CONTROLLING

Contents
 What is Controlling
• It is the process of monitoring, comparing and
correcting work performance.
• It is implemented via planning, supervising and
improving alternative strategies for management.
• Controlling is future-oriented, instead of focusing on
the past it is concentrated on the future.
• As a management tool and management function as
well as a factor affecting competitiveness, the role of
controlling has become more and more significant.
 Why is Control so important
• Planning can be done,
• an organizational structure created to facilitate efficient
achievement of goals,
• employees motivated through effective leadership.
• But there’s no assurance that activities are going as planned
and that the goals employees and managers are working
toward are, in fact, being attained.
• Control is important, therefore, because it’s the only way
that managers know whether
• organizational goals are being met and, if not, the reasons
why.
 Value of Control
The value of the control function can be seen in
three specific areas:

• Planning
• empowering employees, and
• protecting the workplace.
 Basic Planning tools and techniques

• Techniques for assessing the environment

• Techniques for allocating resources and

• Contemporary planning techniques

 Techniques for assessing the environment

“What happens in India in today’s environment may have an impact on an

American accounting firm in North Dakota.”

• Environmental scanning

• Forecasting

• Benchmarking
 Environmental scanning

The screening of large amounts of information to anticipate and interpret

changes in the environment

• Competitor Intelligence

Gathering information about competitors that allows managers to anticipate

competitors’ actions rather than merely react to them
 Forecasting

Predictions of outcome

Quantitative Forecasting
Forecasting that applies a set of mathematical rules to a series of past data to
predict outcomes

Qualitative Forecasting
Forecasting that uses the judgment and opinions of knowledgeable individuals
to predict outcomes
Today, many organizations collaborate on forecasts using an approach
known as CPFR, which stands for collaborative planning, forecasting, and
replenishment
 Benchmarking

The search for the best practices among competitors or non-competitors that
lead to their superior performance.
 Techniques for allocating resources

Resources:
An organization’s assets—including financial, physical, human, intangible,
and structural/cultural—that are used to develop, manufacture, and deliver
products to its customers

Four techniques:
– Budgeting
– Scheduling
– breakeven analysis
– linear programming.
 BUDGETING

• A numerical plan for allocating resources to specific activities

 How to improve budgeting

– Collaborate and communicate.

– Be flexible.
– Goals should drive budgets
– budgets should not determine goals.
– Coordinate budgeting throughout the organization.
– Use budgeting/planning software when appropriate.
– Remember that budgets are tools.
– Remember that profits result from smart management, not because you
– budgeted for them.
 SCHEDULING

• Detailing what activities have to be done, the order in which they are to be
completed, who is to do each, and when they are to be completed.

Scheduling devices:

• Gantt charts
• Load charts
• PERT network analysis
 GANTT CHART

• The Gantt chart was developed during the early 1900s by Henry Gantt,
an associate of Frederick Taylor, the scientific management expert.

• The idea behind a Gantt chart is simple. It’s essentially a bar graph with
time on the horizontal axis and the activities to be scheduled on the vertical
axis.

• The bars show output, both planned and actual, over a period of time.
 LOAD CHART

• Load chart is a modified Gantt chart. Instead of listing activities on the

vertical axis, load charts list either entire departments or specific resources.
This arrangement allows managers to plan and control capacity utilization.
In other words, load charts schedule capacity by work areas.
PERT network
A flowchart diagram showing the sequence of activities needed to complete a
project and the time or cost associated with each

Why PERT Network

– Plan a large project
– Many number of activities to be scheduled
– Dependent of each other
– The implementation of a cost reduction program
– Development of a new product
 How to construct PERT Network
– Events
– Activities
– Slack time
– Critical path

 Events
• End points that represent the completion of major activities in a PERT network
 Activities
• The time or resources needed to progress from one event to another in a PERT
network
 Slack time
• The amount of time an individual activity can be delayed without delaying the
whole project
 Critical path
• The longest sequence of activities in a PERT network
How to draw network diagram

Activity Predecessor Activity

A -

B -

C A

D B

A 2 C
1  Starting Point Nodes
4
1 4  Finish Point  Event

B 3 D
Event Description Expected Time Preceding Event
(in weeks)
A Approve design and get permits 10 -

B Dig subterranean garage 6 A

C Erect frame and siding 14 B

D Construct floor 6 C
E Install windows 3 C
F Put on roof 3 C
G Install internal wiring 5 D,E,F

H Install elevator 5 G
I Put in floor covering and 4 D
paneling

J Put in doors and interior 3 I,H

decorative trim

K Turn over to building 1 J

management group
 4
I 3 1

D 5 J K
6
5 5
3 3
S
10
A
6
B
14
C E G H
3 5

A-B-C-D-I-J-K (44 weeks)

A-B-C-D-G-H-J-K (50 Weeks) – Critical Path
A-B-C-E-G-H-J-K (47 weeks)
A-B-C-F-G-H-J-K (47 weeks)

Events
End points that represent the completion of major activities in a PERT network
Activities
The time or resources needed to progress from one event to another in a PERT
network
Slack time
The amount of time an individual activity can be delayed without delaying the whole
project
Critical path
The longest sequence of activities in a PERT network
Steps in developing a PERT Network:

1. Identify every significant activity that must be achieved for a project to be

completed. The accomplishment of each activity results in a set of events or
outcomes.

2. Determine the order in which these events must be completed.

3. Diagram the flow of activities from start to finish, identifying each activity and its
relationship to all other activities. Use circles to indicate events and arrows to
represent activities. This results in a flowchart diagram called a PERT network.

4. Compute a time estimate for completing each activity. This is done with a weighted
average that uses an optimistic time estimate (to) of how long the activity would take
under ideal conditions, a most likely estimate (tm) of the time the activity normally
should take, and a pessimistic estimate (tp) that represents the time that an activity
should take under the worst possible conditions. The formula for calculating the
expected time (te) is then

te = to + 4tm + tp
6
 Breakeven Analysis

A technique for identifying the point at which total revenue is just sufficient to
cover total costs.

• BE =(TFC/(P – VC))

P  the unit price of the product being sold

VC  variable cost per unit
TFC  total fixed costs

• it’s valuable to managers because it points out the relationship between revenues,
costs, and profits.