Scribd Logo
Upload

Welcome to Scribd!

  • 15K views

    Basic Elements of Control

    Uploaded by

    tanvir09
    Control involves regulating organizational activities to keep performance within acceptable limits and adjust it to goals. It has four main purposes: adapt to the environment, limit resource accumulation, cope with organizational changes, and minimize risks. There are different types of control including physical, human, information, and financial resource controls. Control also occurs at strategic, structural, operational, and financial levels. The control process involves establishing standards, measuring performance, comparing performance to standards, and determining if corrective action is needed.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd

    Basic Elements of Control

    Uploaded by

    tanvir09
    15K views8 pages
    Control involves regulating organizational activities to keep performance within acceptable limits and adjust it to goals. It has four main purposes: adapt to the environment, limit resource accumulation, cope with organizational changes, and minimize risks. There are different types of control including physical, human, information, and financial resource controls. Control also occurs at strategic, structural, operational, and financial levels. The control process involves establishing standards, measuring performance, comparing performance to standards, and determining if corrective action is needed.

    Copyright

    © Attribution Non-Commercial (BY-NC)

    Available Formats

    PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Control involves regulating organizational activities to keep performance within acceptable limits and adjust it to goals. It has four main purposes: adapt to the environment, limit resource accumulation, cope with organizational changes, and minimize risks. There are different types of control including physical, human, information, and financial resource controls. Control also occurs at strategic, structural, operational, and financial levels. The control process involves establishing standards, measuring performance, comparing performance to standards, and determining if corrective action is needed.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    15K views8 pages

    Basic Elements of Control

    Uploaded by

    tanvir09
    Control involves regulating organizational activities to keep performance within acceptable limits and adjust it to goals. It has four main purposes: adapt to the environment, limit resource accumulation, cope with organizational changes, and minimize risks. There are different types of control including physical, human, information, and financial resource controls. Control also occurs at strategic, structural, operational, and financial levels. The control process involves establishing standards, measuring performance, comparing performance to standards, and determining if corrective action is needed.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    You are on page 1of 8

    Basic Elements of Control

    Control and Its Nature


    The regulation of organizational activities so that some targeted element of performance
    remains within acceptable limits.
    • Provides organizations with indications of how well they are performing in
    relation to their goals.
    • Provides a mechanism for adjusting performance to keep organizations moving in
    the right direction.
    Purpose of control: Control basically has four purposes:

    Adapt to environmental Limit the accumulation of

    Control helps the

    Cope with organizational Minimize

    Types of Controls
    ‰ Areas of Control
    „ Physical resources—inventory management, quality control, and
    equipment control.
    „ Human resources—selection and placement, training and
    development, performance appraisal, and compensation.
    „ Information resources—sales and marketing forecasts,
    environmental analysis, public relations, production scheduling,
    and economic forecasting.
    „ Financial resources—managing capital funds and cash flow,
    collection and payment of debts.
    ‰ Levels of Control

    Strategi
    contro

    Structura
    contro

    Operation Financia
    contro contro

    ‰ Responsibilities for Control


    „ Controller—a position in organizations
    that helps line managers with
    their control activities.
    Steps in Control Process:

    1 2 3 4
    Compare Determine need
    Establish Measure
    performance for corrective
    standards performance against standards action

    Maintain the Correct the Change


    status quo deviation standards

    ‰ Establish Standards
    „ Control standard—a target against which subsequent performance
    will be compared.
    ‰ Control standards should be expressed in measurable terms.
    ‰ Control standards should be consistent with organizational
    goals.
    ‰ Control standards should be identifiable indicators of
    performance.
    ‰ Measure Performance
    „ Performance measurement is an ongoing process.
    „ Performance measures must be valid indicators (e.g., sales, costs,
    units produced) of performance.
    ‰ Compare Performance Against Standards
    „ Define what is a permissible deviation from the performance
    standard.
    „ Utilize the appropriate timetable for measurement.
    ‰ Determine the Need for Corrective Action
    „ Maintain the status quo (do nothing).
    „ Correct the deviation to bring operations into compliance with the
    standard.
    „ Change the standard if it was set too high or too low.
    Operations Control
    Forms of operations control:

    Feedback

    Inputs Transformation Outputs

    Preliminary control Screening control Postaction control


    Focuses on Focuses on Focuses on
    to the inputs are from the
    Syste transformed tional
    output

