Republic of the Philippines

BATANGAS STATE UNIVERSITY

Pablo BorbonMain II, AlangilanBatangas City
College of Engineering, Architecture & Fine Arts
www.batstate-u.edu.ph Tel. No. (043) 425-0139 loc. 118

CHEMICAL AND FOOD ENGINEERING DEPARTMENT

FINAL LECTURE 1
CONTROLLING
CONTROLLING
Setting plan, establishing the structure and directing the people do not guarantee that
everything in the organization is going on well. Control is making sure that something happens
the way it was planned to happen. As implied in this definition, planning and controlling are
inseparable functions. Controlling is also the task of ensuring that the activities are providing
the desired results.
IMPORTANCE OF CONTROLLING
o Plans rarely go smoothly. Most plans are executed by people and people vary in their
abilities, motivations and honesty.
• Plans become outdated and require revisions.
• For these reasons control is an important management function.
o Control means controlling every task in an organization – whether it is large or delegated
to some employee.
o Thus, for every task delegated, there has to be a control system that ensures completion
of performances in line with the plans

PREREQUISITES OF CONTROL SYSTEM

CONTROL REQUIRES PLANNING:
All meaningful control techniques are planning techniques. It is worthless to design
control plans without taking in account how well the plans are made.
CONTROL REQUIRES ORGANIZATION STRUCTURE:
Purpose of control is to measure activities and take action to assure that plans are being
accomplished. Control of activities operates through people. Therefore, a major prerequisite of
control is the existence of an organizational structure.

SYSTEM OF CONTROLLING
• Contrived Randomness works by unpredictable processes/combinations of people to
deter corruption, or anti-system behavior
• Competition works by fostering rivalry among individuals
• Oversight works by monitoring and direction of individuals from a point of authority
• Mutuality works by exposing individuals to horizontal influence from other individuals

CONTROL PROCESS
A basic control process involves mainly these steps:
1. ESTABLISHMENT OF STANDARDS
Plans can be considered as the criteria or the standards against which we compare
the actual performance in order to figure out the differences.

Standards could be set on the basis of:

 Profitability standards: How much company would like to make as profit over a given
period of time.
 Market position standards: Standards indicate the share of total sales in the market.
 Productivity standards: How much various segments should produce.
  Employee attitude standards: Indicates what type of attitude the company managers
should have to strive.
 Social responsibility standards: Making contributions to the society.
 Short range goal: Standards that set a balance between the short range and long- range
goals
These are the standards an organization sets at the beginning of a control process.

2. MEASUREMENT OF PERFORMANCES AND COMPARING PERFORMANCES

Measurement of performance is an important procedure of the control process; the
deviations can be detected in advance by taking appropriate actions.
3. COMPARING MEASURED PERFORMANCES TO SET STANDARDS
A standard is the level of activity established to serve as a model for evaluating
organizational performance. Performance evaluated can be for the organization as a
whole or for some individuals working within the organization. In simple terms,
standards are the evaluations that determine an organizations performance is sufficient or
inadequate.
4. TAKING CORRECTIVE ACTION
After the actual performance has been measured and compared with the
established standards, the next step is to take corrective action if necessary. Corrective
action is managerial activity aimed at bringing organizational mistakes that hinder
organizations performance. Before taking corrective actions, managers should make sure
that the standards are properly established and that their measurements of performance
are valid and reliable.
REQUIREMENTS FOR ADEQUATE CONTROL
• Control should be tailored to plans and positions.
• Control must be tailored o individual managers and their responsibilities.
• Control should point up exceptions as critical points.
• Control should be objective.
• Control should be flexible.
• Control should be economical.
• Control should lead to corrective actions.

TYPES OF CONTROL
• Pre-Control - takes place before the work is performed. It is also known as FEED-
FORWARD Control. Pre control focuses on eliminating predicted problems.
• Concurrent Control - refers to the control that takes place as work is being performed.
• Feedback Control - refers to the control that concentrates on the post organizational
performance.
BARRIERS TO SUCCESSFUL CONTROLLING
Barriers to controlling include:
• Control activities can create undesirable overemphasis on short term production as
opposed to long term production.
• Control activities can increase employee’s frustration.
• Control can encourage falsification of reports.

