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GENERAL MANAGEMENT
CHECK POINT 19: THE CONTROLLING PROCESS

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1. the purpose of the controlling process
2. basic questions of the controlling process
3. four basic steps in the controlling process
4. small business example
elements of the controlling function
5. three types of management control
6. feed-forward control
7. concurrent control
8. feedback control
9. elements of effective management control system
10. for serious business owners only
11. the latest information online
 

DO I NEED TO KNOW THIS CHECK POINT?

 

GENERAL MANAGEMENT
CHECK POINT 19: THE CONTROLLING PROCESS

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1. the purpose of the controlling process
2. basic questions of the controlling process
3. four basic steps in the controlling process
4. small business example
elements of the controlling function
5. three types of management control
6. feed-forward control
7. concurrent control
8. feedback control
9. elements of effective management control system
10. for serious business owners only
11. the latest information online
 

DO I NEED TO KNOW THIS CHECK POINT?

 

WELCOME TO CHECK POINT 19

TUTORIAL 1 General Management TUTORIAL 2 Human
Resources Management
TUTORIAL 3 Financial Management TUTORIAL 4 Operations Management TUTORIAL 5 Marketing
And Sales Management
1 6 11 16 21 26 31 36 41 46 51 56 61 66 71 76 81 86 91 96
2 7 12 17 22 27 32 37 42 47 52 57 62 67 72 77 82 87 92 97
3 8 13 18 23 28 33 38 43 48 53 58 63 68 73 78 83 88 93 98
4 9 14 19 24 29 34 39 44 49 54 59 64 69 74 79 84 89 94 99
5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100
 

HOW CAN YOU BENEFIT FROM CHECK POINT 19?

 
The main purpose of this check point is to provide you and your management team with detailed information about the Controlling Process and how to apply this information to maximize your company's performance.
 
In this check point you will learn:
 
• What is the controlling process?
• About the purpose of the controlling process.
• About the questions in the controlling process.
• About four basic steps in the controlling process.
• About two types of variances in the controlling process.
• About the elements of the controlling function.
• About three types of management control.
• About feed-forward control.
• About concurrent control.
• About feedback control... and much more.
 

LEAN MANAGEMENT GUIDELINES FOR CHECK POINT 19

 
You and your management team should become familiar with the basic Lean Management principles, guidelines, and tools provided in this program and apply them appropriately to the content of this check point.
 
You and your team should adhere to basic lean management guidelines on a continuous basis:
 
Treat your customers as the most important part of your business.
Provide your customers with the best possible value of products and services.
Meet your customers' requirements with a positive energy on a timely basis.
Provide your customers with consistent and reliable after-sales service.
Treat your customers, employees, suppliers, and business associates with genuine respect.
Identify your company's operational weaknesses, non-value-added activities, and waste.
•. Implement the process of continuous improvements on organization-wide basis.
Eliminate or minimize your company's non-value-added activities and waste.
Streamline your company's operational processes and maximize overall flow efficiency.
Reduce your company's operational costs in all areas of business activities.
Maximize the quality at the source of all operational processes and activities.
Ensure regular evaluation of your employees' performance and required level of knowledge.
Implement fair compensation of your employees based on their overall performance.
Motivate your partners and employees to adhere to high ethical standards of behavior.
Maximize safety for your customers, employees, suppliers, and business associates.
Provide opportunities for a continuous professional growth of partners and employees.
Pay attention to "how" positive results are achieved and constantly try to improve them.
Cultivate long-term relationships with your customers, suppliers, employees, and business associates.

1. THE PURPOSE OF THE CONTROLLING PROCESS

THE CONTROLLING PROCESS

Business owners and managers must be fully familiar with the basic elements of the controlling process which represents one of the most critical management functions in every business organization.

Regardless of its size, every organization can accomplish satisfactory results only through proper Management Control of a broad range of activities.

