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Unit 5_Controlling.pptx

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Radhakrishnan Chinnusamy

Controlling is an important management process that helps organizations adapt to change, limit errors, and cope with complexity. There are four levels of control: operational, financial, structural, and strategic. A controller helps line managers with control activities. The control process involves establishing standards, measuring performance, comparing performance to standards, determining if corrective action is needed, and taking steps to maintain standards or correct deviations. Budgetary control and non-budgetary techniques are used. Productivity, cost, quality, purchase, and maintenance controls are also discussed. Operational planning describes short-term ways to achieve milestones and strategic goals.

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UNIT-5 CONTROLLING 11
Controlling Process
The Purpose of Control Adapt to environmental change Limit the accumulation of error Control helps the organization Cope with organizational complexity Minimize costs 20 - 3
Levels of Control Operational control: Focuses on the processes used to transform resources into products or services. Financial control: Concerned with financial resources. Structural control: How the elements of structure are serving the intended purposes. Strategic control: How effective are the functional strategies helping the organization meet its goals. 20 - 4
Levels of Control 20 - 5
Who Is Responsible for Control? Control rests with all managers. Large corporations have a controller. What does a controller do? Helps line managers with their control activities. 20 - 6
Process of controlling 17
Steps in the Control Process Establish standards. Measure performance. Compare performance against standards. Determine need for corrective action. The sub-steps: Maintain status quo. Correct deviation. Change standards. 20 - 8
Steps in the Control Process 20 - 9
1. Establishing Standards Measurable or tangible(Output Standards) Standards can be measured and expressed quantitatively are called as measurable standards. They can be in form of cost, output, expenditure, time, profit, etc. Non-measurable or intangible(Input Standards) There are standards which cannot be measured quantitatively. For example- performance of a manager, deviation of workers, their attitudes towards a concern. These are called as intangible standards.
Unit 5_Controlling.pptx
2. Measuring Actual Performance Measurements must be accurate enough to spot deviations or variances between what really occurs and what is most desired. Without measurement, effective control is not possible.
3.Comparing Actual with Standard Deviation is as the gap between actual performance and the planned targets. For example, if stationery charges increase by a minor 5 to 10%, it can be called as a minor deviation. On the other hand, if monthly production decreases continuously, it is called as major deviation.
Acceptable Range of Deviation
4.Correction of Deviation Taking any action necessary to correct or improve things. There are two types of exceptions: Problems - below standard Opportunities - above standard
Types of Control
BUDGETARY CONTROL The establishment of budgets, relating the responsibilities of executives to the requirements of a policy 117
Salient features: a. Objectives: Determining the objectives b. Activities: Determining the variety of activities c. Plans: Drawing up a plan d. Performance Evaluation: Laying out a system of comparison of actual performance e. Control Action: Ensuring that when the plans are not achieved, corrective actions are taken 118
CLASSIFICATION OF BUDGETS 119
Long Term Budget: prepared for periods longer than a year ex: R&D Budget Short Term Budget: less than year ex:cash budget Basic Budget: remains unaltered Current Budget: related to the current conditions Fixed Budget: remain unchanged Flexible Budget: various budgets for different levels of activity Functional Budget: the individual functions in an organization Master Budget: Profit & Loss Account 120
BUDGETARY CONTROL TECHNIQUES 121
1. Revenue and Expense Budgets: budgets spell out plans for revenues and operating expenses in rupee terms. 122
2.Time, Space, Material, and Product Budgets: Many budgets are better expressed in quantities rather than in monetary(money) terms. 123
3. Capital Expenditure Budgets capital expenditures for plant, machinery, equipment, inventories, and other items. 124
4. Cash Budgets cash budget is simply a forecast of cash receipts 125
5. Variable Budget analysis of expense items to determine how individual costs should vary with volume of output 126
6. Zero Based Budget By starting the budget of each package from base zero, budgeters calculate costs 127