CONTROL TECHNIQUES AND INFORMATION TECHNOLOGY

TWO TECHNIQUES

 Traditional techniques
 Modern techniques

TRADITIONAL TECHNIQUES
 Personal observation
 Budgeting
 Break-even analysis
 Financial statement
 Statistical data & report
 Setting examples
 Standard costing
 Written instructions

1. PERSONAL OBSERVATION
 This is the most traditional method of control.
 It helps managers to collect first-hand information.
 It also creates a psychological pressure on the employees to perform well as they are
aware that they are being observed personally on their job.
 However, it is very time consuming, & not suitable for all kinds of jobs.

2. BUDGETING
 A budget is a statement which reflects future incomes, expenditures & profits of the
firm.
 Benefits of budgeting:
a. Standards of performance
b. Planning
c. Predicting the future
d. Financial planning

3. BREAK EVEN ANALYSIS

 It deals with the study of the relationship between costs, volume, & profit.
 It determines the probable profit and losses at different levels of activity.
 The sales volume at which there is no profit, no loss is known as breakeven point.

4. FINANCIAL STATEMENT
 Financial statements show financial position of a firm over a period of time,
generally one year.
  These are prepared along with last year statements, so that firm can compare its
present performance with last year’s performance & improve its future performance.
 It offers information on:
a. Liquidity
b. Financial strength
c. Profitability

5. STATISTICAL DATA AND REPORT

 Statistical analysis in the form of averages, percentages, rations, etc.
 Data can be used for diagram representations like histograms, pie chart, bar graphs,
etc.
 A REPORT is a statement that represents data in the form of information for
carrying out the controlling function.

6. SETTING EXAMPLES
 Some managers follow this and put good examples of performance before
subordinates and expect the same from them.
 Behavior and actions of subordinates can be controlled through exemplary behavior
of the manager.

7. STANDARD COSTING
 It is a technique of cost control
 Under this technique, standard costs of material, labor, overheads, etc. are
determined.
 Actual costs are recorded and compared with the standard costs and variances are
found out.
 Then measures are taken to prevent variances in future.

8. WRITTEN INSTRUCTIONS
 These instructions are issued time to time to the organization members.
 These provide latest information and instructions in the light of changing rules and
conditions.
 These are supplementary control technique.

Modern Techniques of Managerial Control

Modern techniques of controlling are those which are of recent origin & are comparatively new
in management literature. These techniques provide a refreshingly new thinking on the ways in
which various aspects of an organization can be controlled. These include:
 Return on investment
 Ratio analysis
 Responsibility accounting
 Management audit
 PERT & CPM

1. Return on Investment
Return on investment (ROI) can be defined as one of the important and useful techniques. It
provides the basics and guides for measuring whether or not invested capital has been used
effectively for generating a reasonable amount of return. ROI can be used to measure the overall
performance of an organization or of its individual departments or divisions.

2. Ratio Analysis
The most commonly used ratios used by organizations can be classified into the following
categories:
 Liquidity ratios
 Solvency ratios
 Profitability ratios
 Turnover ratios

3. Responsibility Accounting
Responsibility accounting can be defined as a system of accounting in which overall
involvement of different sections, divisions & departments of an organization are set up as
‘Responsibility centers’. The head of the center is responsible for achieving the target set for his
center. Responsibility centers may be of the following types:
 Cost center
 Revenue center
 Profit center
 Investment center

4. Management Audit
Management audit refers to a systematic appraisal of the overall performance of the
management of an organization. The purpose is to review the efficiency and effectiveness of
management & to improve its performance in future periods.  

5. PERT & CPM

PERT (programmed evaluation & review technique) & CPM (critical path method) are
important network techniques useful in planning & controlling. These techniques, therefore, help in
performing various functions of management like planning; scheduling & implementing time-bound
projects involving the performance of a variety of complex, diverse & interrelated activities.
Therefore, these techniques are so interrelated and deal with such factors as time scheduling &
resources allocation for these activities.

References:
• https://riskviews.wordpress.com/2011/03/28/systems-of-controlling/
• https://www.slideshare.net/rithikloveboy4u/the-system-and-process-of-controlling
• https://www.toppr.com/guides/business-studies/controlling/meaning-of-controlling/
• https://www.cliffsnotes.com/study-guides/principles-of-management/control-the-linking-
function/the-organizational-control-process
• https://www.slideshare.net/rakeshkumar9275/control-techniques-14552038?
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