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CONTROLLING (MANAGING QUALITY AND PERFORMANCE)
PRIMAN
KATE MARANON
KAT NG
KRISTA TAMAYO
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WHAT IS CONTROL?The systematic process of regulating
organizational performance towards the attainment of goals.
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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
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CONTROLLING IS GOAL-ORIENTED!
It ensures that the resources of the
organization are being used effectively and
efficiently for the achievement of
predetermined goals.
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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
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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
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THE CONTROL PROCESS
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QUALITIES OF AN EFFECTIVE CONTROL SYSTEM
AccurateEconomicalUnderstandableStrategically placedInvolves multiple criteriaProvides a reasonable criteriaTimelyFlexibleEmphasizes the exceptionInvolves a corrective action
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EXAMPLES OF CONTROL STANDARDS
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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.
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• 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 performanceb. Customer servicec. Business Processd. Potential for learning and growth
BALANCED SCORECARD
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BALANCED SCORECARD
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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 CONTROL MODEL
Establish Strategic
Goals
Feedback
Adjust Standards Adjust Performance
If
Inadequate
If Adequate
Feedback
1. Establish standards of performance
2. Measure actual
performance
3. Compare performance to standards
4. Do nothing or
provide reinforcemen
t
4. Take corrective
action.
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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
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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
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- 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
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- 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
FINANCIAL CONTROL
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• 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.
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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
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TQM TECHNIQUES• Quality Circles• Benchmarking• Six Sigma• Reduced Cycle Time• Continuous Improvement
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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
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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
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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
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