CONTROLLING
Anuj Tagra (25)
Shweta Singh (22)
Anuja Deora (28)
Vikash Bairoliya (04)
Controlling
A process of monitoring performance and
taking action to ensure desired results.
Any process that directs the activities of
individuals toward the achievement of
organizational goals.
It sees to it that the right things happen, in
the right ways , in the right time.
Characteristics/ Strategies Of
Controls
System control Features and requirements
Bureaucratic control
Uses formal rules, standards, hierarchy, legitimate
authority. Works best where tasks are certain and
workers are independent.
Market control
Uses prices, competition, profit centers, exchange
relationships. Works best where tangible output ca
be identified and market can be established betwe
parties.
Clan control
Involves culture, shared values, beliefs, expectation
and trust. Works best where there is “no one best
way” to do a job and where employees are
empowered to make decisions.
The Control Process
Set
Measure Determine
performance Compare
performance deviation
standards
Within
Standards
limits
Take
corrective No Yes
action
Continue
work
progress
Bureaucratic Control Systems
Approaches to bureaucratic control
Feedforward control - control process used
before operations begin
future oriented
prevent problems before they occur
includes policies, procedures, and rules
Concurrent control - control process used
while plans are being carried out
the heart of any control system
directing, monitoring, and fine-tuning activities as
they are occur
advances in information technology have created
powerful concurrent controls
Bureaucratic Control Systems
Feedback control
Control that focuses on the use of information
about previous results to correct deviations from
the acceptable standard
Implies that performance data were gathered and
analyzed
Results used to make corrections
Timing is an important aspect of feedback control
Some feedback processes are under real-time
(concurrent) control
Six Sigma
A type of feedback control.
Most important quality control tool.
Developed by Motorola in the late 1980’s.
GE Commercial introduced it in financial
services domain.
Six sigma achieves 99.99966 percent level
of accuracy.
Relationship Between Sigma Level
And Defects/Million Opportunities
Sigma level DPMO Examples of four sigma quality
2σ 308,537 20,000 lost articles of mail per hour
3σ 66,807 Unsafe drinking water 15 minutes per
day
4σ 6,210
5,000 incorrect surgical operations per
5σ 233 week
6σ 3.4 200,000 wrong prescriptions each year
No electricity for 7 hours each month
Dabbawallas
Dabbawala Association is Six sigma certified.
Employee strength of 5000.
Deliver 2 lacs dabbas everyday.
They rely on low capital .
Groups work independently and network.
Meet once a month where all the groups gather and thrash out issues.
No retirement age. People work as long as they want to.
Involves a lot of physical exercise, so they rarely suffer from illnesses.
Dabbawallas have a credit society which gets them through money crunches.
Being ‘annadattas’ they are automatically treated with respect
How Is The Dabba Delivered
The first dabbawalla picks up the tiffin from home
and takes it to the nearest railway station.
The second dabbawalla sorts out the dabbas at
the railway station according to destination and
puts them in the luggage carriage.
The third one travels with the dabbas to the
railway stations nearest to the destinations.
Scope of Competition
Working of Dabbawallas
Bureaucratic Control
Management Audits
• Evaluation of the effectiveness and efficiency of various systems
within an organization.
External Audit
• Evaluation conducted by one organization, such as a CPA firm, on
another.
Internal Audit
• Periodic assessment of a company’s own planning, organizing,
leading, and controlling processes.
