controlling

controlling
Lecture 10

Whatis
isCONTROLLING?
CONTROLLING?
What
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.

Controlling compares the

events or the accomplishments
with the original plans and
makes necessary corrections
when the events differs from
plans. It is the process by
which management sees if
what happened was what was
supposed to happen.

CONTROL could mean:

(1) To check or verify;
(2) To regulate;
(3) To compare with a given
standard;
(4) To exercise authority over
someone or group; and
(5) To curb or restrain.

distinctdefinitions
definitionsof
ofCONTROL
CONTROL
33distinct
(1) Curbing or restraining
(2) Directing or commanding
(3) Checking or verifying

According to Fayol: Control consists in

verifying whether everything occurs in
conformity with the plan adopted, the
instructions issued and principles
established. It has for its object to point
out weaknesses and errors in order to
rectify them and prevent recurrence.

The control
control process
process
The
1. Establishing standards or
targets
2. Measuring actual
performance
3. Comparing performance
against standards
4. Taking corrective action

Establishing
standards
Establishing standards
Standards are units of measurement
established by management to
serve as benchmarks for
comparing performance levels.
Forms:
1. monetary terms
2. units of production
3. measures of acceptable quality

Methodsfor
forsetting
settingstandards
standards
Methods
1. judgment
2. statistical or historical data
3. observation

Types of
of standards
standards
Types
1. Performance standards
2. Corollary standards
3. Standards of conduct

Establish performance
Establish performance
objectives and standards
objectives and standards
Measure actual
Measure actual
performance
performance
Does actual
Does actual
performanc
performanc
e match
e match
the
the
standards
standards
No
Does
Does
correcti
correcti
ve
ve
actions
actions

Do
Nothing
Yes

STEPSIN
INTHE
THE
STEPS
CONTROL
CONTROL
PROCESS
PROCESS

Measuring actual
actual
Measuring
performance
performance
Pay close attention to:
1. The timeliness of the information
2. The appropriateness of the units

of measurement
3. The reliability of the information
4. The validity of the information
5. The channeling of the
information to the proper person

Comparingperformance
performanceagainst
againststandards
standards
Comparing
The purpose of comparing past
performance with a with planned
performance is not only to determine
when an error has been made but also to
predict future outcomes. A good control
system, then, will provide quick
comparisons so the manager can detect
possible trouble while the operation is
still under control. Comparisons of actual
performance over time often will show
trend that might be a danger signal. The
manager cannot change the past, but the
knowledge of the past will help him or

Taking corrective
corrective
Taking
action
action
The purpose of comparing actual
performance against intended
performance is, of course, to determine
if corrective action is needed. But a
manager cannot see the total activity
and therefore must carefully avoid two
types of errors: (1) taking corrective
action when no action is warranted, and
(2) failing to take corrective action when
I is clearly needed.

Types of
of control
control
Types
3 distinct types:
1. Feedforward control
2. Concurrent control
3. Feedback control

Preoperatio
n phase

Feedforward
Control

Actual
operatio
ns phase

Concurrent Control

Post
operatio
ns phase

Feedback Control

Components of
organizational control
systems
1.
2.
3.
4.
5.
6.

Strategic plan
Long-range financial plan
Operating budget
Performance appraisals
Statistical reports
Policies and procedures

Strategic control
systems

1. Financial analysis
2. Financial-ratio analysis

a. liquidity
b. efficiency
c. financial leverage
d. profitability

Identifying controls
3 approaches (by Kreitner):
1. Executive reality check
2. Comprehensive internal
audit
3. General checklist of
symptoms of inadequate
control