Controlling as a Management

Function
Summary and Case Study
Analysis

By Dexby de Guzman

Summary
Controlling is aimed at determining whether
objectives were realized or not, and if not, by
providing means for achievement.
Controlling is a process.
Control has different types.

Summary
Organization
control
systems
have
components.
Strategic control system includes analysis.
There are means to identify control problems.

Case Study Analysis

GOOD MUSIC BROADCASTING
CORPORATION: Ebb Tide

GIVEN:
Engineer Frederick Panganiban was reading
the advertising sales report handed to him by
his assistant. The report contains information
consolidated from the ten radio stations
owned and operated by Good Music
Broadcasting Corporation (GMBC). These
stations are located in the various parts of the
country.

Map of the Philippines

 GMBC headquarters and sales office are

located in Makati. GMBC derives income from
advertisements lodged by companies like San
Miguel Corporation, Ayala Life, and others.
The sales office receives the cassette tapes
and written texts containing the advertising
messages of the client companies.

 The tapes are meant to be played at regular

intervals in all the ten radio stations operated
by GMBC. The written text is an alternate
advertising form read by the radio announcers
at regular intervals. An advertising message
does not exceed one minute. The advertisers
are billed depending on the frequency of
exposure of their messages.

 Each station is managed by a station manager

who reports directly to Engineer
Panganiban, the general manager. The stations
are allowed to accept local advertisements
subject to availability of slots after
accommodating the national advertisers.

 A certain portion of the advertising income is

credited to the account of the individual
stations depending on the assignments sent to
them by the GMBC Headquarters. The total
advertising income of a station consists of the
credit account from the head office plus
whatever income from local advertisers is
derived.

Engineer Panganiban is now reviewing the

consolidated sales report. He wants some
improvement in operations so that overall
income will increase. He feels that the sales
report is useful, but he believes some other
data may help him make a better decision.

GOOD MUSIC BROADCASTING CORPORATION

CONSOLIDATED ADVERTISING INCOME
For the Three-Year Period, 1995, 1996 and 1997
(P000)

Station
1 Dagupan
2 Santiago
3 Cabanatuan
4 San Pablo
5 Naga
6 Dumaguete
7 Tacloban
8 Cebu
9 Davao
10 Zamboanga
Total

Advertising Income (in Pesos)

1995
1996
1997
15,450
16,998
17,038
12,338
11,465
10,308
10,440
12,444
14,486
8,988
7,676
6,493
11,048
12,121
8,788
11,540
10,001
9,494
12,490
12,500
12,606
20,465
22,030
24,848
16,370
17,017
18,644
13,466
12,506
11,897
132,595
134,758
134,602

Problem:
The problem is how will Engr. Panganiban
make improvements in operations so that
overall income will increase.
Objectives:
To make improvements in operations.
To apply controlling in GMBC.

Alternative Courses of Actions:

1. Establish performance objectives and standards.
I. Alternative standards to be used:
1a. Standard by station w/ highest income
1b. Standard by income from previous year
A more appropriate basis may be having an income
target value equivalent to the income of the previous
year. This is to avoid decline of income per year.

Alternative Courses of Actions:

2. Measure actual performance.
For the GMBC case, the actual performance
(income) from 1996 - 1997 were measured and
given in a consolidated sales report.
3. Compare actual performance to objectives.
5 out of 10 stations had a decrease in yearly
income either once or twice. The other 5 (which
are situated in highly-populated areas) have
increasing advertising income per year.

Alternative Courses of Actions:

30,000

Advertising Income (in Pesos)

25,000

Dagupan
Santiago

20,000

Cabanatuan
San Pablo

15,000

Naga
Dumaguete

10,000

Tacloban
Cebu

5,000

Davao
Zamboanga

0
1995

1996

1997

Year

Figure A: Column Chart of Consolidated Sales Report

Alternative Courses of Actions:

4. Take necessary action.
For the operations of GMBC, the type of control has to be
identified to facilitate activities. Identification of control
problems is needed. Also, an organizational control system
has to be installed.
Considerations:
Types of Control
Identification of Control Problems
Components of Organization
Control System
Strategic Control Systems

Alternative Courses of Actions:

II. Types of Control to Consider:
Alternatives:
2a. Feedback Control
2b. Concurrent Control
2c. Feedforward Control
Comment: There is feedback control because
information for the past three years has been
gathered. Corrective actions are aimed at
improving income for future years.

Alternative Courses of Actions:

III. Identification of Control Problems
Alternatives:
3a. Executive Reality Check Engr. Panganiban can delegate an executive
to check the operations of one of the radio stations (whose income is
declining) for a short period of time. In this way, he can evaluate the
problems in the actual operation of the station through a report.
3b. Comprehensive Internal Audit This can be done to detect
dysfunctions in the radio station operations before they become bigger.

3c. Symptoms of Inadequate Control One common symptom is inherent

according to the sales report. There is an unexplained decline in revenues
and profits.

Alternative Courses of Actions:

IV. Components of Organization Control System
Alternatives:
4a. Strategic Plan In order to attract more advertisers, the radio
station can have a comprehensive branding campaign. For
example, GMBC can launch a specially-composed song as their
station ID.
4b. Long-range Financial Plan This financial plan is needed to
ensure the growth of the company for many years to come.
Depreciation of assets has to be considered.
4c. Operating Budget This is to have planned account of
expenditures, revenues or profits in the future. Proper budgeting
implies savings for the company.

Alternative Courses of Actions:

4d. Performance Appraisals Engr. Panganiban can implement a
friendly atmosphere of competition between radio stations to
increase ratings and therefore advertisements. For instance, the
search for the best GMBC radio station every year can be done.
4e. Statistical Reports A consolidated sales report is shown in
Exhibit A.
4f. Policies and Procedures Engr. Panganiban needs to review
company policies and procedure. There may be some errors in
them. Corrective action needs to be done.

Alternative Courses of Actions:

V. Strategic Control Systems
5a. Financial Analysis
5b. Financial Ratio Analysis
Financial and financial ratio analysis is to be done. Since the only
available data is the consolidated sales report, a financial ratio
analysis is suitable. Yearly advertising income is given.
Thus, profitability ratio is more appropriate than liquidity, efficiency
and financial leverage ratios. However, Engr. Panganiban still needs
more information like net sales, assets and equity which are not
given in the problem.

Recommendations:
1. For the objective/ standard to be used, the income
from previous year is more appropriate than the
income of the highest-netting radio station.
2. The type of control appropriate for the situation is
feedback control since there is previous data available
and corrective actions need to be done.
3. For proper identification of problems, the symptoms
for inadequate control may be chosen. However if
funds are appropriated, the executive reality check
and comprehensive internal audit can be selected.

Recommendations:
4. An organizational control system is required. Thus, its
components have to be satisfied. The components are
the strategic plan, the long range financial plan, the
operating budget, performance appraisals, statistical
reports, policies and procedures. Corresponding
proposals have been cited in the alternative courses of
action part.
5. A financial ratio analysis is needed to accomplish
strategic objectives. Performance ratios are useful
provided that information on net sales, assets, and
equity are available.

Reference
Medina, R. Engineering Management. Manila, Philippines: Rex Book
Store, Inc., 1999.

Thank You!