The process of monitoring, comparing and correcting the work performance is called controlling.

It shows how to check the employees, their working capabilities, how they are performing better than their counterparts, and giving them the correct direction of the work performance is called controlling. It also covers the machinery part of the organization too. Whether its working well or not what are the problems and how to overcome them. This all is called controlling. If it is not performed well, the planning can’t work better in an organization.

PlanningGoalsObjectivesStrategiesPlans

OrganizingStructureHuman resourceManagement

LeadingMotivationLeadershipCommunicationIndividual andGroup behavior

ControllingStandardsMeasurementsComparisonsActions

A three step process of measuring the actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or inadequate standards.

Goals and objectives

OrganizationalDivisionalDepartmentalIndividual

Measuring actual

performance

comparing actual

performance against

standards

Taking managerial

actions

Step 1

Step 3

Step 2

There are three steps of control processMeasuring actual performanceComparing actual performance against standardsTaking managerial actions

1.Measuring actual performance

To measure the actual performance the manager must have the knowledge of the work done

It consists of two steps how we measure what we measure

Personal observation

Statistical reports

Oral reports

Written reports

Benefits• Get firsthand knowledge

• Information is not filtered

• Intensive coverage of work activities

• Easy to visualize

• Effective for showing relationship

• Fast way to get information

• Allow for verbal and non-verbal information

• Comprehensive

• Formal

• Easy to file and retrieve

Drawbacks

• Subject to personal biases

• Time consuming

• Obstructive

• Provide limited information

• Ignore subjective factors

• Information is filtered

• Information can’t be documented

• Take more time to prepare

Whatever is measured is probably more critical to the control process than how it is measured. Why? Because selecting the wrong criteria can create serious problems. Besides, what is measured often determines which employee will do it and what control criteria will manager use?

The comparing step determines the variation between the actual performance and the standards

Range of variation

The acceptable parameters of variance between actual performance and the standard id called range of variation

Managers can choose three possible courses of the action

Do nothing because it is self explanatory

Correct actual performance

It is of two steps

Immediate corrective action

To correct the problem at spot to get performance

Basic corrective action

To look how and why performance deviate before correcting the source of deviation

The deviation can be due to low or high goals. If there is such a situation the managers can revise the standard. If goal is easily obtainable, they can make higher standards. If it is tough to achieve, they can lower the standard.

compare actual performance with

standard

Is standa

rd being attain

ed

yes Do nothing

No

Is varian

ce acceptable

Do nothing

yes

no

Is standa

rd acceptable

yes

Identify cause of variationn

o

Revise standard

Correct performa

nce

Measure actual performance

objective

standard

Performance

The end result of an activity is called performance

Organizational performance

The accumulated results of all the organization’s work activities are called the organizational performance

Productivity

The amount of goal or services produced divided by the input needed to complete that output is called productivity.

A measure how appropriate organizational goals are and how well they are being met is called organizational effectiveness

TOPICSLEVELS OF CONTROLTYPE OF CONTROLCHARACTERISTICS OF ORGANATIONAL CONTROL SYSTEMCHARACTERISTICS OF DYSFUNCTIONAL CONTROL SYSTEMMANAGING FINANCIAL CONTROLRATIO ANALYSISBALANCE SCORECARD INFORMATIONAL CONTROL

LEVELS OF CONTROL

• Strategic control • Tactical control• Operational control

Assess and regulate how the organization fits its external environment and meets its long-range strategic plans.

Strategic control

Tactical control Assess and regulate successful

implementation of departmental level tactical plan, emphasizing specific internal and external forces affecting them

Strategic and tactical control

Time frame limited ObjectiveControls relate to specific,

functional area Type of comparisonComparisons made within

organization FocusImplementation of

strategy

Time frame Long

ObjectiveControls relate to organization

as a whole

Type of comparisonComparisons made to other

organization

FocusDetermination of overall

organizational strategy

Tactical control Strategic control

Operational control

Assess and regulate successful implementation of

day-to-day operational plans by monitoring focused

internal activities.

TYPE OF CONTROL

Preliminary Control

Concurrent Control

Post Action Control

Type of control PRELIMINARY CONTROL

Sometimes called the Feed Forward controls, they are accomplished before a work activity begins.

They make sure that proper directions are set and that the right resources are available to accomplish them.

Type of control

CONCURRENT CONTROL

Focus on what happens during the work process. Sometimes called Steering Controls, they monitor ongoing operations and activities to make sure that things are being done correctly

Type of control

POST ACTION CONTROL

Sometimes called Feedback control, they take place after an action is completed. They focus on end results, as opposed to inputs and activities.

CHARACTERISTICS OF ORGANATIONAL CONTROL SYSTEM

The management of any organization must develop a control system in order to achieve its organization's goals.

