4 PICS 1 WORD

4 PICS 1 WORD
4 PICS 1 WORD
 GROUP 6

Lucky Prawns
Farm
Alemania, Apostol, Estopen, Hernandez, Kawada, Laya, Lim, Querijero
 INTRODUCTION
Lucky Prawn farm is a prawn farming business

Founded by: Ric Solis, Ben Torres, and two other relatives

Started with a ₱75,000 in capital

Ben Torres is in charge of managing the harvesting of crops.

First crop = insufficient net cash flow = infusion of additional ₱30,000.

Problems due to water quality.

Second crop = First crop

Upon review of the company’s cash flow statements, Solis identified several disbursements

made by Torres that were not made aware to himself and the two other partners.
PROBLEM
“Solis now needs to find a way on
how to exercise more effective
control over the operations of the
venture so as not to incur more
financial complications.”
POINT OF VIEW

The point of view of

founding partner Ric
Solis will be assumed.
CONTROL
VOUCHER
ORGANIZATIONAL
CULTURE
THE NEED FOR
CONTROL
Since there is a gap between personal and organizational goals, there

is a need to design a control system that will facilitate goal

congruence 

Behavioral aspect -> motivate employees to strive towards

organizational goals
THE CONTROL
PROCESS
Control is the process of assuring management that organization plans,

programs, and specific tasks are carried out effectively and efficiently 

Management Control is the process of monitoring the adherence of

performance to plans and programs and motivating employees to adhere

to such plans

Operational Control is the process of assuring the management that

specific tasks are effectively and efficiently carried out
 THE CONTROL PROCESS
3 BASIC ACTIVITIES

ESTABLISHMENT OF ANALYSIS OF CORRECTION OF

STANDARDS PERFORMANCE DEVIATION

The process by which criteria The established standards Presentations are

or benchmarks are set against should be used to measure communication tools that can

which actual performance performance if the control be demonstrations, lectures,

can be measured system is to influence people speeches, reports, and more.

to change their behavior Most of the time, they’re

Evaluation of performance presented before an

should be done periodically audience.

and on a regular basis

MANAGEMENT CONTROL VS. OPERATING CONTROL

MANAGEMENT OPERATING
CONTROL CONTROL
PRIMARY OBJECTIVE = GOAL ITS PRIMARY GOAL IS TO OPTIMIZE THE

CONGRUENCE) ENSURES THAT THE RELATIONSHIP BETWEEN THE INPUTS AND

ACTIONS A MANAGER MAKES IS IN THE OUTPUTS OF A PARTICULAR ACTIVITY OR

BEST INTEREST OF BOTH THE TRANSACTION.

ORGANIZATION (BASED ON THE GOALS FOCUS OF ACTIVITY: SINGLE TASK OR

THAT WERE PREVIOUSLY ESTABLISHED) AND OPERATION

THE MANAGER HIM/HERSELF. FOCUS OF CONTROL: EMPLOYEE

FOCUS OF ACTIVITY: OVERALL ASSIGNED TO DO THE JOB; SUPERVISORS

PERFORMANCE CONTROL REPORTS: DATA SPECIFIC TO THE

FOCUS OF CONTROL: OPERATING OPERATION

MANAGERS

CONTROL REPORTS: FINANCIAL AND NON-

FINANCIAL; FUTURE AND HISTORICAL

INFORMAL
CONTROL
Can be as effective as formal control depending on certain factors such as

the size and nature of the company. 

The major shortcoming of this type of approach is its dependence on a few

trusted individuals who are in-charge to implement the particular control

process.

Performance standards are not explicitly defined and formally communicated

Direct observations, individual consultations, and subjective judgments are

commonly used to evaluate performance within the organization.

There is no systematic process wherein the objectives and goals of the

organization are formulated and reappraised.

 TOOLS and
TECHNIQUES
RELEVANCE OF CONTROL TOOLS &
TECHNIQUES
As organizations grow, it becomes more costly to monitor & control each

activity

There are two tools for control:

Operational Control Tools - concerned with the process of how a

company performs an activity

Management Control Tools - more financial by nature

OPERATIONAL CONTROL TOOLS -
SELLING
Merchandise Claim Counter System:

Management should design an internal control system that will protect

company assets

Assets like cash & inventory are managed by employees and customers

respectively

An internal control system exists to prevent fraud

Examples:

