Engineering Management - Chapter 9 Controlling - PDF

# Chapter 9: Controlling ## Controlling - The long-term existence of many companies depends on how well they are controlled. - If activities are not properly controlled, a company may face losses or experience discontinuity in operation. ## Examples of uncontrolled activities - Fire which destro...

# Chapter 9: Controlling ## Controlling - The long-term existence of many companies depends on how well they are controlled. - If activities are not properly controlled, a company may face losses or experience discontinuity in operation. ## Examples of uncontrolled activities - Fire which destroyed the P800 million Superferry 7 luxury ship in 1997 was caused by illegal connections made on its electrical system. - Tragedy at the Ozone Disco in 1996 manifested management’s lack of control over operations and failure to detect violations in the Building Code. - Telephone company could not stop the unauthorized use of lines assigned to many of its subscribers. ## What is Controlling? - Controlling is defined as the process of ascertaining whether organizational objectives have been achieved; if not, why not; and determining what activities should then be taken to achieve objectives better in the future. - Controlling is the last stage in the management function process that verifies the achievement or completion of objectives at any given point in the organizing and implementing stages. - When expectations are not met at scheduled dates, corrective measures are usually undertaken. ## Importance of Controlling - Proper control will help the organization achieve its goal in the most efficient and effective manner possible. - Deviations, mistakes, and shortcomings happen inevitably. - Proper control measures minimize the ill effects of negative occurrences. - Inventory control system minimizes losses in inventory. ## Steps in the control process - The control process consists of four steps: - Establishing performance objectives and standards - Measuring actual performance - Comparing actual performance to objectives and standards - Taking necessary action based on the results of the comparisons. ### Establishing Performance Objectives and Standards - Determine what has to be achieved. - Examples of objectives and standards include: - Sales targets (quantity or monetary terms) - Production targets (quantity or quality) - Worker attendance (terms of rate of absences) - Safety record (number of accidents for given periods) - Supplies used (quantity or monetary terms for given periods). - Standards differ among organizations. ### Measuring Actual Performance - Measure actual performance so that adjustments can be made when shortcomings occur. ### Comparing Actual Performance to Objectives and Standards - Compare actual performance with what the organization seeks to achieve. - The results will be compared and the necessary action will be taken. ### Taking Necessary Action - The purpose is to provide management with the opportunity to take corrective action when necessary. - Examples of corrective actions include: - Hiring additional personnel - Using more equipment - Requiring overtime. ## Types of Control - Control consists of three distinct types: - Feedforward control - Concurrent control - Feedback control. ### Feedforward Control - Management anticipates problems and prevents their occurrence. - This type of control provides assurance that the required resources are in place before operations begin. - An example would be when the manager of a chemical manufacturing firm makes sure that the best people are selected and hired to fill jobs. ### Concurrent Control - Operations are already ongoing and activities are carried out to detect variances. - Adjustments are made when deviations occur to ensure compliance with requirements. - An example would be when The manager of a construction firm constantly monitors the progress of the company's projects. ### Feedback Control - Information is gathered about a completed activity. - Evaluation and steps for improvement are derived. - Corrective actions aimed at improving future activities are features of feedback control. - An example would be a supervisor who discovers that continuous overtime work for factory workers lowers the quality of output. ## Components of organizational control systems - Organizational control systems consist of the following: - Strategic plan - Long-range financial plan - Operating budget - Performance appraisals - Statistical reports - Policies and procedures ### Strategic plans - Provide the basic control mechanism for the organization. - Corrective measures are made possible with the adoption of strategic plans. ### The Long-Range Financial Plan - Planning horizon differs from company to company. - Most firms are satisfied with one year. - Engineering firms require longer term financial plans because of long lead times for capital projects. - An example is the engineering firm assigned to construct the Light Rail Transit (LRT) within three years. ### The Operating Budget - Indicates the expenditures, revenues, or profits planned for some future period regarding operations. - Budget figures are used as standard measurements for performance. ### Performance Appraisals - Measure employee performance and provide a guide on how to do their jobs better in the future. - They also function as effective checks on new policies and programs. ### Statistical Reports - Contain data on various developments within the firm. - Examples include: labor efficiency rates, quality control rejects, accounts receivable, accounts payable, sales reports, accident reports, and power consumption reports. ### Policies and Procedures - Policies refer to the framework within which the objectives must be pursued. - Procedures describe the exact series of actions to be taken in a given situation. ## Identifying Control Problems - It is one thing to recognize the need for control, but it is another to actually implement it. - The engineer manager must take steps to control operations, especially when they become complex. - Three approaches to identifying control problems are: - Executive reality check - Comprehensive internal audit - General checklist of symptoms of inadequate control ### Executive Reality Check - Employees at the frontline may complain about management imposing certain requirements that are not realistic. - The executive reality check requires executives to handle at least one subject load each to gain a better understanding of the needs of the organization. ### Comprehensive Internal Audit - Determine the efficiency and effectivity of the activities of an organization. - Undetected problems may snowball into a full blown problem. - An example is the resignation of several employees from the same department. ### General Checklist of Symptoms of Inadequate Control - Checklist of symptoms of inadequate control: - Unexplained decline in revenues and profits - Degradation of service (customer complaints) - Employee dissatisfaction (complaints, grievances, turnover) - Cash shortages caused by bloated inventories or delinquent accounts receivable - Idle facilities or personnel - Disorganized operations (work flow bottlenecks, excessive paperwork) - Excessive costs - Evidence of waste and inefficiency (scrap, rework) ## Summary - Controlling is one of the main functions of management. - It comes after planning, organizing, and directing. - It is aimed at determining whether objectives were realized or not, and if not, by providing means for achievement. - It complements the other management functions. - It is a process consisting of various steps, namely: establishing performance objectives and standards, measuring actual performance, comparing actual performance with objectives and standards, and taking necessary action based on the results of the comparison. - It can be classified as feedforward, concurrent, or feedback. - Organizational control systems consist of strategic plan, the long-range financial plan, the operating budget, performance appraisals, statistical reports, policies and procedures. - Strategic control systems consist of financial analysis, and financial ratio analysis. - Ways to identify control problems are the executive reality check, the comprehensive internal audit, and the general checklist of symptoms of inadequate control.