Effective control systems share several common characteristics. These characteristics are as follows:----

CHARACTERISTICS OF EFFECTIVE ORGANIZATIONAL CONTROL SYSTEMS

AVAILABILATY OF INFORMATION WHEN NEEDED

Control data should be provided to the responsible managers frequently enough to allow them to react to problems while there is still time to take decisive action. Without timely control information, problem situations turn in to major disasters.

COMPREHENSIBILITY

Controls must be simple and easy to understand.

FOCUS ON CRITICAL POINTS

controls are applied where failure cannot

be tolerated or where costs cannot exceed a certain amount. The critical points include all the areas of an organization's operations that directly affect the success of its key operations.

ACCURACY

Effective control systems provide factual information that's useful, reliable, valid, and consistent.

ECONOMIC FEASIBILITY

Effective control systems answer questions such as, “How much does it cost?” “What will it save?” or “What are the returns on the investment?” In short, comparison of the costs to the benefits ensures that the benefits of controls outweigh the costs.

ACCEPTANCE BY EMPLOYEES

Employee involvement in the design of controls can increase acceptance.

INTEGRATION INTO ESTABLISHED PROCESSES

Controls must function harmoniously within these processes or not.

CHARACTERISTICS OF DYSFUNCTIONAL CONTROL SYSTEM

Over ControlUnder Control

OVERCONTROL

Excessive regulation of work activities, restricting individual autonomy and causing ineffective organizational performance.

UNDER CONTROL

Unregulated work activities, granting employs too much individual autonomy and causing ineffective organizational planning

MANAGING FINANCIAL CONTROL

Balance sheetIncome statementRatio analysis

FINANCIAL CONTROLS

Financial control is a critically important activity to help the business ensure that the business is meeting its objectives.

Financial control provide managers and stakeholders to evaluate organization performance.

It shows the organization financial position and its financial performance and its Ratio analysis.

Balance sheet

A financial statement detailing an organization assets, liabilities, and shareholders equity at a specific point in time

Financial statement

A summary of the an organization's revenue, expenses and profits over a particular period of time.

Ratio analysis

A managerial process used to compare organizational performance with historical, competitive or industry performance

RATIOS ANALYSIS

There are four type of ratios

Liquidity ratios Leverage ratiosActivity ratios Profitability ratios

1) Liquidity ratios

Term liquidity refers to conversion of assets into cash.

Liquidity ratios are of two type Currents ratios Acid test

a) Current ratio

Determine the short term debt paying ability & is computed below.

Current ratio = Current assets/Current liabilities

b) Acid Test Ratio

It is also called the quick ratio. To determine the most immediate position than that indicate by the current ratio.

Acid test = Current assets – inventory current liabilities

2) Leverage ratio

These ratios are used to analyze an organization’s ability to meet its long term short term debt obligation

Leverage ratios are of two type

Debt to assets Time interest earned

a) Debt to assets

It indicates firms long term debt paying ability. It also helps how well creditors will be protected in case of insolvency

Debt to assets = Total debt/ Total assets

b) Time interest earned

It measures the firms ability to make contractual interest payment. The higher its value the better able is the firm to fulfill its interest obligation.

Time interest earned= earning before interest & tax/ interest charges

3) Activity ratios

Activity ratios are also called the assets utilization ratios , are analyze an organization's effectiveness in using its assets to generate sales

There are of two type Inventory turnover Total asset turnover

a) Inventory turnover

# of times inventory will be sold out in a years.

Increase in turnover of inventory is favorable, decrease in turnover take more time to be sold out.

Its ratios are, Inventory turnover= sales/ inventory

b) Total asset turnover

It indicate the efficiency with which the firm uses its assets to generate sales.

Its ratios are, Total assets turnover=sales/total

assets

4) Profitability ratios

Used to analyze an organization's effectiveness in earning a net return on sales and investment

There are of two type

Profit margin on sales Return on investment

a) Profit margin on sales

Identified the profit that are being generated.

Its ratio are, Profit margin on sales = net profit after

tax/ total assets

b) Return on investment

Measures the efficiency of assets to generate profits

Return on investment = net profit after tax/ total assets

Balance scorecard

A performance measurement tool that looks at more than just the financial perspective.

A balance scorecard typically looks at four areas that contribute to company performance: financial, customer, internal processes, and people/innovation/growth assets.

Informational Control

Managers deals with information controls in two ways:

How is information used in controlling? Controlling information.

How is information used in controlling? Managers need the right information at

the right time and in the right amount to monitor and measure organizational activities and performance

A management information system (MIS) Is a system used to provide managers with Needed information on a regular basis.

Controlling information

Managers should have to careful that its secret matters can't be move out of the organization.

Benchmarking of best practices

Benchmarking the search for practices among competitors or non competitors that lead to their superior performance.

Benchmark the standard of excellence against which to measure and compare.

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