Clothing stores having beeper tags & gates

Cashiers having different cash boxes per person

OPERATIONAL CONTROL TOOLS -
SELLING
Office Uniforms

Used for identification

Stock Cards

Shows inventory balance in the stock card

May be used to compare logged inventory and physical inventory

All inflows and outflows must be logged accordingly

 OPERATIONAL CONTROL TOOLS -
PRODUCTION
Economic Order Quantity (EOQ) & Reorder Point

Used to maintain inventory at the optimal level to avoid excess costs & spoilage

Makes use of two important variables

Holding Costs - costs incurred to hold inventory

Ordering Costs - cost of procuring inventory

Given by the formula: E = sqrt((2AP)/S)

E = Optimal Quantity

A = Annual Quantity Demanded

P = Cost per purchase order

S = Holding Cost
 OPERATIONAL CONTROL TOOLS -
PRODUCTION
PERT & Gantt Chart

Gantt Chart - shows the scheduled time of accomplishing tasks for an an

activity

Can be used to compare with actual progress

PERT - Program Evaluation and Review Technique

Three estimates are made for each task in production

Given by the equation: t = (a + 4m + c)/6

Where t = time 

a = earliest completion time

b = target completion time

c = latest possible time

 OPERATIONAL CONTROL TOOLS -
PRODUCTION
Critical Path Model (CPM)

Ideal for large & complex projects

Factors in interdependency of tasks

Goal of finding the minimum amount of time needed to complete the project
 OPERATIONAL CONTROL TOOLS -
ACCOUNTING
Voucher System

Every liability must be recorded

Only checks can be used for payment

The voucher is prepared once the necessary documents are reviewed

Purchase orders, sales invoice, delivery receipts, etc.

Petty Cash Fund

For small transactions 

Transportation expenses, emergency supply purchases

A check written that must be encashed. Like a voucher, it must be reviewed and

filled out
 MANAGEMENT CONTROL TOOLS -
CONTROL REPORTS
Financial Accounting Reports

Prepared in accordance with GAAP

Balance sheet - company’s financial condition as of the date of the statement

Income statement - summarizes the results of operation of the company for a

period of time 

Measurement Reports

Summaries and analysis of deviations from established standards or plans

Budget report - compare actual results with the budget

Variance analysis reports - relates manufacturing costs when a standard cost

system is used
 MANAGEMENT CONTROL TOOLS -
CONTROL REPORTS
Responsibility Accounting Reports and Control Structure

Measure effectiveness and efficiency of responsibility centers

Expense centers - measures performance by analyzing the expenses or costs

incurred by unit

Profit centers - evaluates on the basis of income earned by respective

departments

Investment centers - compares assets employed in earning profit

 MANAGEMENT CONTROL TOOLS -
CASH BUDGET
Cash Budget 

Amount of idle cash that can be put to some use by company or shareholders

Amount of cash that will be needed during periods of deficit

Amount of cash that can be used by company for the acquisition of new, long-

lived assets

Amount of dividends that  can be paid to stockholders

Modifications required in the operating budgets if not acceptable by Top

Management
ISSUES IN CONTROL
 NEW CONTROL MEASURES
Customer Satisfaction

Contemporary firms must be “customer driven” or “close to the customer” to be

successful

How is it measured:

Independent Consumer Research Organizations

Old: Questionnaires, Interviews, Sales Force Feedback, etc.

New: Effort to collect customer satisfaction data on a regular or

continuing basis (To detect and evaluate changes and trends over time)

→ direct basis rather than inferring

 NEW CONTROL MEASURES
Quality Measures

Statistical Quality Control

The traditional approach for the measurement of production quality in the

shop floor

Past: Uses traditional concepts such as “acceptable quality levels”Present:

Firms are enjoined to aim for “zero defects” as their quality standard in

production
 NEW CONTROL MEASURES
Total Quality Management

Through the process of benchmarking, they can obtain data on the practices

and performance of their best competitors against which to compare their own

performance

International Standards Organization

Represents a federation of national standards organizations from more than

100 countries around the world

Promote international standardization of quality practices and can form

independent and comprehensive assessments and certifications of the

practices of a specific firm

 COST IMPLICATIONS OF CONTROL
Personnel Costs

Increases as control is tightened

Due to additional manpower requirements as tasks are divided → Checks

and Balances

Due to close monitoring of performance in order to correct deviations from

targets or plans

Additional Tasks created by the Control Function

Internal Auditing

Regular evaluation of the company’s internal control system, the

examination of the company’s assets

Financial Analysis

Variance analysis reports and timely financial reports

COST IMPLICATIONS OF CONTROL
Capital

More people = more floor space required

Operating Expenses

More people = more administration and overhead costs

 DANGERS OF REMOTE CONTROL
Complementing use of reports in control

Conduct meetings

Joining industry associations 

Presence and observation

Informal meetings

Job rotation and forced vacations

 OVERCOMING RESISTANCE TO
CONTROL
THREE REASONS WHY EMPLOYEES RESIST CONTROL

Control acts as a barrier Affects total It takes the fun out of

for attaining employees’ compensation work

personal goals.
 CREATIVITY AND ORGANIZATIONAL
CONTROL
Standardized and formal procedures and processes inhibit the
creative thinking of some employees.