The Controlling Process
on all levels is concerned with the continuous verification of information and results related to a broad range of activities within the organization. This process is designed to ensure that the company is on the path of achieving its stated objectives, and in case there is an undesirable deviation, management can take corrective action in a timely manner. This is similar to the action of a ship captain, when he is using the compass to find the “true North” and is ready to “turn the wheel”, whenever necessary to avoid the “icebergs”.

The controlling process within any organization can be established through various Controlling Procedures, which subsequently become an integral part of this process, and provide several important advantages outlined below. (48)

THE PURPOSE OF THE CONTROLLING PROCESS

1.

To set performance standards with planned objectives in a systematic manner.

2.

To design information feedback systems.

3.

To compare actual performance with predetermined standards.

4.

To determine whether there are any deviations and to measure their significance.

5.

To take corrective action required to assure that all corporate resources are being utilized in the most effective way.

 
ARE YOU A ONE-PERSON BUSINESS OWNER?

If you are a one-person business owner, you are still advised to learn all you can about the Controlling Process and the entire content of this check point. This will enable you to improve your self-control regarding your own business performance and overall control in relation to your customers, business associates, suppliers, banks and other organizations relevant to your business activities.

 

Finally, your understanding of all aspects of the controlling process will be critical for your future success in business, when you decide to take your business to the next level and employ additional employees within your organization.

 

ADDITIONAL INFORMATION ONLINE

Controlling By Jim White.
Controlling Function Of Management By IIMTS.
Control In Management Processes By Asif J. Mir.
Controlling As A Function Of Management By Dhroov Prasad.
Controlling And Its Importance In Management By Mexus Education.

2. BASIC QUESTIONS OF THE CONTROLLING PROCESS

ARE YOU READY TO ASK RELEVANT QUESTIONS?

As a business owner or manager, you must always be prepared to ask yourself and your subordinates Relevant Questions related to your company’s activities.

Some of the basic questions related to the Controlling Process are outlined below.

 

BASIC QUESTIONS OF THE CONTROLLING PROCESS

1.

Is a particular task clearly defined?

2.

Who is responsible for accomplishing a specific task?

3.

Was the task completed on time?

4.

Were there any deviations between planned and actual results?

5.

What corrective action needs to be taken to eliminate the deviation and rectify the results?

6.

If a specific product was not completed in a timely manner, why did this happen?

7.

If a specific service was not provided in a timely manner, who was responsible?

8.

What is the profit or loss result on this particular assignment?

9.

Was the client informed about a specific problem caused by our company?

10.

Was the supplier informed regarding our change order? If “not”, why not?

3. FOUR BASIC STEPS IN THE CONTROLLING PROCESS

CONTROLING PROCEDURES

 
Business owners and managers must keep in mind that all Controlling Procedures and methods are similar in their application for all operational activities within the organization and include four basic steps.
 

FOUR BASIC STEPS IN THE CONTROLLING PROCESS

Step 1: Establish The Required Standards And Methods For Measuring Performance.

Step 2: Measure The Actual Performance.

Step 3: Compare The Actual Performance With The Required Standards And Measure The Variance Between Them.

Step 4: Take Corrective Action If There Is Variance And Repeat The Process. (Absence of variance means that the performance is acceptable).

 
Each step in the Controlling Process is explained below.
 

THE FIRST STEP IN THE CONTROLLING PROCESS

For the first step to be effective, standards and methods for measuring performance must be determined in meaningful terms and accepted by the employees involved.

The establishment of required Standards and Methods of performance is, in fact, an integral part of the MBO Process, discussed in detail in Tutorial 1.

THE SECOND STEP IN THE CONTROLLING PROCESS

The second step in the controlling process entails measuring actual performance in each department or division. 

Like all elements of Control, this step has to be carried out with a frequency specific to the type of activity being measured. The prime responsibility for carrying out this task lies with respective departmental or divisional managers. 

A typical illustration of measuring actual performance and reviewing results in a small or medium-sized company is similar to the MBO Process: Evaluation Of Results, described in detail in Tutorial 1.

