CONTROLLING

Effective Control
Operations Management
Information Systems
Effective Control System

n “Designing effective control systems

can be difficult. If managers try to
control too many elements in a rigid
way, staff morale will probably suffer
and valuable time, money, and energy
will be wasted. These problems can be
minimised if managers focus on
controlling key performance areas and
strategic control points” (Stoner et al.
1995, p. 576)
Basic Steps in the Control Process

Establish Does Take

standards performance No corrective
Measure
and methods match the action and
performance
for standards? re-evaluate
measuring standards
performance

Easiest step. If it
Goals and Measuremen
matches,
objectives t is ongoing,
Do nothing ‘everything is
established repetitive
under control’. If
during the process
not corrective
planning
measure must be
process will
taken
already be
stated
clearly,
measurable
and include
deadlines
Why control is needed?
n To create better quality
– TQM
– Spotting process flaws
– Correcting mistakes
n To cope with change
– Change is inevitable
– To compete with competitors
– New materials and technologies
n To create faster cycles
– Speed is essential
Why control is needed?
n To add value
– Speed to add value, competitive edge
– Adding value circumvents expensive and
rigorous activities to compete with
competitors
n One way is to incorporate technological
enhancements
n To facilitate delegation and teamwork
– Participative management
– Encourage employees to work together as
teams
– This helps manager in carrying out duties
and he/she monitors employee progress.
Identifying Key Performance
Areas
n Aspects of the unit or
organisation that must function
effectively for the entire unit or
organisation to succeed.
Standards Used in Functional Areas to
Gauge Performance
Financial Controls
n Financial statements
n Balance sheet
n Income statement
n Cash flow: Sources and uses-of-
funds statements
Budgetary Control Methods
n Budgets are stated in monetary
terms
n It conveys capital resources
available
n Budgets run usually over a year.
Type of Budgets
n Operating budgets
– Expense budgets
– Revenue budgets
– Profit budgets
Auditing
n External auditing
n Internal auditing
– Usually evaluates organisation’s
operational efficiency and the
performance of its control systems
 2. Operations System
n An organisation can be viewed as a
system, a set of related and
interacting subsystems that
perform functions directed at
reaching a desired goal.
n Resources/Input include human,
capital, technology and information
INPUT OUTPU
T
Conceptual Model of an Operation
System

EXTERNAL
ENVIRONMENT
INPUT
(resources)
•Human
•Capital OUTPUT
- Land TRANSFORMATIO
- Equipment N OR • Goods
- Building CONVERSION • Services
•Technology PROCESS • Other
•Information

FEEDBACK
The Transformation Process
n Input to output varies from one org to another.
Physical transformation of raw materials into
finished goods occur in production
organisations.
n Service organisations transform also transform
materials (forms and writing equipment) into
finished goods (completed tax forms). Mostly
intangible (cannot be stored)
n Transportation involves locational
transformations
n Retailing involves exchange transformations
(money for goods)
n Legal and accounting firms involve information
transformed from one form into another

(see figure again – loop)

The Importance of Operations
Management
n Operations management refers to
the complex set of management
activities involved in planning,
organising, leading and controlling
an organisation’s operations.
n Important because
– It can improve productivity
– Helps organisation meet customers’
competitive priorities
The Importance of Operations
Management
n improve productivity
– Total productivity
– Partial productivity
n Labour productivity index / output per work-hour
ratio
n competitive priorities
– Pricing
– Quality level
– Quality reliability
– Flexibility (product – eg. custom-made,
volume flexi – eg. rate of production to
meet customer demands – such as
employed by McDonalds)
Designing Operations Systems
n Operational plans must meet
strategic plans
n Operational plans affect design of
operations systems
n Designing OS involve making
decisions on what, how many,
how and where products will be
produced, and who will produce
them.