NON-BUDGETARY CONTROL TECHNIQUES 128 many traditional control devices not connected with budgets, although some may be related to, and used with, budgetary controls.
i) Statistical data: Analysing the numerical data 129
ii) Break- even point analysis 130 chart depicts the relationship of sales and expenses
iii) Operational audit: internal audit 131
iv) Personal observation one should never overlook the importance of control through personal observation. 132
v) PERT(Program (or Project) Evaluation and Review Technique): one should never overlook the importance of control through personal observation. 133
vi) GANTT CHART: a type of bar chart that illustrates a project schedule Gantt charts illustrate the start and finish dates of the terminal elements and summary elements of a project.
PRODUCTIVITY Productivity refers to the ratio between the output from production processes to its input.
Typical Productivity Calculations a) Physical Productivity This is a ratio of the amount of product to the resources consumed. b) Functional Productivity This is a ratio of the amount of the functionality delivered to the resources consumed c) Economic Productivity ratio of the value of the product produced to the cost of the resources used to produce it.
COST CONTROL Cost control is the measure taken by management to assure that the cost objectives set down in the planning stage are attained
Steps involved in designing process of cost control system: Establishing norms: To exercise cost control it is essential to establish norms, targets or parameters Appraisal: The actual results are compared with the set norms. Corrective measures: The variances are reviewed and remedial measures or revision of targets, norms, standards etc., as required are taken.
Advantages of cost control Better utilization of resources To prepare for meeting a future competitive position. Reasonable price for the customers Improves the image of company for long-term benefits. Improve the rate of return on investment.
PURCHASE CONTROL Purchase control is an element of material control. The advantages derived from a good and adequate system of the purchase control are as follows: a) Continuous availability of materials b) Purchasing of right quantity c) Economy in purchasing d) Works as information centre e) Development of business relationship f) Finding of alternative source of supply g) Fixing responsibilities
MAINTENANCE CONTROL Maintenance department has to excercise effective cost control, to carry out the maintenance functions in a pre- specified budget First line supervisors must be apprised of the cost information of the various materials A monthly review of the budget provisions and expenditures actually incurred in respect of each center/shop The total expenditure to be incurred can be uniformly spread over the year The controllable elements of cost such as manpower cost and material cost can be discussed
QUALITY CONTROL Quality control refers to the technical process that gathers, examines, analyze & report the progress of the project & conformance with the performance requirements
steps involved in quality control process are 1) Determine what parameter is to be controlled. 2) Establish its criticality 3)Establish a specification for the parameter to be controlled 4) Produce plans for control 5) Organize resources to implement the plans 6) Install a sensor at an appropriate point 7) Collect and transmit data to a place for analysis 8) Verify the results and diagnose the cause of variance. 9) Propose remedies and decide on the action 10) Take the agreed action and check that the variance
Advantages and disadvantages Advantages include better products and services Disadvantages include needing more man power/operations to maintain quality control
PLANNING OPERATIONS An operational planning is a subset of strategic work plan. It describes short-term ways of achieving milestones and explains how, or what portion of, a strategic plan will be put into operation during a given operational period, in the case of commercial application
Like a strategic plan, an operational plan addresses four questions: Where are we now? Where do we want to be? How do we get there? How do we measure our progress?
Operational plans should contain: clear objectives activities to be delivered quality standards desired outcomes staffing and resource requirements implementation timetables a process for monitoring progress.
References www.slideshare.net www.docstoc.com www.slideworld.com www.nptel.ac.in www.scribd.com http://opencourses.emu.edu.tr/ http://engineeringppt.blogspot.in/ http://www.pptsearchengine.net/ www.4shared.com www.eazynotes.com
Book References & PPT materials 1.Stephen P. Robbins and Mary Coulter, 'Management', Prentice Hall of India. 2.Charles W L Hill, Steven L McShane, 'Principles of Management', Mcgraw Hill Education 3.Hellriegel, Slocum & Jackson, ' Management - A Competency Based Approach 149

