The System and Process of Controlling

Presentation participants

• Sanjid Mahmud• Adil Rayhan• Md. Samiul Islam• Nasim Al Goni• Mahamid Rahaman• Riasat Rahman

Sanjid Mahmud

What is Controlling?

Controlling is the process of monitoring, comparing, and correcting work performance

• Monitoring• Comparing• Correcting

Why controlling is Important??

• Controlling is the only way that managers know whether organizational goals are being met and if not, the reasons why

Process of Control

• Setting Standards for Performance• The standards should be set in a manner that allows

them to be compared with actual performance.•Measuring Actual Performance• An organization must decide:

• What to measure.• When to measure.• How frequently to measure.

Process of Control

•Comparing Actual Performance With Standards• This step involves determining if actual performance

compared to standards falls within acceptable limits•Responding to Deviations• If the deviation from performance is unacceptable,

then corrective action is warranted. If the deviation is acceptable, no correction action is necessary

Managerial Decisions in the Control Process

Adil Rayhan

Critical Control Points, Standards& Benchmarking• Simple Operation – simple control through observation• Large scale operations – Complex to observe and control• Careful selection of critical points for measurement• Principle of Critical Point Control:

– Effective Control requires attention to factors critical to evaluating performance against Plans

Types of Critical Control Point Standards

• Physical Standard– Non-monetary measurements (common at operating

level)– Reflection of quantities: labor-hours, per unit of

output, Lit of fuel/ hour, length of wire/ ton of copper– Reflection of quality: hardness, durability, fastness of

color, allowance of tolerance

Types of Critical Control Point Standards

• Cost standards:–Monetary measurements (common at operating level)– Cost/ unit produced, labor cost/ hour, machine hour

cost• Capital Standards:

– Monetary measurements to physical items– Related to Capital investment rather than Costs– Balance sheet, Ratios current assets to liabilities, RoI

etc.

Types of Critical Control Point Standards

• Revenue Standard – Attaching monetary values to Sales (Avg Sales/ customer group)• Program Standards: – Program to improve QC, Program to develop new product, etc.• Intangible Standard: – Neither physical nor monetary; difficult to establish these standards – Whether the Public Relations program is successful or not? – Are Supervisor loyal to the Co.?

Types of Critical Control Point Standards

• Goals as Standards: – In modern management, verifiable Goals can be used as standards – Both quantitative & qualitative goals (objectives) can be measured• Strategic Plan as Control (Strategic Control) – Systematic monitoring of strategic control points – Modifying strategies based on this evaluation

Benchmarking

An approach for setting goals and productivity measures based on best industry practices.• Widely accepted concept & technique• Three types of Benchmarking: – Strategic Benchmarking – Operational Benchmarking – Management Benchmarking

Md. Samiul Islam

Feedback and Feedforward Control System

Feedback ControlFeedback refers to the process of adjusting future actions on the basis of information about the past performance. Many Systems controls through information feedback, which shows deviations from standards and initiates changes. The following chart, which depicts the Feedback process involved in a management control, gives an idea of the Feedback system.

Feedback Control

Real Time Information and Control

Real Time Information is what is happening while it is happening.

In todays world computers and from electronic gathering, transmission, and storage of data is the development of systems of real-time information.

And this has the following advantages: • ability to make immediate production adjustments• compare these data with standards and to identify deviations.• allows faster decision making

Feedforward Control

The most desirable type of control is feedforward control which prevents problems because it takes place before the actual activity.

The key to feedforward controls is taking managerial action before a problem occurs. That way, problems can be prevented rather than having to correct them after any damage (poor-quality products, lost customers, lost revenue, etc.) has already been done.

Feedforward versus Feedback

Simple feedback systems measure output of a process and feed into the system or the inputs of a system corrective actions to obtain desire outputs.

For most management problems, due to the time lags, this process becomes unfavorable. Feedforward system monitors inputs into a process to ascertain whether they are as planned.

