1 Martin Zralý: ENTERPRISE MANAGEMENT CONTROL Department of Enterprise Management and Economics Faculty of Mechanical Engineering, Czech Technical University.

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Presentation transcript:

1 Martin Zralý: ENTERPRISE MANAGEMENT CONTROL Department of Enterprise Management and Economics Faculty of Mechanical Engineering, Czech Technical University in Prague Prague 11/2011

2 Questions: Questions:  Which are the Basic Elements of Enterprise Management Control (MC)? Their hierarchy?  What does it mean to apply the Process Approach (Control)?  What does it mean the Enterprise Control is integrated?  Why the Time is considered as the key factor in contemporary Management Control  Which optimal TIME situation are required in MC?  Measures (Indicators): Why they are of the key role in MC?

3 What is it about ? What is it about ?  Basic Elements of Enterprise Management Control Processes - In which way to accept them  Processes - In which way to accept them Integration in Enterprise Control  Integration in Enterprise Control Controlling as an Approach to Enterprise Control  Controlling as an Approach to Enterprise Control  Convergent controlling concept  Time - the key factor in contemporary management control  Resources Capacity Utilization  Measurement - Indicators  Summary - Final Conclusions

4 Basic Elements (Entities) of Enterprise Management Control  Products (incl. services) (set of products, product’s group)  bring money in !  Processes  create products or support creation and sale of the products  Activities (= parts of processes)  Projects (= campaign to support achievement of targets of the processes or activities)  Resources:  Human  Tangible and Intangible  Finance  Departments (Centres)  Primary: Which features of these elements and at their important connections are decisive and in which way to do measure them?

5 ( Processes - In which way to accept them )  Process = purpose-built consequence of activities  Production (money earning) process: … product producing  Supportive process: … preconditions for effectiveness of the P-processes  Example: Processes in a project company:  Production processes  Projects creation, possible more processes if they significantly differ  Calculations  Expert opinions activities (e.g.: somebody else's project assessment)  Supportive processes  Recruitment and retention of the customers (organizing common actions, special offers, identification of the customer’s requirements, etc.)  Motivational for employees  Qualifying for employees  Innovation of the project technologies (incl. bmkg of the competitors, new knowledge assessment, project methodology procedures and recommendations)

6 Enterprise Control has to be Integrated  In which way to interpret „Integration“ in enterprise control ? = Unifying, harmonizing interconnections of all parts in one cohesive unit  Basic characteristics of the „Integration“ are: self-contained, linking, unifying, interconnection, but also completion  The Aim of the „Integration concept“ in an enterprise control: „In which way can „Integration“ contributes to the ability to achieve the high extent of the control of enterprise processes and results.“  Integration in technical systems - Examples:  Computers - hardware i software (MS-Office, CAD + simulation prg.)  Machining centres

7 Why Integration Has to Be Considered as Significant Feature ?  Major reasons for growing importance of Integration:  The number (+ rate) of changes is rapidly growing - turbulent environment (Drucker, etc.)  Product’s complexity and requirements to the product is growing  Process’s complexity is growing  Enterprise size is growing  Product and process costs are growing, namely fixed ones      Enterprise has to operate as consistent unit  Input changes have to cause adequate changes in processes and in outcome      Elements in the enterprise control has to be interconnected, possibly unified, …  integrated

8 Controlling as an Approach to Enterprise Control  Enterprise control has to be kept in fixed framework  Enterprise control has to be developed step by step, no revolution is recommended (continuous development)     Convergent controlling concept can be considered as an suitable framework Convergent controlling concept can be considered as an suitable framework WHY?     WHY?      Basic points:  practical experiences from enterprises in different areas  it respects recommendations of leading persons in controlling theory: prof. Horváth, prof. Eschenbach  it respects recent approaches to enterprise control: process control, ABM, resp. TO-ABM (emphasis to Activities and Time characteristics) prof. Kaplan  it respects recommendations from broad discussions.

9 Convergent controlling concept Convergent controlling concept 1/2  Concept based on seven viewpoints:  (1) Objectives are primarily  Acceptance of basic controlling line (spiral): (vision)  objectives  targets  processes (+ activities)  projects (initiatives)  indicators  plan x records  evaluation  decision (D) (correction)  D- execution  D-evaluation  (2) Integration horizontal and vertical horizontal and vertical content and formal content and formal TOOLS: methods, approaches, methodologies, software, … TOOLS: methods, approaches, methodologies, software, …  (3) Planning (budgeting) has exceptional role  (4) Evaluation Regular and consistent, in short time-periods  (5) Tools Application of controlling and other managerial tools and their combination, emphasis to integrative ability of tools

10 Convergent controlling concept Convergent controlling concept 2/2  (6) Standardization and formalization of procedures (for control, etc.)  (7) Broad acceptance of learning processes (ability to take lessons) in all areas  Regular update, resp. improving of procedures, regulations, rules … ( „we did it in this way last year, we will continue in this way this year again“)  Regular update, resp. improving of procedures, regulations, rules … (versus: „we did it in this way last year, we will continue in this way this year again“) Important confirmation of this approach + another inspirations:  BM- project fy. Point Consulting (9/2003) and its results:  namely:   Dominant support of saying „Missing integration in enterprise control", related to the evaluation of all managerial tools  Dominant support of saying „Missing integration in enterprise control", related to the evaluation of all managerial tools !!  Solutions: Integrative System Concept  E.g.: „Business Navigation“

11 Time - the key factor in contemporary mgmt. control WHY?  Time related costs rate in total costs is growing  E.g.: Equipment & Machine C., Space C., IT-C., Staff C., Admin. C., Maint. & Repair C., etc.  In some branches: % costs   „Time“ is more and more expensive  Time can be controlled „Time“ as: „Time“ as: (1)Time expression of disposable capacity of resources: staff, machine, activity, process,.. (  capacity utilization) (2) Time consumption for product, service  typical application in Target Costing processes (  cutting time consumption)  + It is measurable indicator!     Importance of HCT-Method application in different areas

12 Utilization of Resources Capacity  Link to the previous slide “Time as key factor“  (time costs)  Human and Equipment Capacity is continually getting: (1) More expensive (2) More productive (mainly equipment capacity)   It has to be managed in more economic way, or the performance efficiency is decreasing       Consistency in capacity planning and recording is required  Activity time sheet is applied for equipment and staff too (also in areas of product design, product development, at administrative staff, … )  Activity time sheet is applied for equipment and staff too (also in areas of product design, product development, at administrative staff, … )  (1) Motivational effect  (1) Motivational effect (2) To get an overview of the capacity planned consumed (2) To get an overview of the capacity planned versus consumed     Essential significance of HCT-Method application

13 Measurement - Indicators  Quotation: „Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.“ If you can’t control it, you can’t improve it.“ H. J. Harrington

14 Summary - Final Conclusions  Essential Factors of Contemporary Enterprise Control:  Controlling management concept  Convergent Approach (7V)  Process (Activity) Oriented Approach (Process control, ABM)  Time Control (Capacity, Time consumption/unit)  Maximization of Resource Capacity Utilization  Selection of Suitable Indicators  permanent searching, making them more accurate  Look after specific solutions according to your managerial needs  Prefer simple, understandable, effective tools  Do regular, critical evaluation of application functioning  make it better (improve it continuously)  make it better (improve it continuously)  Personality of Manager is and will be most important