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Unit 5_Controlling.pptx

  • 3. The Purpose of Control Adapt to environmental change Limit the accumulation of error Control helps the organization Cope with organizational complexity Minimize costs 20 - 3
  • 4. Levels of Control Operational control: Focuses on the processes used to transform resources into products or services. Financial control: Concerned with financial resources. Structural control: How the elements of structure are serving the intended purposes. Strategic control: How effective are the functional strategies helping the organization meet its goals. 20 - 4
  • 6. Who Is Responsible for Control? Control rests with all managers. Large corporations have a controller. What does a controller do? Helps line managers with their control activities. 20 - 6
  • 8. Steps in the Control Process Establish standards. Measure performance. Compare performance against standards. Determine need for corrective action. The sub-steps: Maintain status quo. Correct deviation. Change standards. 20 - 8
  • 9. Steps in the Control Process 20 - 9
  • 10. 1. Establishing Standards Measurable or tangible(Output Standards) Standards can be measured and expressed quantitatively are called as measurable standards. They can be in form of cost, output, expenditure, time, profit, etc. Non-measurable or intangible(Input Standards) There are standards which cannot be measured quantitatively. For example- performance of a manager, deviation of workers, their attitudes towards a concern. These are called as intangible standards.
  • 12. 2. Measuring Actual Performance Measurements must be accurate enough to spot deviations or variances between what really occurs and what is most desired. Without measurement, effective control is not possible.
  • 13. 3.Comparing Actual with Standard Deviation is as the gap between actual performance and the planned targets. For example, if stationery charges increase by a minor 5 to 10%, it can be called as a minor deviation. On the other hand, if monthly production decreases continuously, it is called as major deviation.
  • 14. Acceptable Range of Deviation
  • 15. 4.Correction of Deviation Taking any action necessary to correct or improve things. There are two types of exceptions: Problems - below standard Opportunities - above standard
  • 17. BUDGETARY CONTROL The establishment of budgets, relating the responsibilities of executives to the requirements of a policy 117
  • 18. Salient features: a. Objectives: Determining the objectives b. Activities: Determining the variety of activities c. Plans: Drawing up a plan d. Performance Evaluation: Laying out a system of comparison of actual performance e. Control Action: Ensuring that when the plans are not achieved, corrective actions are taken 118
  • 20. Long Term Budget: prepared for periods longer than a year ex: R&D Budget Short Term Budget: less than year ex:cash budget Basic Budget: remains unaltered Current Budget: related to the current conditions Fixed Budget: remain unchanged Flexible Budget: various budgets for different levels of activity Functional Budget: the individual functions in an organization Master Budget: Profit & Loss Account 120
  • 22. 1. Revenue and Expense Budgets: budgets spell out plans for revenues and operating expenses in rupee terms. 122
  • 23. 2.Time, Space, Material, and Product Budgets: Many budgets are better expressed in quantities rather than in monetary(money) terms. 123
  • 24. 3. Capital Expenditure Budgets capital expenditures for plant, machinery, equipment, inventories, and other items. 124
  • 25. 4. Cash Budgets cash budget is simply a forecast of cash receipts 125
  • 26. 5. Variable Budget analysis of expense items to determine how individual costs should vary with volume of output 126
  • 27. 6. Zero Based Budget By starting the budget of each package from base zero, budgeters calculate costs 127
  • 28. NON-BUDGETARY CONTROL TECHNIQUES 128 many traditional control devices not connected with budgets, although some may be related to, and used with, budgetary controls.
  • 29. i) Statistical data: Analysing the numerical data 129
  • 30. ii) Break- even point analysis 130 chart depicts the relationship of sales and expenses
  • 31. iii) Operational audit: internal audit 131
  • 32. iv) Personal observation one should never overlook the importance of control through personal observation. 132
  • 33. v) PERT(Program (or Project) Evaluation and Review Technique): one should never overlook the importance of control through personal observation. 133
  • 34. vi) GANTT CHART: a type of bar chart that illustrates a project schedule Gantt charts illustrate the start and finish dates of the terminal elements and summary elements of a project.
  • 35. PRODUCTIVITY Productivity refers to the ratio between the output from production processes to its input.
  • 36. Typical Productivity Calculations a) Physical Productivity This is a ratio of the amount of product to the resources consumed. b) Functional Productivity This is a ratio of the amount of the functionality delivered to the resources consumed c) Economic Productivity ratio of the value of the product produced to the cost of the resources used to produce it.
  • 37. COST CONTROL Cost control is the measure taken by management to assure that the cost objectives set down in the planning stage are attained
  • 38. Steps involved in designing process of cost control system: Establishing norms: To exercise cost control it is essential to establish norms, targets or parameters Appraisal: The actual results are compared with the set norms. Corrective measures: The variances are reviewed and remedial measures or revision of targets, norms, standards etc., as required are taken.
  • 39. Advantages of cost control Better utilization of resources To prepare for meeting a future competitive position. Reasonable price for the customers Improves the image of company for long-term benefits. Improve the rate of return on investment.
  • 40. PURCHASE CONTROL Purchase control is an element of material control. The advantages derived from a good and adequate system of the purchase control are as follows: a) Continuous availability of materials b) Purchasing of right quantity c) Economy in purchasing d) Works as information centre e) Development of business relationship f) Finding of alternative source of supply g) Fixing responsibilities
  • 41. MAINTENANCE CONTROL Maintenance department has to excercise effective cost control, to carry out the maintenance functions in a pre- specified budget First line supervisors must be apprised of the cost information of the various materials A monthly review of the budget provisions and expenditures actually incurred in respect of each center/shop The total expenditure to be incurred can be uniformly spread over the year The controllable elements of cost such as manpower cost and material cost can be discussed
  • 42. QUALITY CONTROL Quality control refers to the technical process that gathers, examines, analyze & report the progress of the project & conformance with the performance requirements
  • 43. steps involved in quality control process are 1) Determine what parameter is to be controlled. 2) Establish its criticality 3)Establish a specification for the parameter to be controlled 4) Produce plans for control 5) Organize resources to implement the plans 6) Install a sensor at an appropriate point 7) Collect and transmit data to a place for analysis 8) Verify the results and diagnose the cause of variance. 9) Propose remedies and decide on the action 10) Take the agreed action and check that the variance
  • 44. Advantages and disadvantages Advantages include better products and services Disadvantages include needing more man power/operations to maintain quality control
  • 45. PLANNING OPERATIONS An operational planning is a subset of strategic work plan. It describes short-term ways of achieving milestones and explains how, or what portion of, a strategic plan will be put into operation during a given operational period, in the case of commercial application
  • 46. Like a strategic plan, an operational plan addresses four questions: Where are we now? Where do we want to be? How do we get there? How do we measure our progress?
  • 47. Operational plans should contain: clear objectives activities to be delivered quality standards desired outcomes staffing and resource requirements implementation timetables a process for monitoring progress.
  • 48. References www.slideshare.net www.docstoc.com www.slideworld.com www.nptel.ac.in www.scribd.com http://opencourses.emu.edu.tr/ http://engineeringppt.blogspot.in/ http://www.pptsearchengine.net/ www.4shared.com www.eazynotes.com
  • 49. Book References & PPT materials 1.Stephen P. Robbins and Mary Coulter, 'Management', Prentice Hall of India. 2.Charles W L Hill, Steven L McShane, 'Principles of Management', Mcgraw Hill Education 3.Hellriegel, Slocum & Jackson, ' Management - A Competency Based Approach 149