THE THIRD STEP IN THE CONTROLLING PROCESS

The third step in the controlling process entails comparing actual performance with required standards and measuring variance.
 

This step enables top management to examine whether Actual Performance matches the Projected Standards and to identify specific areas of inefficiency. Absence of Variance between actual and projected results signifies that the performance is acceptable. Hence, managers may assume that "everything is under control" and the operation can continue without any additional changes.

However, if variances are found, it is essential to identify the specific areas of operational activities in which such variances occur. Moreover, it is necessary to establish whether such variances are favorable or unfavorable, as illustrated below.

TWO TYPES OF VARIANCES

 Favorable Variance

Unfavorable Variance

In this case actual results are better than the projected ones.

In this case actual results are worse that the projected ones.

 

THE FOURTH STEP IN THE CONTROLLING PROCESS

The fourth step in the controlling process entails taking corrective action if there is unfavorable variance between actual and projected performance results. 

Such action often involves a change in one or more Operational Activities and a re-assessment of employees' performance within the organization. The prime purpose of Corrective Action is not merely to rectify past inefficiencies, but to develop constructive methods to maintain an acceptable performance level.  

A favorable variance, conversely, helps top management to identify those operational activities where actual results exceed corresponding projections. This, in turn, enables management to encourage and to promote those employees who contribute to improved company performance.

The Controlling Function must be carried out by every business owner and manager in accordance with the vested degree of authority, responsibility, and accountability. Typical elements of controlling function in a small or medium-sized company are illustrated next.

4. SMALL BUSINESS EXAMPLE
ELEMENTS OF THE CONTROLLING FUNCTION

ELEMENTS OF THE CONTROLLING FUNCTION

President.

  • • Controls the implementation of strategic and operational plans of the company.
  • • Monitors the adherence to strategies, policies, procedures, and rules by all employees.
  • • Controls the company's performance by examining results and by taking corrective actions    in all areas of its activity, including human resources management.
   

Financial
Department

 

Operations
Department

 

Marketing
And Sales
Department

Vice President,
Finance:

  • Controls the implementation of financial policies, plans, and budgets.
  • Controls cash, credit to customers, operational and capital expenditure, and inventory.
  • Reviews cost recovery and adjusts hourly rates accordingly.
  • Reviews management accounting reports.
  • Controls the recruitment and performance of subordinates.
 

Vice President,
Operations:

  • Controls the implementation of production policies, plans, and budgets.
  • Controls the product, service, or process design.
  • Controls selection, performance, maintenance, and replacement of equipment and tools.
  • Reviews cost estimating procedures.
  • Controls production performance.
  • Controls product quality.
  • Controls materials purchasing, storage, and dispatch.
  • Controls the 
    recruitment and performance of subordinates.
 

Vice President,
Marketing And Sales:

  • Controls the implementation of marketing and sales policies, plans, and budgets.
  • Controls the implementation of product, price, promotion, and distribution strategies.
  • Controls the development of the sales organization and all its activities.
  • Controls the recruitment and performance of subordinates.

5. THREE TYPES OF MANAGEMENT CONTROL

IMPORTANCE OF A RELIABLE MANAGEMENT CONTROL

Controlling Procedures often cause unavoidable delays during the process of identifying and measuring performance variations, developing and implementing corrective action, and monitoring corrected results. Reliable and effective control is, therefore, particularly important to ensure successful performance of the organization.

There are three types of Management Control, which can be effectively used by business owners and managers as described below.

THREE TYPES OF MANAGEMENT CONTROL

   

Feed-Forward 
Control

 

Concurrent 
Control

 

  Feedback 
Control

 

ADDITIONAL INFORMATION ONLINE

Feedforward Vs Feedback By Manoj Sharma.
Feedback And Feedforward By Control Theory Org.
Try Feedforward Instead Of Feedback By Nick Petrie.
Feedforward Exercise For Business By Marshall Goldsmith.
Feedback Biting You? Try Feedforward Instead By Bob Faw.

