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Chapter 10 - Controlling The Management Process V1 - 0

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23 views

Chapter 10 - Controlling The Management Process V1 - 0

notes

Uploaded by

Khusta Putuzo
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 10

Controlling the management process


Learning outcomes

• Give an overview of the purpose of control


• Describe how a control process should
function
• Explain the various types of control
• Discuss the characteristics of an effective
control system
Chapter outline

• Introduction
• The purpose of control
• The control process
• Types of control
• Characteristics of an effective control system
• Summary
The purpose of control

• A control process is necessary for the


following reasons:
– Linked with planning, organising and leading
– Helps companies adapt to environmental change
– Helps limit the accumulation of error
– Helps companies cope with increasing
organisational size and complexity
– Helps minimise costs.
The control process
The control process
(continued)

• Step 1: Establish standards


– Establish a performance standard at strategic points
– Performance or control standard is a planned target
against which the actual performance will be compared
– Appropriate performance standards:
• Profit standards
• Market-share standards
• Productivity standards
• Staff-development standards.
The control process
(continued)
• Step 2: Measure actual performance
– Collection of information and reporting on actual
performance are continuous activities
– Activities need to be quantifiable before any valid
comparisons can be made
– Important requirement for reports to be absolutely
reliable for the measurement of actual achievements
– Control by exception – only important disparities
reported to top management in large organisations.
The control process
(continued)

• Step 3: Evaluate deviations


– Determine the performance gap between the
performance standard and actual performance
– Important to know why a standard has only
been matched, and not exceeded.
The control process
(continued)

• Step 3: Evaluate deviations (continued)


– Essential to ensure that the disparities are
genuine
– Determine whether the deviations are large
enough to justify further investigation
– All reasons for the deviations and the relevant
activities should be identified.
The control process
(continued)
• Step 4: Take corrective action
– Corrective actions need to be taken to ensure that deviations
do not recur
– If actual achievements match standards then no corrective
action is needed
– If actual achievements do not match standards, three
possible actions exist:
• Actual performance can be improved to reach the standards
• Strategies can be revised to accomplish the standards
• Performance standards can be lowered or raised to make them
more realistic.
Types of control

• Organisations control activities and processes in a


number of different areas and at different levels in
the organisation.
• The four key areas of control include the following:
– Physical resources
– Human resources
– Information sources
– Financial resources.
Types of control (continued)
• Key areas of control
Types of control (continued)

• The control of physical resources


– Inventory control
• Economic-ordering quantity (EQP)
• Material requirements planning (MRP) system
• Just-in-time (JIT) system
– Quality control
• Define the quality goals or standards
• Measure quality
• Rectify deviations and solve quality problems in an effort to
keep the cost of quality as low as possible.
Types of control (continued)

• The control of financial resources


– Financial resources and abilities are vital to the success of
the organisation, and therefore need to be strictly
controlled
– Financial control is concerned with the following:
• Resources as they flow into the organisation
• Financial resources that are held by the organisation
• Financial resources flowing out of the organisation.
Types of control (continued)
• The control of financial resources
– The budget
• The budget contributes to financial control:
– Supports management in coordinating resources,
departments and projects
– Provides guidelines on application of the organisation’s
resources
– Defines or sets standards that are vital to the control process
– Makes possible the evaluation of resource allocation,
departments or units.
• Financial analysis (or ratio analysis) can be used to complement
the budget when applying financial control
Types of control (continued)
• The control of financial resources
– Types of budgets
Types of control (continued)

• The control of information resources


– Relevant and timely information made available to
management during the management process is
vital in monitoring how well goals are
accomplished
– The faster feedback is received, the more
effectively the organisation’s control systems
function.
Types of control (continued)
• The control of human resources
– Control of human resources falls within the ambit of
human resources management
– The main instrument used to control an
organisation’s human resources is performance
measurement
– Other human resources control instruments include
specific ratio analyses that can be applied to labour
turnover, absenteeism and the composition of the
labour force.
Characteristics of an effective
control system

• Integration
• Flexibility
• Accuracy
• Timeliness
• Simplicity
Characteristics of an effective
control system
• Integration of planning and control
Summary

• Control is a fundamental management function and


is the final step in the management process
• Control focuses on all the activities in the
organisation
• Effective control systems characterised by the extent
to which planning and control are integrated
• Application of control system should not become so
complex that it costs more than it saves.

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