Controlling

Presented by
Md. Ziaul Huq

Lecturer
Department
Of
Business Administration
Bangladesh Islami University

Figure 20.2
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 Definition of Controlling

 Control is the regulation of organizational

activities so that some targeted element of
performance remains within acceptable limits.
Without this regulation, organizations have no
indication of how well they are performing in
relation to their goals.
 Control helps organizations cope with changes
and complexity.

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 Definition of Controlling (cont..)

According to Heinz Weihrich and Harold Koontz,

“Controlling is the management function of measuring
and correcting individual and organizational performance
to ensure that events conform to plans”.

According to Ricky W. Griffin, “Controlling is the

process of monitoring and correcting ongoing activities to
facilitate goal attainment”.

Figure 20.2
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 The Purpose of Control

Adapt to environmental change Limit the accumulation of error

Control helps the organization

Cope with organizational complexity Minimize costs

Figure 20.1
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 The Purpose of Control (cont..)
1. Adapting to Environmental Change:
 In today’s complex and turbulent business
environment, all organizations must struggle with
change. If managers could establish goals and
achieve them instantaneously, control would not be
needed.
 But, however the time of goal is established and the
time it is reached, many things can happen in the
organization and its environment to disrupt
movement toward the goal-or even to change the
goals itself.
 A properly designed control system can help
managers anticipate, monitor, and respond to
changing circumstances.
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 The Purpose of Control (cont..)

2. Limiting Accumulation of Error:

 Small mistakes and errors do not often
seriously damage the financial health of an
organization.
 Over time, however, small errors many
accumulate and become very serious. As
these small problems grew into large ones,
the firm has struggled with how to correct
them.
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 The Purpose of Control (cont..)

3. Coping with Organizational Complexity:

 When a firm purchase only one raw material,
produces one product, has a simple organization
design, and enjoy constant demand for its product,
its managers can maintain control with a very basic
and simple system.
 But a business that produces many products from
myriad (ten thousand) raw materials and has a large
market area, a complicated organization design, and
many competitors needs a sophisticated system in
order to maintain adequate control.
4. Minimize Costs: When it is practiced effectively,
control can also help reduce costs and boost output.
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 Steps in the Control Process

 Regardless of the type or levels of control

systems an organization needs, there are four
fundamental steps in any control process.
These are illustrated as follows:

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 Steps in the Control Process (cont...)

1 2 3 4
Compare Determine need
Establish Measure
performance for corrective
standards performance against standards action

Maintain the Correct the Change

status quo deviation standards

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 Steps in the Control Process (cont...)

1. Establishing Standards: The first step in the

controlling processes is establishing standards. A
control standard is a target against which
subsequent performance will be compared. For
example, employees at a fast food restaurant work
toward the following service standards:
a. A minimum of 95% of all customers will
be greeted within three minutes of their arrival.
b. Empty tables will be cleaned within five
minutes after being vacated.

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 Steps in the Control Process (cont...)

2. Measuring Performance: The second step

in the control process is measuring
performance. Performance measurement is a
constant, on going activity for most
organizations.
Employees’ performance is often measured in
terms of quality or quantity of output, but for
many jobs measuring performance is not so
straightforward.
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 Steps in the Control Process (cont...)
3. Comparing Performance against Standards:
 The third step in the control process is comparing
measured performance against established standards.
Performance may be higher than, lower than, or
identical to the standard.
 Comparing performance to standards depends on a
variety of factors, including the importance and
complexity of what is being controlled. For long run
and higher-level- standards, annual comparisons may
be appropriate. In other circumstances, more frequent
comparisons are necessary.

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 Steps in the Control Process (cont...)
4. Considering Corrective Action:
 The final step in the controlling process is
determining the need for corrective action. Decisions
regarding corrective action draw heavily on a
manager’s analytical and diagnostic skills.
 After comparing performance against control
standards, one of three actions is appropriate:
 a. maintain the status quo (do nothing)
 b. correct the deviation or
 c. change the standards.
 Maintain the status quo is preferable when
performance essentially matches the standards, but it
is more likely that some action will be needed to
correct a deviation from the standards. 13
 Types of Control

Control can be broken down by

A. Areas of Control
B. Levels of Control
within the organizational system which are as
follows:

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 Types of Control (cont…)

A. Areas of Control: Control can focus on any area of

an organization. Most organizations define areas of
control in terms of their four basic types of resources
they use:

1. Control of physical resources

2. Control of human resources
3. Control of information resources
4. Financial control

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 Areas of Control (cont…)

