Module 6: Controlling

Learning objectives Understand the control process Review three approaches to control systems Be familiar with different control techniques Review qualities of an effective control system

Managerial Decisions in the Control Process Identify Causes Identify Causes Correct Performance Correct Performance Variance Acceptable? Variance Acceptable? Revise Standard Revise Standard Attained? Standard Attained? Standard Acceptable? Standard Acceptable? Yes No Compare Performance to Standard Compare Performance to Standard Measure Performance Measure Performance Objectives Standard Do Nothing

Three Approaches to Control Systems MarketControl(priceCompetition, Market share) ClanControl(norms, Values, and Beliefs)BureaucraticControl(rules,Regulations,Policies)

Quality Control This speaks a lot about the quality of Japanese products and their quality standards. They're still laughing about this at IBM. Apparently the computer giant decided to have some parts manufactured in Japan as a trial project. In the specifications, they set out that they will accept three defective parts per 10,000. When the delivery came in there was an accompanying letter. "We, Japanese people, had a hard time understanding North American business practices. But the three defective parts per 10,000 have been separately manufactured and have been included in the consignment. Hope this pleases you."

InformationPeopleFinancesOperations What Managers Measure

Defining an Acceptable Range of Variation Acceptable Upper Limit Standard Acceptable Lower Limit Acceptable Range of Variation t t+1 t+2 t+3 t+4 t+5

Do Nothing TakingManagerialAction CorrectPerformance Revise the Standard

InputProcessesOutput FeedforwardControlAnticipatesProblemsConcurrentControl Corrects Problems as They Happen FeedbackControl Corrects Problems after They Occur Three Types of Control

Control techniques Budget: the formulation of plans for a given future period in numerical terms, examples include: –Revenue and expense budgets –Time, space, material, and product budgets –Capital expenditure budgets –Cash budgets –Variable budgets –Zero-based budgeting

Nonbudgetary control devices –Statistical data –Special reports and analysis –Operational audit –Personal observation

Sample Gantt Chart A. Decide topic B. Decide content C. Assign work D. Finish the 1 st draft E. Revise some parts F. Finalize some parts G. Final revision and submission Activities Oct.15Dec.3 3 days 1 30 days 8 days 6 days 4 days Reporting date

A PERT Network for completing the final project for the course 472a A B C D E F G Start Finish

Qualities of an Effective Control System Accuracy Timeliness Economy Flexibility Understandability

Qualities of an Effective Control System Reasonable criteria Emphasis on exceptions Strategic placement Multiple criteria Corrective action

Contingency Factors in Control Systems Organization Size Position and Level Degree of Decentralization Organizational Culture Importance of an Activity Small Large Informal, personal management Formal, personal management High Low High Low Open Closed High Low Contingency Variable Control Recommendations Many complex criteria Few, easy-to-measure criteria Increased number of controls Reduced number of controls Informal, self-control Formal, external controls Elaborate, comprehensive controls Loose, informal controls

Summary Control is an essential component of management function. Organizational plans can not be achieved without an effective control system. Various control systems and techniques can be combined to build an effective control system.

Final project Deadline: December 3, 2001 Citation: in text At the end of the project

Final project No excuse for the late submission Penalty for the late submission –0-30 minutes deduct 25 marks –30 minutes – 1 hours deduct 50 marks –1 hours – 1 hour 30 minutes deduct 75 marks –1 hour 30 minutes – 2 hours deduct 100 marks

Final examination Definition question Define plan and strategy Explain theory Explain expectancy theory Use an example to explain a theory

Final examination (contd.) Apply a theory to the health care industry context Chapters will not be covered History module Managing in Today’s world Quantitative module