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© Prentice Hall, 2002 19 - 2
Objectives
• A definition of control
• A thorough understanding of the controlling subsystem
• An appreciation for various kinds of control and for how each kind can be used advantageously by managers
• Insights into the relationship between power and control
• Knowledge of the various potential barriers that must be overcome to implement successful control
• An understanding of steps that can be taken to increase the quality of a controlling subsystem
.
© Prentice Hall, 2002 19 - 3
THE FUNDAMENTALS OF CONTROLLING
Defining Control
Defining Controlling
The Controlling Subsystem
The Controlling Process
Measuring Performance
How to Measure
What to Measure
.
© Prentice Hall, 2002 19 - 4
THE FUNDAMENTALS OF CONTROLLING
Figure 19.1Relationship between overall management system
and controlling subsystem.
© Prentice Hall, 2002 19 - 6
THE FUNDAMENTALS OF CONTROLLING
Defining Controlling (con’t)The Controlling Process (con’t)Comparing Measured Performance to Standards
GE's standards:1. Profitability standards2. Market position standards3. Productivity standards4. Product leadership standards
5. Personnel development standards6. Employee attitudes standards7. Social responsibility standards8. Standards reflecting relative balance between short- and long-range goals
American Airlines standards:1. 95% accuracy on posted flight arrival times2. No more than 5 minute wait for 85% of customers at ticket counter
.
© Prentice Hall, 2002 19 - 7
THE FUNDAMENTALS OF CONTROLLING
Defining Controlling (con’t)
The Controlling Process (con’t)
Taking Corrective Action
Recognizing Problems
Recognizing Symptoms
.
© Prentice Hall, 2002 19 - 8
THE FUNDAMENTALS OF CONTROLLING
Types of Control
Precontrol
Concurrent Control
Feedback Control
.
© Prentice Hall, 2002 19 - 9
THE CONTROLLER AND CONTROL
The Job of the Controller
Works with these organizational financial dimensions:1. Profits
2. Revenues3. Costs4. Investments5. Discretionary expenses
How Much Control Is Needed?
Cost-benefit analysis
.
© Prentice Hall, 2002 19 - 10
THE CONTROLLER AND CONTROL
Table 19.1Sample Job Description for a Controller in a Large Company
(part 1 of 2)
ObjectivesThe controller (or comptroller) is responsible for all accounting activities within the organization.
Functions1.General accounting—Maintain the company’s accounting books, accounting records, and forms.
This includes:a. Preparing balance sheets, income statements, and other statements and reportsb. Giving the president interim reports on operations for the recent quarter and fiscal year to datec. Supervising the preparation and filing of reports to the SEC
2.Budgeting—Prepare a budget outlining the company’s future operations and cash requirements.
3.Cost accounting—Determine the cost to manufacture a product and prepare internal reports for management of the processing divisions. This includes:
a. Developing standard costsb. Accumulating actual cost datac. Preparing reports that compare standard costs to actual costs and highlight unfavorable differences
.
© Prentice Hall, 2002 19 - 11
THE CONTROLLER AND CONTROL
Table 19.1Sample Job Description for a Controller in a Large Company
(part 2 of 2)
4.Performance reporting—Identify individuals in the organization who control activities and prepare reports to show how well or how poorly they perform.
5.Data processing—Assist in the analysis and design of a computer-based information system. Frequently, the data-processing department is under the controller, and the controller is involved in management of that department as well as other communications equipment.
6.Other duties—Other duties may be assigned to the controller by the president or by corporate bylaws. Some of these include:
a. Tax planning and reportingb. Service departments such as mailing, telephone, janitors, and filingc. Forecastingd. Corporate social relations and obligations
RelationshipThe controller reports to the vice president of finance.
.
© Prentice Hall, 2002 19 - 12
THE CONTROLLER AND CONTROL
Figure 19.3Value of additional controlling
.
© Prentice Hall, 2002 19 - 13
POWER AND CONTROL
A Definition of Power
Total Power of a ManagerPosition power
Personal power
Steps for Increasing Total Power1. Sense of obligation toward manager
2. Belief that manager possesses high level of expertise3. Sense of identification with manager4. Perception of dependency on manager
.
© Prentice Hall, 2002 19 - 14
PERFORMING THE CONTROL FUNCTION
Potential Barriers to Successful Controlling
Long-Term Versus Short-Term Production
Employee Frustration and Morale
Filing of Reports
Perspective of Organization Members
Mean Versus Ends
.
© Prentice Hall, 2002 19 - 15
PERFORMING THE CONTROL FUNCTION
Making Controlling Successful
Specific Organizational Activities Being Focused On
Different Kinds of Organizational Goals
Timely Corrective Action
Communication of the Mechanics of the Control Process
.