The System and Process of Controlling

What is Controlling?

Controlling is the measurement and correction of performance in order to make sure that enterprise objectives and the plans devised to attain them are being accomplished Bureaucratic or formal Control Market Control Clan Control
Use of formal rules, standards, hierarchy, legitimate authority tasks are certain and workers are independent

Use of price, competition, profit centres exchange relationship- tangible outputs can be identified market can be developed between parties
Involves culture, shared values, beliefs, expectations and trust- no one best way to do and employees are empowered to make decisions

Planning and controlling are closely related

Features of controlling
Positive

force Continuous process Forward looking Universal Dynamic Goal-oriented Key to control based on planning

Importance of controlling
Achievement

of goals Execution and revision of plans Brings order and discipline Facilitates decentralization of authority Promotes coordination Coping with uncertainty and change

Limitations of controlling
Enterprise

has very little control over external influences Employees do not like to be watched and offer resistance Setting control points is not easy It is expensive and takes time and effort Many areas defy measurement in quantitative terms

The Basic Control Process

The

basic control process involves three steps:

establishing standards, measurement of actual performance comparing performance against the standards, and correcting variations from standards and plans

Standards

are criteria of performance

Resistance to control
Over-control

Inappropriate

controls Unachievable standards Unpredictable standards Rewards for efficiency Uncontrollable variables

Overcoming resistance to control

Employee

participation Justifiable controls Precise and understandable standards Realistic standards Timely communication of findings Accurate findings Assuring support Positive reinforcement

Characteristics of effective control system

Suitable Simple Selective Sound and economical Flexible Forward-looking Reasonable Objective Responsibility for failures Acceptable

Dimensions of Control
Principle of Critical-Point Control Strategic control comprises systematic monitoring at strategic control points as well as modifying the organization's strategy on the basis of this evaluation Effective control requires attention to those factors critical to evaluating performance against plans Examples of critical-point standards (1) physical standards, (2) cost standards, (3) capital standards, (4) revenue standards, (5) program standards, (6) intangible standards, (7) goals as standards, and (8) strategic plans as control points for strategic control

Dimensions of Control
Management by Exception (MBE) It tries to focus attention on exceptionally serious deviations from the plans and standards

Saves time Identifies critical problem areas Stimulates communication Reduces the frequency of decision-making Leads to concentration of efforts on important things Makes more use of knowledge and data

What is Benchmarking?
Benchmarking

is an approach for setting goals and productivity measures based on best-industry practices Three types of benchmarking:
strategic, operational, and management

Control as a Feedback System

Management

control is usually perceived as a feedback system similar to that which operates in the common household thermostat
Information and Control Real-time information is information about what is happening while it is happening

Real-Time

Feedforward Control
What

managers need for effective control is a system that will tell them potential problems, giving them time to take corrective action before problems occur Feedforward systems monitor inputs into a process to ascertain if the inputs are as planned; if they are not, the inputs or the process is changed in order to obtain the desired results

Comparison of Simple Feedback and Feedforward Systems.

Requirements for Feedforward Control

1. Make a thorough and careful analysis of the planning and control system, and identify the more important input variables 2. Develop a model of the system 3. Take care to keep the model up to date; in other words, the model should be reviewed regularly to see whether the input variables identified and their interrelationships continue to represent realities 4. Collect data on input variables regularly, and put them into the system 5. Regularly assess the variations of actual input data from planned-for inputs, and evaluate the impact on the expected end result 6. Take action

CONTROL OF OVERALL PERFORMANCE

As

overall planning is applied to enterprise, in the same way overall control is applied Decentralization of authority Measuring total efforts Financial controls have to be tailored to the specific needs

PROFIT AND LOSS CONTROL

Profit

and Loss controls are used in departments and divisions where each has to make a profit But high cost of accounting and paper transactions give rise to limitations. Though computer technology has made things easier

Requirements for Effective Controls

Tailoring Controls to Plans and Positions Tailoring Controls to Individual Managers Making Sure That Controls Point Up Exceptions at Critical Points Seeking Objectivity of Controls Ensuring Flexibility of Controls Fitting the Control System to the Organization Culture Achieving Economy of Controls Establishing Controls that Lead to Corrective Action

What is Budgeting?
Budgeting

is the formulation of plans for a given future period in numerical terms Zero-base budgeting is dividing enterprise programs into "packages" composed of goals, activities, and needed resources and calculating the costs for each package from the base zero

Information Technology
Data

are the raw facts that may not be very useful until they become information, that is, after they are processed and become meaningful and understandable by the receiver The information system is defined as a formal system of gathering, processing, and dispersing information internal and external to the enterprise in a timely, effective, and efficient manner

Challenges Created by Information Technology

Resistance to Computer Use Speech Recognition Devices Telecommuting

Telecommuting means that a person can work at a computer terminal at home instead of commuting to work

Computer Networks Internet Other Types of Networks

intranet extranet

Groupware
Groupware makes it possible to collaborate with others over long distances at the same time

Information Security

CAD/CAM
CAD/CAMs

help engineers design products much more quickly than they could with the traditional paperand-pencil approach

The Digital Economy, E-commerce, and M-commerce The Emerging Digital Economy Four Kinds of Transactions Business to Consumers (B2C). Consumer to Business (C2B). Consumer to Consumer (C2C). Business to Business (B2B). M-Commerce and Wireless Communication

Productivity, Operations Management, and Total Quality Management

What is Productivity?
Productivity

is the input-output ratio within a time period with due consideration for quality

Production and Operations Management: Manufacturing and Service

Production

management was the term used to refer to those activities necessary to manufacture products Operations management refers to activities necessary to produce and deliver a service as well as a physical product

Operations Management Systems

Steps in Product and Production Design

1. Create product ideas by searching for consumer needs and screening the various alternatives 2. Select the product on the basis of various considerations, including data from market and economic analyses, and make a general feasibility study 3. Prepare a preliminary design by evaluating various alternatives, taking into consideration reliability, quality, and maintenance requirements 4. Reach a final decision by developing, testing, and simulating the processes to see if they work 5. Decide whether the enterprise's current facilities are adequate or if new or modified facilities are required 6. Select the process for producing the product; consider the technology and the methods available 7. After the product is designed, prepare the layout of the facilities to be used, plan the system of production, and schedule the various things that must be done

Tools and Techniques for Improving Productivity

Inventory

Planning and Control Just-in-Time Inventory System

In the just-in-time (JIT) inventory method, the supplier delivers the components and parts to the production line "just in time" to be assembled
Outsourcing

Outsourcing means that production and operations are contracted to outside vendors that have expertise in specific areas

What is Operations Research?

Operations

research is the application of scientific methods to the study of alternatives in a problem situation, with a view to obtaining a quantitative basis for arriving at a best solution

What is Value Engineering?

Value engineering, is the process of analyzing the operations of the product or service, estimating the value of each operation, and attempting to improve that operation by trying to keep costs low at each step or part Work simplification is the process of obtaining the participation of workers in simplifying their work A quality circle (QC) is a group of people from the same organizational area who meet regularly to solve problems they experience at work Total quality management (TQM) is the organization's long-term commitment to the continuous improvement of quality, throughout the organization and with the active participation of all members at all levels, to meet and exceed customer expectations

Mass Production Versus Lean Production Managerial Practices

MASS PRODUCTION

LEAN PRODUCTION

Sporadic and inconsistent improvements Satisfied with good enough High inventory acceptable Me management with emphasis on individual performance Workers considered the cause of poor quality

Continuous improvements (kaizen) with strategic breakthroughs Aim at zero defects Just-in-time inventory system We or team management Everyone is the problem; especially management