Budgetary Control
ost widely recognized and commonly used
method of managerial control
udgeting
rocess of investigating what is being done and
comparing the results with the corresponding
budget data
Budgetary Control
Fundamental Budgetary Considerations
Budgetary control proceeds through several stages
Types Of Budgets
Budgetary Control
Accounting Audits
• Procedures used to verify accounting reports and statements
• Performed by an outside firm of public accountants
Activity-Based Costing (ABC)
• Cost accounting method that identifies streams of activity
• Employees break down what they do to define basic activities
• Total amounts spread over the activities according to time spent
on each
• Provides an accurate picture of how costs should be charged
• Highlights where wasted activities are occurring
Financial Controls
Balance Sheet
Report that shows the financial picture of a company at a given time
Shows trends over time
Gives managers insight into overall performance
Identifies areas which require adjustments
Profit and loss statement
Itemized financial statement of the income and expenses of a
company’s operations
Comparisons of profits and losses can identify trouble areas
A common control for the enterprise as a whole
Financial Controls
inancial Ratios
ndicate possible strengths and weaknesses
calculated from selected items on the Profit and
Loss statement and the Balance Sheet
iquidity ratios
everage ratios
rofitability ratios
Downside of bureaucratic control
Rigid bureaucratic behavior
• Acting in ways that make one look good on the control system’s
measure
Tactical behavior
• Behavior aimed at “beating the system
Resistance to control
• control system can change expertise and power structures
• control system can change the social structure
• control system may be perceived as an invasion of privacy
Markets Control
Market control
involves the use of economic forces - and the pricing
mechanisms that accompany them - to regulate performance
as a market for these transactions becomes established:
price becomes an indicator of the value of the product or service
price competition effectively controls performance
market controls at the corporate level
used to regulate independent business units
business units treated as competing profit centers
profit and loss data used to evaluate performance
Markets Control
Market control (cont.)
• market controls at the business unit level
regulates exchange among departments and functions
transfer price - price charged by one unit in the organization for a
product or service that it supplies to another unit of the same
organization
• ideally, reflects the price that the receiving business unit would
have to pay for that product or service in the marketplace
provide natural incentives to keep costs down when organization has
the option to outsource products and services to external partners
Example Of Market Control
CEO uses market
controls to evaluate CEO/
performance of business President Managers use transfer
unit heads pricing to establish
values for internal
transactions among
units
Business Business Business Business
unit unit unit unit
manager manager manager manager
Market rates determine
the base wage/salary for
managers and employees
Clan Control
Clan control: the role of empowerment and culture
• Bureaucratic and market controls are no longer sufficient because:
employees’ jobs have changed
the nature of management has changed
the employment relationship has changed
• Empowerment - has become a necessary aspect of a manager’s repertoire
of control
employees trusted to act in the best interests of the firm
does not mean giving up management control
• Clan control - create relationships built on mutual respect
encourage each person to take responsibility for her/his actions
Clan Control
Clan control
• diagnosing culture - clues about culture
• corporate mission statements and official goals
• business practices
• symbols, rites and ceremonies
• the stories people tell
cultures can be categorized according to whether
they emphasize flexibility versus control and
whether their focus is internal or external to the
organization
Clan Control
Clan control (cont.)
• diagnosing culture (cont.)
• general cultures can be categorized
group culture
• dominant attribute: cohesiveness,
participation, teamwork, sense of family
• leadership style: mentor, facilitator, parent-
figure
• bonding: loyalty, tradition, interpersonal
cohesion
• strategic emphasis: toward developing
human resources, commitment, and morale
Competing Values Model Of
Culture
Flexible
Processes
Group Adhocracy
Internal External
Maintenance Positioning
Hierarchy Rational
Control-Oriented
Processes
Management Control In An
Empowered Setting
[Link] control where the operation is
[Link] “real time” rather than after-the-fact
controls
[Link] the assumptions underlying management
control to build on trust rather than distrust
[Link] to control based on peer norms
[Link] the incentive systems to reinforce
responsiveness and teamwork
DESIGNING EFFECTIVE CONTROL
SYSTEMS
1. Establish valid performance standards
2. Tend to expressed in quantitative terms
3. Provide adequate information Relevant ,right amount,
accesible, feedback
4. Ensure acceptability to employees
5. Useful but not over controlling standards
6. Maintain open communication
7. Use multiple approaches
Performance Metrics
Customer Satisfaction
Market Share
Revenue Growth
Expenses
Earnings
TIME EVENT NETWORK ANALYSIS PERT
•Circle – event
•Arrow –
activity
•Activity times
-numbers
beside the
arrows