    Financial Control
    ‰ Control of financial resources (i.e., revenues, shareholder investment) as
    they flow into the organization, are held by the organization (i.e., working
    capital, retained earnings),
    and flow out of the organization
    (i.e., payment of expenses).
    ‰ Budgetary Control
    • A budget is a plan expressed in numerical terms
    • Budgets may be established at any organizational level.
    • Budgets are typically for one year or less.
    • Budgets may be expressed in financial
    terms, units of output, or
    other quantifiable factors.
    ‰ Budgets serve four purposes:
    • Help managers coordinate resources and projects.
    • Help define the established standards for control.
    • Provide guidelines about the
    organization’s resources
    and expectations.
    • Enable the organization
    to evaluate the
    performance of
    managers and
    organizational units.

    Types of Budgets

    Type of Budget What Budget Shows

    Financial budget Sources and uses of cash


    Cash-flow or cash budget All sources of cash income and cash
    expenditures in monthly, weekly, or daily
    periods
    Capital-expenditures budget Costs of major assets such as a new plant,
    machinery, or land
    Balance-sheet budget Forecast of the organization’s assets and
    liabilities in the event that all other budgets
    are met

    Type of Budget What Budget Shows

    Operating budget Planned operations in financial terms


    Sales or revenue budget Income the organization expects to receive from
    normal operations
    Expense budget Anticipated expenses for the organization during
    the coming time period
    Profit budget Anticipated differences between sales or revenues
    and expenses

    Type of Budget What Budget Shows

    Nonmonetary budget Planned operations in nonfinancial terms


    Labor budget Hours of direct labor available for use

    Space budget Square feet or meters of space available for


    various functions

    Production budget Number of units to be produced during the coming


    time period
    Operating unit Division Organizational
    budget request • Prepared by
    committe
    • Approved by
    committee, controller,
    and

    Financial Control
    Developing
    Budgets in
    Organizations

    Strengths and Weaknesses of Budgeting


    „ Strengths
    ‰ Budgets facilitate effective operational controls.
    ‰ Budgets facilitate coordination and communication between departments.
    ‰ Budgets establish records of organizational performance, which can
    enhance planning.
    „ Weaknesses
    ‰ Budgets can hamper operations if applied too rigidly.
    ‰ Budgets can be time consuming to develop.
    ‰ Budgets can limit innovation and change.
    Other Tools of Financial Control
    „ Financial Statements
    ‰ A financial statement is a profile of some aspect of an organization’s
    financial circumstances.
    ‰ Balance sheet
    „ A listing of assets (current and fixed), liabilities (short- and long-
    term), and stockholders’ equity at a specific point in time (typically
    year-ending) that summarizes the financial condition of the
    organization.
    ‰ Income statement
    „ Summary of financial performance—revenues less expenses as net
    income (i.e., profit or loss)—over a period of time, usually one
    year.
    „ Ratio Analysis
    ‰ The calculation of one or more financial ratios to assess some aspect of the
    organization’s financial health. (liquidity ratio, debt ratio etc.)
    „ Financial Audits
    ‰ Audit—an independent appraisal of an organization’s accounting,
    financial, and operational systems.
    „ External audits—financial appraisals conducted by experts who
    are not employees of the organization. Internal audits—appraisals
    conducted by employees of the organization.

    Structural Control
    „ Structural control is concerned with how the elements of the organization’s
    structure are serving their intended purpose.
    ‰ Bureaucratic Control
    „ A form of organizational control characterized by formal and
    mechanistic structural arrangements.
    ‰ Clan Control
    „ An approach to organizational control characterized by informal
    and organic structural arrangements.
    Organizational Control

    Bureaucratic Control Dimension Clan control


    Goal of control
    Employee Employee

    Strict rules, formal Degree of Group norms, culture,


    rigid self-control

    Directed toward minimum Performance Directed toward


    levels of acceptable performance above
    performance beyond the

    Tall structure, top-down Organization Flat structure, shared


    influence influence

    Directed at Reward Directed at group


    performanc performance

    Participatio
    Limited and Extended and

    Strategic Control
    „ Integrating Strategy and Control
    ‰ Strategic control
    „ Control aimed at ensuring that the organization is maintaining an
    effective alignment with its environment and moving toward
    achieving its strategic plan.
    „ Focuses on structure, leadership, technology, human resources, and
    informational and operational systems.
    „ Focuses on the extent to which an implemented strategy achieves
    the organization’s goals.

    Personal reading
    „ International strategic control
    „ Characteristics of effective control.

    You might also like