BA 101 │ INTRODUCTION TO BUSINESS
MANAGEMENT
BA 101
Controlling
I. INTRODUCTION
Organizations always want high productivity. Various control measures are
undertaken to achieve pre-established goals towards productivity. Managers measure what
they manage and manage what they measure. That is the essence of controlling. The
process of measuring the actual performance, comparing the actual performance against
the standard, and taking the appropriate managerial action is the focus of this module.
II. LEARNING OUTCOMES
• Explain the nature and importance of control
• Describe the steps in the control process
• Analyze how organizational performance is measured
• Define the tools used in measuring organizational performance
III. NUMBER OF MEETINGS
1 week
IV. KEY OUTPUT OF STUDENTS
Case Analysis
V. OUTLINE
A. Definition of Controlling
B. Importance of Management Control
C. Planning and Controlling: The Siamese twins of Management
D. The Control Process
E. Controlling for Organizational Performance
VI. DISCUSSION
(All the information were taken from Robbins & Coulter, 2012)
A. Definition of Controlling
Controlling is the process of monitoring, comparing, and correcting work
performance. The value of the control function can be seen in three specific areas:
planning, empowering employees, and protecting the workplace.
B. Importance of Management Control
1. Control is the only way that managers know whether organizational goals are being
met and if not, the reasons why.
2. An effective control system can provide information and feedback on employee
performance and minimize the chance of potential problems.
3. Managers impose control measures to protect the organization and its assets.
MODULE 7 │CONTROLLING
BA 101 │ INTRODUCTION TO BUSINESS
MANAGEMENT
C. Planning and Controlling
Planning is the process of setting organizational goals, objectives, and strategies.
Controlling is the process of evaluating whether the goals are achieved. Any deviations
will be used as significant inputs in the next planning process.
Both planning and controlling are considered the dynamic processes in an organization.
D. The Control Process
1. Measuring the actual performance based on criteria
Approaches
a. personal observations
b. statistical reports
c. oral reports
d. written reports
Issue: Actual performance cannot always be quantified
2. Comparing actual performance against the standard
Issue: Actual performance is not always the same as the standard. There is a
concept called an acceptable range of variation and the size (large or small) and
direction (over or under) of the variation from the standard (forecast or budget)
MODULE 7 │CONTROLLING
BA 101 │ INTRODUCTION TO BUSINESS
MANAGEMENT
3. Taking managerial action
Possible courses of action
a. Correct actual performance. Effective managers analyze deviations and if
the benefits justify it, take the time to pinpoint and correct the causes of
variance.
b. Revise the standard. Some unrealistic standards create a variance.
Issue: What is the realistic standard? How it is determined?
The Control Process
E. Controlling for Organizational Performance
Performance is the end result of an activity. Managers are concerned with
organizational performance—the accumulated results of all the organization’s work
activities.
Measures of Organizational Performance
1. Organizational productivity. Productivity is the measure of output (goods and/or
services produced) divided by the input (cost of acquiring and transforming
resources to outputs).
2. Organizational effectiveness. It is a measure of how appropriate organizational goals
are and how well those goals are being met. The organizational goals guide
managerial decisions in formulating strategies and action programs and in
coordinating the work of employees.
3. Industry and company rankings. Rankings are determined by specific performance
measures. It gives managers (and others) an indicator of how well their company
performs in comparison to others.
Types of Control
1. Feedforward control – anticipates problems and taking managerial action before a
problem occurs
• Building in quality through design.
• Requiring suppliers conform to ISO 9002.
2. Concurrent control – takes place while an activity is in progress; it can be done
through the practice of “Management by walking around”.
• Direct supervision: management by walking around.
3. Feedback control – takes place after the activity is done
MODULE 7 │CONTROLLING
BA 101 │ INTRODUCTION TO BUSINESS
MANAGEMENT
Control Tools
1. Financial control – the use of budget analysis and financial ratio analysis
a. Liquidity ratios measure an organization’s ability to meet its current debt
obligations. The higher is the ratio/result, the better is the company’s liquidity
position.
b. Leverage ratios examine how much capital comes in the form of debt. The lower
is the result, the better for the company.
c. Activity ratios assess how efficiently a company is using its assets. A high ratio
means the company is efficient.
d. Profitability ratios measure how efficiently and effectively the company is using
its assets to generate profits. A high result is ideal for the company.
2. The balanced scorecard approach. This approach looks at four areas that contribute
to a company’s performance: financial, customer, internal processes, and
people/innovation/growth assets.
3. Information control.
A management information system (MIS) is a system used to provide
managers with needed information regularly. In theory, this system can be
manual or computer-based, although most organizations have moved to
computer-supported applications. The term system in MIS implies order,
arrangement, and purpose.
4. Benchmarking. A benchmark is the standard of excellence against which to
measure and compare. Benchmarking, is therefore, the search for the best practices
among competitors or non-competitors that lead to their superior performance. It is
a control tool for identifying and measuring specific performance gaps and areas for
improvement.
The following are the steps to successfully implement an internal benchmarking
best practices program:
• Connect best practices to strategies and goals.
• Identify best practices throughout the organization.
• Develop best practices reward and recognition systems.
• Communicate best practices throughout the organization.
• Create a best practices knowledge-sharing system.
• Nurture best practices on an ongoing basis.
Contemporary Control Issues
1. Cross-Cultural Issues
• The use of technology to increase direct corporate control of local operations
• Legal constraints on corrective actions in foreign countries
• Difficulty with the comparability of data collected from operations in different
countries
2. Workplace Concerns
• Workplace privacy versus workplace monitoring: E-mail, telephone, computer,
and Internet usage; Productivity, harassment, security, confidentiality,
intellectual property protection
• Employee theft - The unauthorized taking of company property by employees for
their personal use.
• Workplace violence - Anger, rage, and violence in the workplace is affecting
employee productivity.
MODULE 7 │CONTROLLING
BA 101 │ INTRODUCTION TO BUSINESS
MANAGEMENT
3. Customer Interactions
• Service profit chain which is the service sequence from employees to customers
to profit. Service capability affects service value which impacts on customer
satisfaction that, in turn, leads to customer loyalty in the form of repeat business
(profit).
That’s why companies conduct customer satisfaction survey.
4. Corporate Governance
• The system used to govern a corporation so that the interests of the corporate
owners are protected.
Module Reference:
Robbin, S. & Coulter, M. (2012). Management 11th ed., Prentice-Hall. Retrieved from:
[Link]
[Link]
MODULE 7 │CONTROLLING