vary and accordingly

managers of different levels can choose the appropriate computerslots for themselves


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The Digital economy, E commerce, and M commerce: Information technology affects most aspects of business and

personal; life. The relationships with the suppliers and customers

are changing dramatically. The economic gains of e commerce

come from the lower costs of online companies. Buyers benefitfrom being able to compare prices and select the best from the

comfort of their own place.

While e commerce is changing the way business is conducted,

wireless communications and m commerce (mobile commerce)

are emerging to take it still further. They provide great

opportunities for enterprise. Managers need to observe the trends

and develop strategies to take advantage of new technologies.


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Customer relations management (CRM): Customers are the reason for an organizations existence.

The enterprise needs to focus on their needs. CRM

addresses this need. In broad terms CRM means promoting

the interactions between the customers and the organizatinsby collecting, analyzing and using this information to

better serve the client.

There are concerns and limitations of CRM and is clearly

not the cure all for all the problems between theorganization and its customers. However, to remain

competitive companies may use CRM for systematically

staying in contact with the customers


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Behavioral control techniques: Managers accomplish goals byworking with other people. It is therefore important to ensure thatthe employees are performing at their optimal level. Following aresome of the control devices the managers have at their disposal.

A. 1.Selection 2.Goals 3.Job design 4.Orientation. 5.Direct

Supervision 6.Training 7.Mentoring 8.Formalization9.Performance appraisal 10.Organizational rewards11.Organizational culture

B. When an employees performance regularly isnt par orconsistently ignores organizations rules and regulations, the

manager may have to use discipline (principle of hot stove) as away to control behavior Four cardinal principles Immediacy,Advance warning, Consistency and Impersonal. Knowing whatattitude, even what tone of voice to take when discipliningemployees is important.


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Control Tools and Techniques 9 Time Management

1. List your objectives

2. Rank objectives according to their importance3. List the activities necessary to achieve your objectives

4. For each objective, assign priorities to the variousactivities required to reach the objective.

5. Schedule your activities according to the priorities youhave set.

6. Follow the 1090 principle

7. Know your productivity cycle

8. Remember Parkinsons Law9. Group less important activities together

10. Minimize disruptions

11. Beware of wasting time in Poorly run meetings


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Requirements for Effective Controls -1

All alert managers want to have an adequate and effective

systems of control to assist them in making sure that events

conform to plans. Indeed, if the controls are to work, they must

be tailored to plans and positions, to the individual managers

and their personalities, and to the needs for efficiency and

effectiveness.

Efficient control requires that managers look for exceptions,

while effective control requires that managers pay primary

attention to things that are most important.


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Requirements for Effective Controls -2

Seeking Objectivity (effective, accurate and suitable

standards) of controls

Ensuring Flexibility of Controls: If the controls are to remain

effective despite failure or unexpected changes of plans, they

must be flexible

Fitting control system to the Organization Culture: To be

effective, any control system or technique must fit the

organization culture

Achieving Economy of controls: must be worth their costs

Establishing controls that lead to CorrectiveAction: An

adequate control system will disclose where failures are

occurring and who is responsible for them, as well as ensuring

that corrective action is taken.


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Effective Control

System

Multiple

criteria

Emphasis onexception

Strategic

placement

Corrective

actionAccuracy

Timeliness

Understandability

Economy

Reasonable

criteriaFlexibility

Qualities of Effective Control System

Ethical

Ethical


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References

ManagementBy Stoner, Freeman and Gilbert Jr ManagementA global Perspective By Heinz Weihrich

and Harold Koontz

Management By Robbins

The System and Process of Controlling MBA 11

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