What Is Control? Control Control –the process of monitoring activities to ensure that they are being accomplished as planned and of correcting significant deviations –control systems are judged in terms of how well they facilitate goal achievement 1

Organizational Control The systematic process through which managers regulate organizational activities to make them consistent with expectations established in The systematic process through which managers regulate organizational activities to make them consistent with expectations established in ● Plans ● Targets ● Standards of performance 2

Defining The Acceptable Range Of Variation Acceptable Upper Limit Standard Acceptable Lower Limit Measurement of Performance Acceptable Range of Variation tt+1t+2t+3t+4t+5 Time Period (t) 3

Managerial Decisions in the Control Process 4

Organizational Control  Feed forward Sometimes called preliminary or preventive control Sometimes called preliminary or preventive control  Concurrent ● Assesses current work activities, relies on performance standards ● Includes rules and regulations for guiding employee tasks and behaviors ● Intent to ensure that work activities produce the correct results  Feedback Focuses on the organization’s outputs; also called post-action or output control Focuses on the organization’s outputs; also called post-action or output control Three types of control 5

Feedback Control Model If Inadequate If Adequate Adjust Standards Adjust Performance Feedback Establish Strategic Goals. 1. Establish standards of performance. 2. Measure actual performance. 3. Compare performance to standards. 4. Take corrective action. 4. Do nothing or provide reinforcement. 6

Organizational Control Focus Feedforward Control Anticipates Problems Examples Pre-employment testingInspect raw materialsHire only college graduates Focus is on Inputs Concurrent Control Solve Problems as They Happen Examples Adaptive cultureTotal quality management Employee self-control Focus is on Ongoing Processes Feedback Control Solves Problems After They Occur ExamplesAnalyze sales per employeeFinal quality inspection Survey customers Focus is on Outputs 7

TECHNIQUES OF CONTROL  Budgetary control  Financial statement analysis  TQM  Kaizen  balanced score card 8

Kaizen Japanese word –continuous & never ending improvement involving everyone in the organization.  Management oriented kaizen  Group oriented kaizen-Through quality circles  Individual oriented kaizen 9

 Muda (waste), Muri (strain) and Mura (discrepancy) are the basic checkpoints.  Involves 5 steps to keep work spot clean, maintain discipline,, put things in order & help straighten up tools & equipments.  5Ws-(who, what, where, when, why) and 1H(how)  4Ms-(Man, machine, material & method)  There will be no progress if you keep doing things exactly the same way all the time 10

Budgetary Control Most commonly used method of managerial control Most commonly used method of managerial control Process of setting targets Process of setting targets Used to monitor results and compare to budget Used to monitor results and compare to budget 11

Budgets Managers Use ● Expense = anticipated and actual expenses ● Revenue = identifies forecasted and actual revenues ● Cash = estimates and reports cash flows ● Capital = plans and reports investments in major assets to be depreciated ● Master budget 12

Financial Analysis Managers need to be able to evaluate financial reports that compare the organization’s performance with earlier data or industry norms Managers need to be able to evaluate financial reports that compare the organization’s performance with earlier data or industry norms  Liquidity ratios  Activity ratios  Profitability ratios  Leverage ratios 13

Total Quality Management - TQM Organizationwide commitment to infusing quality into every activity through continuous improvement Organizationwide commitment to infusing quality into every activity through continuous improvement  Quality circles  Benchmarking  Six Sigma  Reduced cycle time  Continuous improvement Based on decentralized control philosophy 14

The Balanced Scorecard Financial Internal Business processes Learning and Growth Customers How well do we serve our customers? Are we learning, changing, and improving? Do internal activities and processes add value for customers and shareholders? Do actions contribute to improving financial performance? Mission & Goals 15