Download Ch20 Controlling Process

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Compared to planning, developing org. structure,
developing strategies, goals and motivating employees
Adeyl Khan, Faculty, BBA, NSU
Why Control?
 Controls help the manager
 Control is a process to
regulate organizational
activities to make them
consistent with established:
 Plans
 Targets
 Standards
Types of control
• Inventory, QC
• Selection
Acceptable level? Compare (Financial …)
• Forecasting, PR
Effective? Need a change?
process of monitoring, comparing, and
correcting work performance.
• Manage Debt, Assets
FedEx- 99.8% On time Delivery
Adeyl Khan, Faculty, BBA, NSU
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What Is the Purpose of Control?
 It is one of the four basic management functions
and has four basic functions.
 Functions of control
 Adapts to change.
 Limits accumulation of error.
 Helps coping with complexity.
 Helps minimize costs.
Adeyl Khan, Faculty, BBA, NSU
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Purpose- Control helps the organization
 Many things can happen during
the execution of a plan
 Anticipate, monitor, respond
 Rising quality standard at
 Accumulation creates a huge
Adapt to
environmental change
2. Limit the
accumulation of error
 Defect rate rose 4% > 9% > 25%
(100/250 People reworking)
 100s of raw material, large market
segments, complicated work
 Calculation based on
implementation of new woodcutting technology
Adeyl Khan, Faculty, BBA, NSU
3. Cope with
4. Minimize costs
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Levels of Control
Focuses on the processes used to transform
resources into products or services. E.g. Quality
Concerned with financial resources. E.g. Accounts
How the elements of structure are serving the
intended purposes. E.g. Administrative ratio
How effective are the functional strategies
helping the organization meet its goals. E.g.
Related diversification failed
Adeyl Khan, Faculty, BBA, NSU
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Figure 20.2: Levels of Control
Adeyl Khan, Faculty, BBA, NSU
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Who Is Responsible for Control?
 Control rests with all
 Large corporations
have a controller.
 What does a controller
 Helps line managers
with their control
U-Form (Single)
H-form (Multiple), M-form (Multiple)
Adeyl Khan, Faculty, BBA, NSU
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F20.3: Steps in the Control Process
 Taco Bell
 95% greeted within 3 minutes
 Preheated chips- maximum 30 mins
 Tables Cleaned within 5 mins
Adeyl Khan, Faculty, BBA, NSU
# Graduates/year
(Performance Indicators)
Consistent with organization goal
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F20.4: Forms of Operational Control
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What Does Preliminary Control
 It attempts to monitor quality and quantity of:
 Financial resources.
 Material resources.
 Human resources.
 Information resources.
 Why?
 Before they become part of the system.
 Ex: Employee Interview, Who can buy stocks
Adeyl Khan, Faculty, BBA, NSU
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Purpose of Screening Controls
 They focus on how inputs are being transformed
into outputs.
 They also rely heavily on feedback processes during
the transformation process.
 Ex: LCD panel on TV-
Check before installation
Adeyl Khan, Faculty, BBA, NSU
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Postaction Control- Focus
 Focus is on outputs
from the
organizational system.
 What do they monitor?
 They monitor the
output results of the
organization after the
process is complete.
 (see Figure 20.4
Adeyl Khan, Faculty, BBA, NSU
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Financial Controls- Most common
 They control the financial resources as they flow
into the organization.
 Then they are held by the organization.
 Then they flow out of the organization.
 Businesses must manage their finances so that
revenues are sufficient to cover expenses and still
return a profit.
Adeyl Khan, Faculty, BBA, NSU
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What Is a Budget?
 It is a plan expressed in numerical terms.
 What is the time frame for a budget?
 Usually a year, but sometimes broken down into
quarters and months.
 Budgets are quantitative in nature and provide
yardsticks for measuring performance and
facilitating comparisons.
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Strength and Weaknesses of Budget
Adeyl Khan, Faculty, BBA, NSU
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Types of Budgets
 Types of budget:
 Financial
 Operating
 Non-monetary
 What the budget
 Sources and use of
 Operations in
financial terms.
 Operations in nonfinancial terms.
Capital Budget at Exxon
Vs. Shell and Exxon-Mobil
Adeyl Khan, Faculty, BBA, NSU
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Adeyl Khan, Faculty, BBA, NSU
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F20.5: Developing Budgets in
Adeyl Khan, Faculty, BBA, NSU
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Other Tools for Financial Control
Financial Statement:
Income Statement
• A profile of some aspect of an
organization’s financial
• A summary of financial
performance over a period of
time, usually one year.
Other Financial
Control Tools
Balance Sheet
Ratio Analysis
• List of assets and liabilities of
an organization at a specific
point in time, usually the last
day of the fiscal year.
• The calculation of one or more
financial ratios to assess some
aspect of the organization’s
financial health.
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Adeyl An
Faculty, BBA,
NSU of an organization’s accounting, financial, and operational system.
Structural Control
 Bureaucratic Control
 A form of organizational control characterized by
formal and mechanistic structural arrangements.
 Decentralized control
 An approach to organizational control characterized
by informal and organic structural arrangements.
Adeyl Khan, Faculty, BBA, NSU
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Figure 20.6: Organizational Control
Adeyl Khan, Faculty, BBA, NSU
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What Is Meant by Strategic Control
 Control aimed at
ensuring that the
organization is
maintaining an
effective alignment
with its environment
and moving toward
achieving its
strategic goals
Adeyl Khan, Faculty, BBA, NSU
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Characteristics of Effective Control
 Integration with plan
 Flexibility
 Accuracy
 Timeliness
 Objectivity
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What Influences Resistance to Control?
 Over-control
 Inappropriate focus
 Rewards for inefficiency
 Too much accountability
Adeyl Khan, Faculty, BBA, NSU
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How Can Resistance to Control Be
 When employees are involved with planning and
implementing the control system, they are less
likely to resist.
 Verification procedures need to be developed to
provide checks and balances in order for managers
to verify the accuracy of performance indicators.
Adeyl Khan, Faculty, BBA, NSU
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