Module 6: Controlling

Learning objectives

• Understand the control process

• Review three approaches to control systems

• Be familiar with different control techniques

• Review qualities of an effective control system

Managerial Decisions in the Control ProcessManagerial Decisions in the Control Process

IdentifyCauses IdentifyCauses

CorrectPerformance

CorrectPerformance

VarianceAcceptable?

VarianceAcceptable?

ReviseStandardRevise

Standard

StandardAttained?StandardAttained?

StandardAcceptable?

StandardAcceptable?

YesYes

YesYes

YesYes

NoNo

NoNo

NoNo

ComparePerformanceto Standard

ComparePerformanceto Standard

MeasurePerformance

MeasurePerformance

ObjectivesObjectives

StandardStandard

Do NothingDo Nothing

Do NothingDo Nothing

Three ApproachesThree Approachesto Control Systemsto Control Systems

MarketMarketControlControl(price (price

Competition,Competition,Market share)Market share)

ClanClanControlControl(norms, (norms,

Values, and Values, and Beliefs)Beliefs)

BureaucraticBureaucraticControlControl(rules, (rules,

Regulations,Regulations,Policies)Policies)

Quality Control This speaks a lot about the quality of Japanese products and

their quality standards. They're still laughing about this at IBM.

Apparently the computer giant decided to have some parts manufactured in Japan as a trial project. In the specifications, they set out that they will accept three defective parts per 10,000.

When the delivery came in there was an accompanying letter. "We, Japanese people, had a hard time understanding North American business practices. But the three defective parts per 10,000 have been separately manufactured and have been included in the consignment. Hope this pleases you."

InformationInformation

PeoplePeopleFinancesFinances

OperationsOperations

What ManagersWhat ManagersMeasureMeasure

Defining an Acceptable Range of Variation

AcceptableAcceptableUpper LimitUpper Limit

StandardStandard

AcceptableAcceptableLower LimitLower Limit

AcceptableAcceptableRange ofRange ofVariationVariation

t t+1 t+2 t+3 t+4 t+5t t+1 t+2 t+3 t+4 t+5

Do NothingDo Nothing

TakingTakingManagerialManagerial

ActionAction

CorrectCorrectPerformancePerformance

ReviseRevisethe Standardthe Standard

InputInput ProcessesProcesses OutputOutput

FeedforwardFeedforwardControlControl

AnticipatesAnticipatesProblemsProblems

ConcurrentConcurrentControlControl

Corrects ProblemsCorrects Problemsas They Happenas They Happen

FeedbackFeedbackControlControl

Corrects ProblemsCorrects Problemsafter They Occurafter They Occur

Three Types of ControlThree Types of Control

Control techniques

• Budget: the formulation of plans for a given future period in numerical terms, examples include:– Revenue and expense budgets– Time, space, material, and product budgets– Capital expenditure budgets– Cash budgets– Variable budgets– Zero-based budgeting

• Nonbudgetary control devices– Statistical data– Special reports and analysis– Operational audit– Personal observation

Sample Gantt Chart

A. Decide topic

B. Decide content

C. Assign work

D. Finish the 1st draft

E. Revise some parts

F. Finalize some parts

G. Final revision and submission

Activities Oct.15 Dec.3

3 days

3 days

1

30 days

8 days

6 days

4 days

Reporting date

A PERT Network for completing the final project for the course 472a

A

B

C

D

E

F

G

Start

Finish

Qualities of an Effective Control System

• Accuracy

• Timeliness

• Economy

• Flexibility

• Understandability

Qualities of an Effective Control System

• Reasonable criteria

• Emphasis on exceptions

• Strategic placement

• Multiple criteria

• Corrective action

Contingency Factors in Control Systems

Organization Size

Position and Level

Degree of Decentralization

Organizational Culture

Importance of an Activity

Small

Large

Informal, personal management

Formal, personal management

High

Low

High

Low

Open

Closed

High

Low

Contingency Variable Control Recommendations

Many complex criteria

Few, easy-to-measure criteria

Increased number of controls

Reduced number of controls

Informal, self-control

Formal, external controls

Elaborate, comprehensive controls

Loose, informal controls

Summary

• Control is an essential component of management function. Organizational plans can not be achieved without an effective control system.

• Various control systems and techniques can be combined to build an effective control system.

Final project

• Deadline: December 3, 2001

• Citation: in textAt the end of the project

Final project

• No excuse for the late submission

• Penalty for the late submission– 0-30 minutes deduct 25 marks– 30 minutes – 1 hours deduct 50 marks– 1 hours – 1 hour 30 minutes deduct 75 marks– 1 hour 30 minutes – 2 hours deduct 100 marks

Final examination

• Definition question

Define plan and strategy

• Explain theory

Explain expectancy theory

Use an example to explain a theory

Final examination (contd.)

• Apply a theory to the health care industry context

• Chapters will not be covered

History module

Managing in Today’s world

Quantitative module