CONTROLLING
(MANAGING QUALITY AND PERFORMANCE)
PRIMAN
KATE MARANON
KAT NG
KRISTA TAMAYO
WHAT IS CONTROL?
The systematic process of regulating
organizational performance towards the
attainment of goals.
WHAT IS CONTROL?
ESTABLISHING STANDARDS
at the time of planning
MEASURING PERFORMANCE
and comparing it to the set
standards
TAKING CORRECTIVE ACTION
when any deviation is found
“The essence of control is action which
adjusts operations to predetermined
standards, and its basis is information in the
hands of managers.” by Douglas S. Sherwin
CONTROLLING IS GOAL-ORIENTED!
It ensures that the
resources of the
organization are being
used effectively and
efficiently for the
achievement of
predetermined goals.
STEPS IN THE CONTROL PROCESS
1. MEASURING ACTUAL
PERFORMANCE
• Personal observation, statistical
reports, oral reports, and written
reports
• Management by walking around
(MBWA)
2. COMPARING
ACTUALPERFORMANCE AGAINST
A STANDARD
• Comparison to objective
measures: budgets, standards,
goals
STEPS IN THE CONTROL PROCESS
3. TAKING MANAGERIAL ACTION TO CORRECT
DEVIATIONS OR INADEQUATE STANDARDS
• Immediate corrective action
• Correcting a problem at once to get performance back
on track
• Basic corrective action
• Determining how and why performance has deviated
and then correcting the source of deviation
• Revising the standard
• Adjusting the performance standard to reflect current
and predicted future performance capabilities
THE CONTROL PROCESS
QUALITIES OF AN EFFECTIVE CONTROL SYSTEM
Accurate
Economical
Understandable
Strategically placed
Involves multiple criteria
Provides a reasonable criteria
Timely
Flexible
Emphasizes the exception
Involves a corrective action
EXAMPLES OF CONTROL STANDARDS
CHOOSING STANDARDS AND MEASURES
• Organization focus on
measuring and controlling
financial performance, such
as sales, revenue and profit.
• Managers recognize the
need to also measure
intangible aspects of
performance to manage the
value-creating activities of
contemporary organizations.
BALANCED SCORECARD
• It is a comprehensive management control system that
balances traditional financial measures with operational
measures relating to a company’s critical success factors.
• Contains four major perspectives:
a. Financial performance
b. Customer service
c. Business Process
d. Potential for learning and growth
BALANCED SCORECARD
FEEDBACK CONTROL MODEL
All well-designed control systems involve the use of feedback to
determine whether performance meets established standards.
We will examine the steps in the feedback control model and
how it applies to organizational budgeting.
Feedback
Adjust Standards
Establish
Strategic
Goals
1. Establish
standards of
performance
Adjust Performance
2. Measure
actual
performance
3. Compare
performance
to standards
If Adequate
Feedback
4. Do
nothing or
provide
reinforcemen
t
If
Inadequate
4. Take
corrective
action.
BUDGETING
- Reports that list planned and actual expenditures
- They highlight the variance between budgeted and actual
amounts
- They are created for all departments and divisions in an
organization
Responsibility Center – any organizational department or
unit under the supervision of a single person who is
responsible for its activity.
• Types of Budget
• Expense Budget
• Revenue Budget
• Cash Budget
BUDGETING
• Capital Budget
–Top-Down Budgeting – budgets for the
coming year are imposed on middle and lower
level managers
–Bottom-Up Budgeting – involves lower-level
managers anticipating their department’s
budget needs and passing them up to top
management for approval
FINANCIAL CONTROL
- Review performance and highlight potential problems
- Managers need to be able to evaluate financial reports
- Comparisons allow managers to see improvement and focus on
competition
FINANCIAL CONTROL
- Most common financial statements
a. Balance Sheet
b. Income Statement or Profit & Loss
- Ratios and statistics highlight relationships
between performance indicators such as
asset, sales and inventory
- Ratios are stated fractions or proportions
- Most common financial ratios
a. Liquidity Ratio
b. Activity Ratio
c. Profitability Ratio
• Hierarchical Control
Involves monitoring and influencing employee behaviour
through extensive use of rules, policies, hierarchy of
authority, written documentation, reward systems and other
formal mechanisms
• Decentralized Control
The organization fosters compliance with organizational
goals through the use of organizational culture, group norms,
and a focus on goals rather than rules and procedures.
• Open-book management
Allows employee to see for themselves the financial
condition of the organization and encourages them to think
and act like business owners.
TOTAL QUALITY MANAGEMENT (TQM)
• Total Quality Management
(TQM) is a
decentralized control
philosophy
• Infuse quality into every
activity in a company
through continuous
improvement
• Toyota is a good example of
the results of TQM
• TQM became attractive in the
1980s because of its success
in Japan
TQM TECHNIQUES
• Quality Circles
• Benchmarking
• Six Sigma
• Reduced Cycle Time
• Continuous Improvement
TRENDS IN QUALITY AND FINANCIAL CONTROL
• International Quality Standards
• New Financial Control Systems
• Economic Value-Added (EVA)
• Market Value-Added (MVA)
• Activity-Based Costing (ABC)
• Corporate Governance
CONTROLS AND CULTURAL DIFFERENCES
• Methods of controlling employee
behavior and operations can be quite
different in different countries
• Distance creates a tendency for
formalized controls in the form of
extensive, formal reports
• In less technologically advanced
countries, direct supervision and
highly centralized decision making are
the basic means of control
• Local laws may constrain the
corrective actions that managers can
take in foreign countries
THE DYSFUNCTIONAL SIDE OF CONTROL
• Unfocused controls
• Failure to achieve desired or intended results occur
when control measures lack specificity
• Incomplete control measures
• Individuals or organizational units attempt to look good
exclusively on control measures
• Inflexible or unreasonable control standards
• Controls and organizational goals will be ignored or
manipulated