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THE INSTITUTE OF FINANCE
MANAGEMENT
Topic coverage
Meaning of controlling
MSD 06202: FUNDAMENTALS OF MANAGEMENT
Features of controlling
Types of controlling
Lecture 7
The Controlling Function Tools/ techniques for controlling
The controlling process
By
Mr. Lema, F Aspects for effective control
Office No: 608- Block A Critical areas for controlling
Mobile: 0783-229535
Email:
[email protected] Reasons for controlling
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Meaning of Controlling Concept of Organizational Performance
Is the process of ensuring that organizational Organizational performance – refers to the accumulated results of all
activities are going according to plan, the organization’s work activities
accomplished by comparing actual performance NB: Performance – is the end result of an activity.
to predetermined standards or objectives, then
taking action to correct any deviations How to Measure Organizational performance?
OR Managers must know which measure will give them the information
they need about organizational performance – commonly are;-
Is the process of monitoring, comparing and Organizational Productivity – the amount of goods produced divided by
correcting work performance, Robbins (2014). inputs needed to generate that output.
OR Organizational Effectiveness – a measure of how appropriate goals are and
how well this goals are being met. and
According to Koontz “Controlling refers to the Industry and company ranking – comparing some special characteristics
measurement and correction of performance (specific performance measures) with others enterprises.
to make sure proper implementation of the
devised plans for accomplishment of enterprise NB: Employee performance – is controlled through effective
objectives performance feedback and through disciplinary action when needed
Features/characteristics of Types of controlling
control 1. Feed forward control
Control is forward and Backward looking It is also called preliminary or steering control –
A control that is take place before a work activity is
Control is continuous process done
Control process is universal It anticipate problems and prevent it from happening
Control is action based Prevent damages like poor quality products, lost of
customers, lost revenue e.t.c
Control is a corrective action
2. Concurrent control –
Control involves measurements Also known as Screening control
Control is exercised at all level of mgt A control that takes place while a work activity is in
progress
Control is a dynamic process
It corrects problems that happens in the process
Management control is a system The Best known concurrent control is direct
supervision (management by walking around)
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Types of Controlling cont.... Tools/techniques of controlling
Financial controls – e.g. involves analysis of income statements, ratio
analysis, budget analysis, profitability e.t.c
3. Feedback control –
Budgetary controls – focuses on implementing planed activities only
Also know as Post-Action Control Direct observation – being part of operations (mgt by walking
A control that takes place after a work around)
activity is done Written reports - a system of periodic reporting
It focuses of corrects problems after they Management Information System (MIS) – computerized system
designed to provide information needed at any time
occur - but before they reach to a crisis
Management Audits – an attempt to evaluate the overall mgt
proportions. e.g Financial control practices and policies of the organization
It gives managers meaningful information on Benchmarking of best practices – search for the best practices
how their planning effort were. among your competitors /non-competitors that lead to their
superior performance
It can enhance motivation – people wants to Balance score card- a performance measurement tools that looks at
know hw the performed more than just financial issues
The controlling process The controlling process cont…
1. Measuring actual performance;
◦ HOW? Through Personal observation, statistical reports, oral and 3. Taking managerial action: Management can
written reports a manager determine the actual performance in
his/her area of command
choose among three possible course of action
2. Comparing actual performance against the standards: – to
The step helps to determine variation between actual performance and the Do nothing
established standard.There should be an acceptable range of variation (acceptable
parameters of variance between actual performance and the standard) as seen in figure Correct actual performance; This can be done by:-
below Immediate corrective action – corrective action that corrects
Acceptable
problems at once to get performance back on track
Upper Limit
Basic corrective action – is corrective action that looks at how
STANDARD
Acceptable Range and WHY performance deviated before correcting the
of Variation
source of deviation
Acceptable
Lower Limit Revise the standard
The controlling Process Important aspect (requirements)
Compare Is
YES for effective control
OBJECTIVES actual
performance
standard
being
Do Nothing
The effective control system has to be;-
and Standard attained?
Objective- specific focus
NO
PLANS YES Have prompt reporting of issues
Forward looking
Is Variation Do nothing
acceptable?
Measure
NO
Point out expectations
Standard
Economical – the benefits > costs
actual
Performanc YES
Identify
It must be simple- easy understood by an
e Is standard
Acceptable cause of
? variation
ordinary layman
It should be flexible
NO
REVISE
integrate with planning
Correct
STANDARD Performanc
e
Suggest remedial action
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Critical areas of control Why controlling?
Guide operations of the business
Control over policies Provides assurance that activities are going as
Control over personnel planned
Control over Costs Ensure managers and workers efforts are
Control over Research and Dev geared to attainment of goals
Control over Financial It also provide reasons for not meeting
Control over Capital expenditure objectives (if goals are not met)
Reduce risk of system failure
Control over Production
Ensure effective use of scarce resources
Control over Performance
Simplifies overall coordination & supervision
Control over Morale
Provides basis for future action
Overall control
Shows an indicator for managerial weakness
Revision Questions
What is management control?
What are the characteristics of control?
What is organizational performance?
Briefly describe the steps involved in controlling?
THANK YOU
Describe the model of the management control process
Discuss various types of tools used to monitor and measurer
organization performance
Briefly explain the basic types of control?
Name and explain the major controlling tools
FOR
What are critical areas of control?
Why controlling is important to customer interactions?
What are the disadvantages of control?
LISTENING
Explain the important aspect (requirements) for effective
control
