the controlling process
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Slide content created by Joseph B. Mosca, Monmouth University. Copyright © Houghton Mifflin Company. All rights reserved.
20Ready Notes
The Controlling Process
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Why Control?
• Control is an issue every manager faces.
• How does control help the manager?– Control is a process to
regulate organizational activities to make them consistent with established:
• Plans• Targets• Standards
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What Is the Purpose of Control?
• It is one of the four basic management functions and has four basic functions. What are the functions?– Adapts to change.– Limits accumulation of
error.– Helps coping with
complexity.– Helps minimize costs.
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The Purpose of Control
Adapt to environmental change
Limit the accumulation of error
Control helps the organization
Cope with organizational complexity Minimize costs
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Name the 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.
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Figure 20.2: Levels of Control
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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.
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What Are the 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.
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Figure 20.3: Steps in the Control Process
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What Does Preliminary Control Monitor?
• It attempts to monitor quality and quantity of:– Financial resources.– Material resources.– Human resources.– Information resources.
• Why?– Before they become part of the system.
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What Is the Purpose of Screening Controls?
• They focus on how inputs are being transformed into outputs.
• They also rely heavily on feedback processes during the transformation process.
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What Do Postaction Controls Focus On?
• Focus is on outputs from the organizational system.
• What do they monitor?– They monitor the output
results of the organization after the transformation process is complete.
– (see Figure 20.4 illustration)
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Figure 20.4: Forms of Operational Control
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What Are the Reasons for Financial Controls?
• They control the financial resources as they flow into the organization.
• Then they are held by the organization.• Then they flow out of the organization.• Businesses must manage their finances
so that revenues are sufficient to cover expenses and still return a profit.
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What Is a Budget?
• It is a plan expressed in numerical terms.
• What is the time frame for a budget?– Usually a year, but sometimes broken
down into quarters and months.• Budgets are quantitative in nature and
provide yardsticks for measuring performance and facilitating comparisons.
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What Are the Types of Budgets?
• Types of budget:– Financial– Operating– Non-monetary
• What the budget shows:– Sources and use of
cash.– Operations in
financial terms.– Operations in non-
financial terms.
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Developing Budgets
OperatingUnit
Budget Request
DivisionBudgetRequest
OrganizationalBudget Prepared
by Budget Committee Approved by
BudgetCommittee
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Figure 20.5: Developing Budgets in Organizations
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Financial Statement: A profile of
some aspect of anorganization’s financial
circumstances.
Balance Sheet: List of assets and liabilities of an
organization at a specific point in time, usually the last day of the fiscal year.
Income Statement: A summary of financial
performance over a period of time, usually one year.
Ratio Analysis: The calculation of one or more financial ratios to assess
some aspect of the organization’s financial
health.
Audit: An independent appraisal of an organization’saccounting, financial, and operational system.
Other Tools for Financial Control
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What Is Bureaucratic Control?
• A form of organizational control characterized by formal and mechanistic structural arrangements.
• What is clan control?– An approach to
organizational control characterized by informal and organic structural arrangements.
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Figure 20.6: Organizational Control
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What Is Meant by Strategic Control
• Control aimed at ensuring that the organization is maintaining an effective alignment with its environment and moving toward achieving its strategic goals.
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Characteristics of Effective Control
• Integration with planning
• Flexibility• Accuracy• Timeliness• Objectivity
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What Influences Resistance to Control?
• Over-control• Inappropriate focus• Rewards for
inefficiency• Too much
accountability
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How Can Resistance to Control Be Overcome?
• When employees are involved with planning and implementing the control system, they are less likely to resist.
• Verification procedures need to be developed to provide checks and balances in order for managers to verify the accuracy of performance indicators.