SEWP ZC 241: SEWP ZC 241: PRINCIPLES OF PRINCIPLES OF MANAGEMENTMANAGEMENT

SYSTEM & PROCESS SYSTEM & PROCESS OF CONTROLLINGOF CONTROLLING

After studying this chapter, you After studying this chapter, you should understand:should understand:

1. The steps in the basic control process.

2. The importance of critical control points, standards, and benchmarking.

3. Control as a feedback system.

4. That real-time information will not solve all the problems of management control.

5.  That feedforward control systems can make management control more effective.

6. The requirements for effective controls

What is Controlling?What is Controlling?• Controlling is the

measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are being accomplished

• Planning and controlling are closely related

The Basic Control ProcessThe Basic Control Process

• The basic control process involves three steps: establishing standards, measuring performance against

these standards, and correcting variations from

standards and plans

Standards are criteria of performance

Principle of Critical-Point Principle of Critical-Point Control Control • Effective control

requires attention to those factors critical to evaluating performance against plans

Critical-Point ControlCritical-Point Control

Examples of Critical-Point Examples of Critical-Point Control Control

• Examples of critical-point standards (1) physical standards, (2) cost standards, (3) capital standards, (4) revenue standards,

Examples of Critical-Point Examples of Critical-Point Control : PHYSICAL STANDARDSControl : PHYSICAL STANDARDS

• Non monetary Standards.

• May reflect QUANTITYUnits of production per machine

hourLabour hours

per unit of

output

Examples of Critical-Point Examples of Critical-Point Control : PHYSICAL STANDARDSControl : PHYSICAL STANDARDS

• Non monetary Standards.

• May reflect QUALITYToleranceStrengthResistance

Examples of Critical-Point Examples of Critical-Point Control : COST STANDARDSControl : COST STANDARDS

• Monetary measurement.

• Attaches monetary value to specific operationsDirect &

Indirect costLabour costSelling cost

Examples of Critical-Point Examples of Critical-Point Control : CAPITAL STANDARDSControl : CAPITAL STANDARDS

• Monetary measurement of physical items.

• Concerned with Capital

invested

• ROI (Return

On Investment

most common.

Examples of Critical-Point Examples of Critical-Point Control : REVENUE STANDARDSControl : REVENUE STANDARDS

• Attaching monetary value to Sales. Average sales per

customer. Average

sales per region

Examples of Critical-Point Examples of Critical-Point Control Control • Examples of critical-point

standards (5) program standards, (6) intangible standards, (7) goals as standards(8) strategic plans as control

points for strategic control

Examples of Critical-Point Examples of Critical-Point Control : PROGRAM STANDARDSControl : PROGRAM STANDARDS

• Subjective considerations along with objective standards. New product

development. Improving sales

force quality.

Examples of Critical-Point Examples of Critical-Point Control : INTANGIBLE Control : INTANGIBLE STANDARDSSTANDARDS

• Not expressed in physical or monetary terms. Effectiveness of advertising

campaigns. Effectiveness of

PR activities.Company’s

goodwill

What is Strategic Control?What is Strategic Control?

Strategic control comprises systematic monitoring at strategic control points as well as modifying the organization's strategy on the basis of this evaluation

What is Benchmarking?What is Benchmarking?• Benchmarking is an approach for

setting goals and productivity measures based on best-industry practices

• Three types of benchmarking: strategic, operational, and management

Control as a Feedback Control as a Feedback System System

• Management control is usually perceived as a feedback system similar to that which operates in the common household thermostat

DFF

AFFDSSS

DESIRED

IMPLEMENTATION OF CORRECTIONS

ACTUAL PERFORMANCE

MEASUREMENT OF ACTUAL

PERFORMANCE

COMPARISON OF ACTUAL

PERFORMANCE AGAINST

STANDARDS

IDENTIFICATION OF DEVIATIONS

ANANLYSIS OF CAUSES OF DEVATION

PROGRAM OF CORRECTIVE

ACTIONS

FEEDBACK LOOPFEEDBACK LOOP

Real Time Information and ‑Real Time Information and ‑Control Control • Real‑time information is

information about what is happening while it is happening

Feedforward Control Feedforward Control

What managers need for effective control a system that will tell them potential problems, giving them time to take corrective action before problems occur

Feedforward Control Feedforward Control

Feedforward systems monitor inputs into a process to ascertain if the inputs are as planned; if they are not, the inputs or the process is changed in order to obtain the desired results

Comparison of Simple Comparison of Simple Feedback and Feedforward Feedback and Feedforward Systems.Systems.

24

Requirements for Feedforward Requirements for Feedforward Control Control 1. Make a thorough and careful analysis of the planning and control system, and identify the more important input variables

2. Develop a model of the system

3. Take care to keep the model up to date; in other words, the model should be reviewed regularly to see whether the input variables identified and their interrelationships continue to represent realities

4. Collect data on input variables regularly, and put them into the system

5. Regularly assess the variations of actual input data from planned‑for inputs, and evaluate the impact on the expected end result

6. Take action

Chapter 18. The System and Process of Controlling

Requirements for Effective Controls Requirements for Effective Controls • Tailoring Controls to Plans and Positions

• Tailoring Controls to Individual Managers

• Making Sure That Controls Point Up Exceptions at Critical Points

• Seeking Objectivity of Controls

• Ensuring Flexibility of Controls

• Fitting the Control System to the Organization Culture

• Achieving Economy of Controls

• Establishing Controls that Lead to Corrective Action

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