Opportunity cost of foregoing unplanned improvisations and

creative innovation over tighter control practices and techniques.
CONTROL THROUGH “SELF
CONTROL”
People have internalized values and beliefs that govern behavior.

These values and beliefs can be used as a means of “self-control”

that an organization can use aside from external control techniques.

Organizational Culture

Values and shared beliefs that employees internally accept.

Motivates and ‘controls’ behavior in a sense that it is inline

with the organization’s ideologies

Employees have to be properly inculcated.

Japan has a systematic practice of doing this.

CONTROL THROUGH “SELF
CONTROL”
People have internalized values and beliefs that govern behavior.

These values and beliefs can be used as a means of “self-control”

that an organization can use aside from external control techniques.

Organizational Culture

Values and shared beliefs that employees internally accept.

Motivates and ‘controls’ behavior in a sense that it is inline

with the organization’s ideologies

Employees have to be properly inculcated.

Japan has a systematic practice of doing this.

 SWOT ANALYSIS

STRENGTHS WEAKNESSES OPPORTUNITIES THREATS

Despite having a Partners lack a clear The city is known to

Distance between upper
generally poor crop in agreement regarding
have successful prawn
management and
the area, they are still investment decisions.
related ventures.   operations may cause
able to continue with the Operations lack the
The cost for the difficulties in
experience and
operations of their
communication and fast
fishponds they will be
knowledge on prawn
business.  
decision-making.
farming causing needing are cheap. 
Ben Torres is in contact Unexpected
unexpected Other ventures in the
with a technician from environmental calamities
disbursements.
area gave up on prawn
UP to aid in solving their such as typhoons and
Management lacks
culture and switched to droughts may destroy
problem on soft shelled
transparency with
prawns. culturing Bangus. their fishponds.
operations.
ANALYSIS
COSO
FRAMEWORK
Five Components that work together

to achieve a company’s mission,

strategies, and objectives:

1. Control Environment

2. Risk Assessment

3. Control Activities

4. Information & Communication

5. Mentoring Activities
COSO
FRAMEWORK
Five Components that work together

to achieve a company’s mission,

strategies, and objectives:

☑ Control Environment
☑ Risk Assessment
Control Activities

Information & Communication

Mentoring Activities
COSO
FRAMEWORK
Control Activities

Policies & Procedures not well-established (ex. Changes in

operations)

Information & Communication

Ineffective and inefficient information dissemination (ex. Partners

are informed of additional costs after it has been purchased)

Mentoring Activities

Sparse & Costly Evaluations

COSO
FRAMEWORK
Control Activities

Policies & Procedures not well-established (ex. Changes in

operations)

Information & Communication

Ineffective and inefficient information dissemination (ex. Partners

are informed of additional costs after it has been purchased)

Mentoring Activities

Sparse & Costly Evaluations

 LEVERS OF
CONTROL
Diagnostic Control

Standard use of performance measures for

feedback.

Interactive Control

Meaningful interaction between levels.

Boundary Systems

Practices which the company will not do or

pursue.

Belief Systems

Shared visions, mission, and values in a

business.
 LEVERS OF
CONTROL
Diagnostic Control

Only diagnostics are results which aren’t

enough.

Interactive Control

No real interaction on a regular basis due to

distance of relatives. 

Boundary Systems

Too little boundaries as Ben seems to be able

to do as he pleases without much concern.

Belief Systems

Only shared value is profit.

MANAGEMENT
ACCOUNTABILITY
FRAMEWORK
Four core areas considered to be

important to good management

1. Financial Management

2. People Management

3. IT Management

4. Results (Strategic) Management

 MANAGEMENT
ACCOUNTABILITY
FRAMEWORK
Supports four core areas

1. Public Sector Values

2. Continuous Learning

Management Methodologies

3. Management of Policy & Programs

4. Management of Service Delivery

ALTERNATIVES
ALTERNATIVES
ALTERNATIVES
ALTERNATIVES
ALTERNATIVES
RECOMMENDATIONS