3. Controlling

3.1 Feedback and Control

3.2 More on Feedback

3.3 Financial and Non- Financial Controls

3.4 Control and Planning

3.1 Feedback and Control

Control - how we manage the execution of our plans and make sure we stay on target

Control needs a target (Goal) and a feedback loop

The Cars Stay In Their Lane Through Visual Feedback

• Blindfold means no visual feedback

• Other children must give you verbal feedback - negative and positive

Plans provide the goals that are your target.

Feedback gets you to them.

Budgets Control spendingSchedules Control timingPersonnel Reviews Control performanceQuality Control Controls quality of processesGPS Controls route to geographic

destination

Lots of Different Control Tools

Budgets help control expenditure of resources - usually money. They tell you what you planned to spend.

Without control, you are not managing anything and goals are just dreams.

3.2 More on Feedback

Feedback can be complex. How much and what type can affect how we control outcomes

Positive feedback = Going in the right direction. Keep it up

Negative feedback = Going in the wrong direction. Change course

A key choice in feedback is closeness of coupling - how much deviation before you react

Very close coupling can leave employees feeling distrusted and micromanaged

Very loose coupling can let things get out of control and lead to disaster

Chernobyl - a failure of control

A 360 degree performance review collects feedback from supervisors, employees, and subordinates

Budgetary Review

The budget describes how much money you expect to spend each month. Are you over or under?

Feedback is important in every aspect of management. Without it, you are not managing anything

3.3 Financial and Non-Financial Controls

Businesses control financial activities but all organizations control non-financial activities

Financial Controls

Control/manage a firm’s costs and expenses

Key Financial Control Tools

Budgets Control spendingCash Flow Statements Monitor money in and outBalance sheets Provide a snapshot for current

conditionsBreak-even analysis When have you paid off the initial

investment and started making profits?

Productivity Analysis How much of the inputs become useful outputs?

Break-Even Analysis

When total revenue (Money in) = total costs (Money out), you have broken even on a decision

Break-Even Analysis

When total revenue (Money in) = total costs (Money out), you have broken even on a decision

Productivity = Ratio of output to input. A basic measure of efficiency in any organization

Productivity is a key goal for any organization

Key Non-Financial Control Tools

Quality Control Are you building the product in the right way?

Performance reviews Are employees performing in the right ways?

Customer Satisfaction Are you serving customers in the right way?

Schedule Are you doing things at the right time?

Waste Management Are you wasting resources that you could be using?

Quality control means adhering to a standard for output. Are you building things the way you should be?

We use ratios to correct for the differences in absolute size. They help compare big things to little things.

3.4 Control and Planning

All the functions of management are related, but planning and control are the closest in the relationship

Planning sets the goals and control manages how we reach them.

Strategic Controls

Broad strategic plans need controls that track broad outcomes, like market share or productivity

Tactical Controls

Short-term plans need flexible controls that track very specific things during short periods of time

Productivity = Ratio of output to input. A basic measure of efficiency in any organization

Productivity is a key goal for any organization

If planning and control are not closely connected, planning is useless and control is not efficient