1. Control of physical resources: Control of physical

resources includes inventory management like
stocking neither too few nor too many units in
inventory, quality control like maintaining
appropriate levels of output quality and equipment
control like supplying the necessary facilities and
machineries.
2. Control of human resources: Control of human
resources includes and selection and placement,
training and development, performance appraisal and
compensation.
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 Areas of Control (cont…)

3. Control of information resources: Control of

information resources includes sales and marketing
forecasting, environmental analysis, public
relations, production scheduling and economic
forecasting.
4. Financial control: Financial control includes
managing the organization’s debt so that it does not
become excessive, ensuring that the firm always has
enough cash on hand to meets its obligations but
does not have excessive cash in a checking account
and ensuring that receivable are collected and bills
are paid on a timely basis. 17
 B. Levels of Control

Managers use control at several different

levels. The most basic levels of control in
organizations are strategic, structural,
operations and financial control. Each level
must be managed properly if control is to be
most effective. The levels of control are
depicted as follows:

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 Levels of Control

1. Operations Control
2. Financial Control
3. Strategic Control
4. Structural Control Strategic
control

Structural
control

Operations Financial
control control

Figure 20.2
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 Levels of Control (cont..)

1. Operations Control: Operations control

focus on the processes the organization uses
to transform resources into product and
services. Quality control is one type of
operations control.

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 Levels of Control (cont..)

2. Financial Control: Financial control is concerned

with the organization’s financial resources.
Monitoring receivables to make sure customers are
paying their bills on time is an example of financial
control. In many ways, the control of financial
resources is the most important area, because finical
resources are related to the control of all the others
resources in an organization.

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 Levels of Control (cont..)

3. Structural Control: structural control is concerned

with how the elements of the organization’s
structure are serving their intended purpose.
Monitoring the administrative ratio to make sure
staff expenses do not become excessive is an
example of structural control.
4. Strategic Control: Strategic control focuses on
how effectively the organization’s different
strategies are succeeding in helping the
organization meet its goals.

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 Techniques or Methods of Controlling
1. Statistical data analysis: In this method past
experience and results are shown in statistical data and
by analyzing the data deviation is estimated and
necessary preventive steps are taken.
2. Special report analysis: Generally it is not possible
to analyze all data and information regularly. So, some
times it seems impossible to solve problem for an
organization. In such situation analysis special report
is very important for the identification and correction
of the situation.
3. Internal auditing: Internal auditing method means
the regular estimating of defects and deviations of
internal activities of an organization. Figure 20.2
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4. Budget: Budget is considered as one of the best
strategies for controlling. Numerical presentation of
planning is known as budget.
5. Provision of punishment: If the workers will neglect
their work again and again provision of punishment
can be taken.
6. Personal observation: If the defects and deviations
are estimated by physical present of the executive in
the workplace is called personal observation.
7. Census: Census is one of the ancient processes of
controlling the activities of the workers in an
organization. Under this method superiors behave
rudely with their sub-ordinates which make the careful
about the work.
Figure 20.2
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 Techniques or Methods of Controlling
8. Break-even point analysis: For the identification of
relationship between sales and profit and with the
help it taking proper steps, break-even point is one of
the best methods for the manufacturing organizations
especially.
9. Standing rules and order: For the controlling of the
activities of an organization standing rules and
regulations can be established.
10. Critical path method: Every function has got some
interrelated steps. Beginning and ending of every
activity creates separate events. Special attention
should be given on the activities which should be
done before that separate other activities should be 25
11.Quality Control: There are two methods for
controlling the quality of products. Such as, statistical
quality control and observation quality control.
12.Inventory control: For the activation of production
necessity of inventory is inevitable. Yet controlling of
inventory cannot be neglected. By establishing
minimum and maximum level of every raw-material,
examining the quality and ensuring its proper use
controlling system is adopted under this method.
13.Income statement: Controlling system can be
established by preparing income statement an
organization at the end of a period. By this numerical
information of income, expenditure and profit of an
organization can be gained.
Figure 20.2
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14. Program evaluation and review technique
(PERT): Today’s organizations use this method as
both planning and controlling strategy. By this the
activities of an organization, its time and relation
between activities are presented in a diagram. ‘Critical
path’ is indicated for the activities which will perform
continuously. So, by paying extra attention to the
critical path the controller can establish control system
according to the diagram.
15. Restriction: Under this method restriction is imposed
on the decision making power of the workers. By so
the workers cannot perform power. So, generally
everything comes under control. Normally, this
method can control expenditure easily by estimating
Figure 20.2
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maximum expenditure.
Thanks

Figure 20.2
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