Feedforward versus Feedback

Inputs Process Outputs

Desired value of Outputs (Standard)

Simple Feedback

Feedforward

Corrective ActionInformation

Requirements for Feedforward Control

• make a thorough and careful analysis of the planning as well as the control system and identify the more important input variables by applying careful discrimination• develop a model of the system• keep the model up-to-date by reviewing it regularly to see

whether the identified input variables and their inter- relationships still represent realities

Requirements for Feedforward Control

• collect regularly the data on input variables and assess it properly before putting it into the system• keep the feed forward system dynamic by regularly

assessing the variations of actual input data from the planned—for inputs and evaluating their impact on expected end-results• take prompt corrective action to solve the problems that

are detected by the Feed forward Control System

Nasim Al Goni

Control of Overall Performance

• Planning and Controlling are interrelated system• Control helps to measure overall performance of the

enterprise or integrated division or project against total goal• Overall performance is mainly measured against financial

documents i.e profit or loss statements and take necessary steps accordingly

Reason of Controlling

Three reason1. Like as overall planning, overall control is required to

achieve the over all goals set by the enterprise 2. Decentralization creates semi independent units. Overall

control removes the chaos of complete independence 3. Permits the measurement of Manager’s total effort rather

part of it

Profit and Loss Control

• Measure immediate revenue or cost factor which have accounted for success or failure• Income statement as the better controlling device here• For startups, goals may be different than the big

corporations even it serves the same type of things

Purpose of Profit and Loss Control

• Survival of business depends on profits• Profits are the definite standards against which success or

failure is measured • Income statements gives the picture of revenue and

expense at the same time• Individual division or department should contribute to

achieve the total goal of the company

Limitations of Profit and Loss control

1. Arise the cost accounting and paper transection due to Intracompany transfer (though it is now reduced due to the use of computers)

2. Duplication of accounting records 3. Time and effort required to calculate

Control through Return on Investment

• Commonly known as ROI• Instead of calculating profit and loss of the company

compared to others, ROI gives the feedback of the overall performance of the company

Management Audit and Accounting firms

• One of the significant role of the Audit firm is they can act as the consultancy firm for Board Committee • Company’s own Audit/Financial department can play this

role since they have easy access and monitoring the data but it arise the question of power • Weather an outsider or Company’s very own department,

an audit firm requires a great deal of trust

Mahamid Rahaman

Bureaucratic Control Systems: The Control Cycle

A typical bureaucratic control system has four major steps• Setting performance standards• Measuring performance• Comparing performance against the standard

and determining deviations• Taking corrective action

Bureaucratic Control (Advantages)

• Top-level managers in bureaucratic organizational structures exercise a great deal of control• Strategic decision-making time can be shorter as less

individuals are involved in the process• Ensures that work is consistently completed efficiently and

effectively

Bureaucratic Control (Disadvantages)

• Bureaucratic structures can discourage creativity and innovation throughout the organization• Front-line employees may receive less satisfaction from

their jobs in a rigidly bureaucratic organization• Employee turnover rates are high

Clan Control: The Role of Empowerment and Culture

• Clan control involves creating relationships built on mutual respect and encouraging each individual to take responsibility for his or her actions • Employees work within a guiding framework of

values, and they are expected to use good judgment• The emphasis in an empowered organization

is on satisfying customers, not on pleasing the boss• Clan control takes a long time to develop and

an even longer time to change

Clan Control (Advantages)

• Employees with common beliefs, goals or even demographic characteristics make united effort easier• Emphasizes on reaching common

agreement on important decisions• Clan culture is open, friendly and arguably

more appreciative of its employees

Clan Control (Disadvantages)

• Lack of diversity• Employees may be hesitant to voice

dissenting opinions or to fight for an unpopular idea• Lack of a clearly-defined chain of

command causes problems in crucial situations

Riasat Rahman

Requirements for effective controls

• Tailoring controls to plans and positions• Tailoring controls to individual managers• Designing controls to point up exceptions at

critical points• Seeking objectivity of controls• Ensuring flexibility of controls• Fitting the control system to the

organization culture

Requirements of Effective Controls

• Achieving economy of control• Establishing controls that lead to

corrective action• Strategic placement• Information quality• Quick action

Thank You