6. FEED-FORWARD CONTROL

WHAT IS FEED-FORWARD CONTROL?

Feed-Forward Control is designed to prevent anticipated problems. This is the most desirable type of control since it helps business owners and managers to avoid problems rather than to rectify them later.

In order to develop and to maintain effective feed-forward control, managers need to have access continually to the most updated information. Feed-forward control, in turn, enables managers to examine the situation in a specific area of the company's activities, to identify potential problems, and to take appropriate steps to prevent them.

7. CONCURRENT CONTROL

WHAT IS CONCURRENT CONTROL?

Concurrent Control occurs while a particular activity is in progress and enables managers to identify and to rectify problems before they cause excessive damage. 

One of the best forms of concurrent control is Direct Supervision. Through direct supervision of subordinates, business owners and managers are able to concurrently monitor specific actions of employees, identify, and rectify problems as they arise. Although there is a time delay between the activity and problem rectification, such a delay is usually minimized if concurrent control is carried out effectively. The majority of modern equipment and computers, for example, have a built-in concurrent control, which enables operators to minimize delays and to rectify problems without causing further damage.

8. FEEDBACK CONTROL

WHAT IS FEEDBACK CONTROL?

Feedback Control is imposed after the action has occurred. This type of control is the most common type of control used in industry. It enables business owners and managers to identify problems through regular examination of various Management Reports submitted by subordinates.

These reports are prepared at different intervals depending upon the specific operational requirements. Management accounting reports, for example, are usually prepared on a monthly basis, while inventory status reports may be prepared every day. Since they contain a broad range of information, management reports enable managers to exercise Different Levels Of Control. Thus, management accounting reports provide managers with a comparison between actual and budgeted financial results, while inventory status reports help to monitor the availability of materials.

Feedback control has two distinct advantages over the feed-forward and concurrent types of control. First, Feedback provides information that enables managers to evaluate the effectiveness of their planning efforts. If feedback indicates a small variance between projected and actual results, the performance was generally on target. If, conversely, the variance is substantial, feedback reflects poor performance and helps to direct future planning efforts. Moreover, feedback control helps managers to evaluate the quality of performance by subordinates and enhances employee motivation.

9. ELEMENTS OF AN EFFECTIVE MANAGEMENT CONTROL SYSTEM

MANAGEMENT CONTROL SYSTEM

To ensure effective overall performance, you and your management team must design an appropriate Management Control System, taking into consideration the specific nature of your company's activities. 

Moreover, it is necessary to consider particular functions, abilities, and personalities of individual managers. Management control systems must ensure high accuracy and timely availability of information, be flexible and inexpensive, and focus on all strategic and operational aspects of your company's activities.

Several elements of Management Control must be implemented throughout your organization and this should include the following as described below.

ELEMENTS OF AN EFFECTIVE MANAGEMENT CONTROL

General
Management
Control

Human
Resources
Management
Control

Financial
Management
Control

Operations
Management
Control

Marketing
And Sales
Management
Control

It is essential that Management Information is coordinated with the overall flow of work within your organization and remains effective on a continuous basis. It is equally important to ensure that management control systems are organizationally realistic, are acceptable to employees, and provide sufficient autonomy in individual performance.

 

ADDITIONAL INFORMATION ONLINE

Management Control Systems By RCA Belfast.
Management Control Systems By The EXP Group.
Management Controls - People, Action And Results By Neale O'Connor.
Transform Your Business Through Information By Capgemini Business.
Planning And Controlling Inseparable Twins Of Management By Mexus Education.

10. FOR SERIOUS BUSINESS OWNERS ONLY

ARE YOU SERIOUS ABOUT YOUR BUSINESS TODAY?

Reprinted with permission.

11. THE LATEST INFORMATION ONLINE

 

LESSON FOR TODAY:
If You Will Not Control Your Business, Your Business Will Control You!

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