Adeyl Khan, Faculty, BBA, NSU Compared to planning, developing org. structure, developing strategies, goals and motivating employees

Adeyl Khan, Faculty, BBA, NSU Why Control? Controls help the manager Control is a process to regulate organizational activities to make them consistent with established: Plans Targets Standards Physical Inventory, QC Human Selection Informational Forecasting, PR Financial Manage Debt, Assets process of monitoring, comparing, and correcting work performance. Effective? Need a change? Acceptable level? Compare (Financial …) FedEx- 99.8% On time Delivery Types of control

Adeyl Khan, Faculty, BBA, NSU What Is the Purpose of Control?  It is one of the four basic management functions and has four basic functions.  Functions of control  Adapts to change.  Limits accumulation of error.  Helps coping with complexity.  Helps minimize costs

Adeyl Khan, Faculty, BBA, NSU Purpose- Control helps the organization Many things can happen during the execution of a plan Anticipate, monitor, respond (contingency) Rising quality standard at Metalloy Accumulation creates a huge problem! Defect rate rose 4% > 9% > 25% (100/250 People reworking) 100s of raw material, large market segments, complicated work design, Calculation based on implementation of new wood- cutting technology Adapt to environmental change 2. Limit the accumulation of error 3. Cope with organizational complexity 4. Minimize costs

Adeyl Khan, Faculty, BBA, NSU Levels of Control Operational control: Focuses on the processes used to transform resources into products or services. E.g. Quality Control Financial control: Concerned with financial resources. E.g. Accounts receivable Structural control: How the elements of structure are serving the intended purposes. E.g. Administrative ratio Strategic control: How effective are the functional strategies helping the organization meet its goals. E.g. Related diversification failed

Adeyl Khan, Faculty, BBA, NSU Figure 20.2: Levels of Control

Adeyl Khan, Faculty, BBA, NSU 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 U-Form (Single) H-form (Multiple), M-form (Multiple) U-Form (Single) H-form (Multiple), M-form (Multiple)

Adeyl Khan, Faculty, BBA, NSU F20.3: Steps in the Control Process  Taco Bell  95% greeted within 3 minutes  Preheated chips- maximum 30 mins  Tables Cleaned within 5 mins Measurable Consistent with organization goal Measurable Consistent with organization goal # Graduates/year … …. ….. …… (Performance Indicators) # Graduates/year … …. ….. …… (Performance Indicators)

Adeyl Khan, Faculty, BBA, NSU F20.4: Forms of Operational Control

Adeyl Khan, Faculty, BBA, NSU 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.  Ex: Employee Interview, Who can buy stocks

Adeyl Khan, Faculty, BBA, NSU 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.  Ex: LCD panel on TV- Check before installation

Adeyl Khan, Faculty, BBA, NSU Postaction Control- Focus 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)

Adeyl Khan, Faculty, BBA, NSU Financial Controls- Most common  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

Adeyl Khan, Faculty, BBA, NSU 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 Page 566 Strength and Weaknesses of Budget Page 566 Strength and Weaknesses of Budget

Adeyl Khan, Faculty, BBA, NSU 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 Capital Budget at Exxon Vs. Shell and Exxon-Mobil Capital Budget at Exxon Vs. Shell and Exxon-Mobil

Adeyl Khan, Faculty, BBA, NSU

Adeyl Khan, Faculty, BBA, NSU F20.5: Developing Budgets in Organizations

Adeyl Khan, Faculty, BBA, NSU Other Tools for Financial Control Financial Statement: A profile of some aspect of an organization’s financial circumstances Income Statement A summary of financial performance over a period of time, usually one year. Balance Sheet List of assets and liabilities of an organization at a specific point in time, usually the last day of the fiscal year. Ratio Analysis The calculation of one or more financial ratios to assess some aspect of the organization’s financial health. Other Financial Control Tools Audit: An independent appraisal of an organization’s accounting, financial, and operational system.

Adeyl Khan, Faculty, BBA, NSU Structural Control  Bureaucratic Control  A form of organizational control characterized by formal and mechanistic structural arrangements.  Decentralized control  An approach to organizational control characterized by informal and organic structural arrangements

Adeyl Khan, Faculty, BBA, NSU Figure 20.6: Organizational Control

Adeyl Khan, Faculty, BBA, NSU 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

Adeyl Khan, Faculty, BBA, NSU Characteristics of Effective Control  Integration with plan  Flexibility  Accuracy  Timeliness  Objectivity

Adeyl Khan, Faculty, BBA, NSU What Influences Resistance to Control?  Over-control  Inappropriate focus  Rewards for inefficiency  Too much accountability

Adeyl Khan, Faculty, BBA, NSU 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