MG4031 Management Principles Control PDF

MG4031 Management Principles Control Reading: Chapter 10, Modern Management, pages 267- 298  Learning Objectives To understand the centrality of control to organisational survival and success To know the different stages in the contro...

MG4031 Management Principles Control Reading: Chapter 10, Modern Management, pages 267- 298  Learning Objectives To understand the centrality of control to organisational survival and success To know the different stages in the control process To distinguish between Feedforward, Concurrent and Feedback controls To identify common financial and non financial controls  What is Control? Control is the final function of management Control can be defined as ‘the process of ensuring the effective and efficient achievement of organisational goals’ It involves measuring progress towards planned performance and, where necessary taking action. Feedback is an essential part of the architecture of control  Control Process (1) Setting performance standards (What Should be) (3) Taking (2) Measuring corrective action and comparing (What we do performance about it) (What is)  (1) Setting performance standards (What Should Be) Sources of standards Historical standards, based on the organisations past experience (previous production, sales, profits) Comparative standards (benchmarking) (against the competition) Engineering standards, based on technical analyses of production methods, materials, safety and quality (2) Measuring and Evaluating Performance (What is) Data can come from different sources Written reports Oral reports (from managers and supervisors) Personal observation Problems of subjectivity Determine performance gap, if there is one  (3) Taking Corrective Action (What we do about it) Can be taken by: Top management A specialist Operators themselves Could include: Training and development Introduce new technology Disciplinary action Alter or revise standards Types of Control  Feedforward Control 1. Feedforward Control -future directed and aimed at preventing mistakes before they occur e.g. Banks seeking information on Salary, other loans and credit history before granting loan approval Examination of the various inputs to make sure they meet standards for transformation into outputs  Concurrent Control 2. Concurrent Control- control of the transformation of inputs into outputs (Real Time Control) Monitor the transformation to make sure outputs meet standards Ensure material and staff are available when needed Cope with contingencies which are not anticipated, adjustments while the work is being done  Feedback Control 3. Feedback Control – control of the outputs to ensure that they meet standards Monitors outputs after the product/service has been completed Focuses on end results about ROI (return on investment), output produced, quality levels and costs. Basis to evaluate the reasonableness of organisational goals and standards Ensure the organisation does not make the same mistakes again  Characteristics of Effective Controls 1. Appropriate for an Organisations goals and plans 2. Cost-effective so that the benefits achieved offset the costs 3. Acceptable to those to whom they apply 4. Emphasis on exceptions as control points 5. Flexibility 6. Reliable and Valid 7. Based on Valid Performance Standards and accurate information  Examples of Methods of Control Financial Controls Non-Financial Controls 1. Budgetary control 1. Project controls: Gantt 2. Break even analysis 2. Quality control: TQM  Financial Control: Budgetary Ties together all three types of control 4 main types of budget Revenue and Expense Budget - actual revenues, expenses and sales can be compared to expected Time, space, material and production – projections of hours, space, material to be used Capital Expenditure - projections for expenditure on plant and machinery Cash Budget - projections about cash receipts and outgoings  Financial Control: Break Even Analysis The calculation of fixed and variable costs to analyse the point at which it becomes profitable to produce a good or service Fixed + Variable = Total provides calculation of the volume needed to reach break-even point Especially helpful for dropping or adding product ranges  Non-Financial Project Control Project Controls are the most common non-financial method of control used by an organisation Example of a popular project control is a Gantt chart Example of integrated control is through Total Quality Management Non-Financial: Project Control- Gantt Non-Financial: Total Quality Control Inspection: Identify Sources of Non Conformance Quality Control: Develop Quality Manual and Engage in Inspection Quality Assurance: Broader Quality Systems Development Total Quality Management: Comprehensive Policies; Involves Suppliers and Customers; Applies to all Operations; Premised on Empowerment and Involvement at source  The Impact of Overall Controls Financial and Non-Financial Controls enhance the Business Model and overall quality of product or service through: Identification of need to improve Identification of best practice Implementation of desired practices Evaluation of the improvement in operational performance Integrated approach in the form of TQM Thank you