Management functions
Controlling
Definition
• Management control is the systematic effort to set
performance standards with planning objectives, to
design information feedbacks, to compare actual
performance with these predetermined standards, to
determine whether there are any deviations and to
measure their significance, and to take any action
required to assure that all corporate resources are
being used in the most effective and efficient way
possible in achieving corporate objectives (Mockler
1984;Stoner & Freeman 1992:600)
Definition
• Controlling is the process by which
management ensures that the actual
organisational activities are compatible with
the predetermined goals and planned
activities; enabling management to measure
the actual performance against the set goals
and plans to take corrective action if
significant deviations occur(Du-Toit et al
2010).
Definitions and explanation
• A performance or control standard is a
planned target against which actual
performance will be compared-they must be
relevant, realistic, attainable, measurable so
that there can be no doubt whether the
actual performance meets the standard or not
• c/o profit standards, market share standards,
productivity standards, staff development
standards.
Definitions and explanations
• Comparing planned performance and actual
performance triggers the beginning of a new
cycle of planning, organising, leading and
controlling.
• Organisations must use procedures to ensure
that they are progressing towards their goals,
and that resources are used properly and
productively
Definitions and explanations
• All these derive from the goals set during the
planning process.
Reasons for controlling
• Controlling helps in aligning the organisation’s
goals and activities with actual performance
• Controlling is linked with planning, organising
and leading
• Without controlling, planning is pointless.
Reasons for controlling
• Controlling helps company adapt to
environmental changes because it helps
management to cope with change and
uncertainty
• Controlling helps to limit the accumulation of
errors-an effective control system should
detect errors before they accumulate and
become critical
Reasons for controlling
• Controlling helps company to cope with
increasing size and complexity
• Controlling help minimize costs(reduces costs
and increases output)
Reasons for controlling
• Controlling unites workers from different
backgrounds and culture
• Controlling facilitates delegation and
teamwork
The control process
The controlling process model
Setting
standards(derived
from goals
Rectifying
Measuring
deviations(
actual
corrective
performance
actions)
Evaluating
deviations &
performance
gaps
Controlling steps explained
• 1. Setting standards and methods for
measuring performance requires that goals be
stated in clear and measurable terms-refer to
your SMART-B model
• [Link] the performance must be an on
going process and frequency of measurement
depends on the type of business.
Controlling steps explained
• [Link] whether performance matches
standards is a matter of comparing measured
results with the set standards( below /match /
exceed).Develop a mind that even questions
performance which match or exceed standard.
• [Link] corrective action if performance falls short
of standards-adjust operations or adjust standard
Types of control methods
• Pre-action controls-carried out to ensure that
human, material, and financial resources have
been budgeted c/o financial budgets and
schedules.
• This type of control helps prevent problems
from happening as opposed to solving
problems(corrective action).
Types of control methods
• Steering controls-(in process controls)
• They are meant to detect deviations from the
set standards and to permit corrective action
to be taken before the whole process is
completed
• Predominantly quality assurance based
Types of controls
• Screening controls e.g (yes/no controls)
• These are control methods for screening
procedures that must be followed or
conditions to be met before operations
continue-refer use of control charts
• Post action controls post-evaluations
• Used for measuring the results of a completed
activity-may be used as the basis for
rewarding staff bonuses
Designing a control system
• Define required results(refer to plans)
• Establish predictors of results(milestones-e.g
going over budget, late sales reports,
Designing a control system
• Establish standards for predictors and results-
create benchmarks for evaluating actual
performance
• Establish the information and feedback
network(both top down and bottom up)
• Implement the system and take corrective
action is needed
Key performance areas/basic areas of
control
1. Finance=concerned with capital
expenditures, budgeting, working capital and
cash flow management, buying and selling on
credit, financial investment, payments and
salary expenditure management. NB Always
make sure revenues are sufficient to cover
expenses.
basic areas of control
2. Procurement-quality of bought items,
deliveries vs ordered quantities, specifications,
payment of correct amounts as per orders
basic areas of control
3 Human resources= Labour relations, Labour
turnover, Labour absenteeism, employees
expectations, informal and formal
communications need to be managed,
employees attitudes, performance
measurement, ghost workers
basic areas of control
4. Production-Quality of products and services,
Quantity produced of right size, Cost of
production and labour productivity
basic areas of control
5. Physical=tangible assets such as buildings,
equipment, motor vehicles, trading stock,
furniture, raw materials, WIP, finished
products c/o usage procedures, stock takes,
inspections and quality control, inventory
control, and quality control c/o inventory
control systems such as EOQ,MRP, JIT,etc.
Basic areas of control
6. Information= planning, organising, leading
and controlling are based on relevant,
accurate, adequate, timely information.
Invest in information technology,
communication technology and control
technology
Your communication policy guards against
industrial espionage and unnecessary attraction
of media.
Qualities of a good control system.
• It is integrated with all other managerial
functions
• It is objective
• It is flexible
• It is accurate
• It is timely
• It is simple
Qualities of a good control system.
• A control system that is flexible
accommodates change, and revised objectives
and plans
• Accuracy means providing an objective and
accurate picture of the situation
Qualities of a good control system.
• simplicity –unnecessarily complex systems
affect management judgement, unnecessary
controls are unmotivating and may invite
resistance to control systems, too much
irrelevant information makes the control
process more expensive
Qualities of a good control system.
• Benefits of control must be greater than the
cost of control c/o paralysis-analysis problem
is anathema.
• Timeliness-time is money