Unit – 5 Controlling Strategies

System and Process of Controlling

 Controlling
 The measurement and correction of performance in order to make
sure that enterprise objectives and the plans devised to attain them
are being accomplished
 Without objectives and plans, control is not possible because
performance has to be measured against some established criteria

 The Basic Control Process

 Establishing standards
 Measuring performance against these standards
 Correcting variations from standards and plans

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The Basic Control Process
 Establishment of Standards
 Standards – Criteria of performance
 Selected points in an entire planning program at which measures of
performance are made so that managers can receive signals about
how things are going and thus do not have to watch every step in the
execution of plans
 Measurement of Performance
 Measurement be done on a forward – looking basis so that deviations
may be detected in advance of their occurrence and avoided by
appropriate actions
 Correction of Deviation
 By exercising their organizing function through reassignment or
clarification of duties

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Critical Control Points, Standards, and
Benchmarking
 Principle of Critical Point Control
 Effective control requires attention to factors critical to evaluating
performance against plans
 Types of Critical Point Standards
 Standards are physical, cost, capital, revenue, program, intangible, goal,
and strategic plans as control points for strategic control
 Strategic Control
 Systematic monitoring at strategic control points and modifying the
organization’s strategy based on this evaluation
 Benchmarking
 An approach for setting goals and productivity based on best industry
practices
 Three types – Strategic, Operational, and Management

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5
Control as a Feedback System
 Control as Feedback
 Many systems control themselves through information feedback,
which shows deviations from standards and initiates changes
 Management control is usually perceived as a feedback system similar
to the common house – hold thermostat

 Real Time Information and Control

 Advances arising from the use of the computer and from electronic
gathering, transmission, and storage of data is the development of real
time information
 Information about what is happening while it is happening
 Real – time control in areas of importance to managers

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Feed forward or Preventive Control
 Feed forward Systems
 Monitor inputs into a process to ascertain if the inputs are as planned;
if they are not, the inputs or the process is changed in order to obtain
the desired results
 Requirements for Feed forward Control
 Identify the more important input variables
 Develop a model of the system
 Take care to keep the model up to date
 Collect data on input variables regularly, and put them into the system
 Regularly assess variations of actual input data from planned – for
inputs, and evaluate the impact on the expected end result
 Take action to solve them

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Comparison of Simple Feedback & Feed forward Systems

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Control of Overall Performance
 Reasons for control of overall performance
 Overall planning must apply to enterprise, so must overall
control
 Decentralization of authority
 Overall control permits the measurement of an integrated
area manager’s total effort, rather than parts of it
 Many overall controls in business are financial

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Other Controls
 Profit and Loss Statement
 Shows all revenues and expenses for a given time, so it is a true
summary of the results of business operations
 Limitations – Duplication of accounting records, allocating overhead
costs, and time etc.,
 Control through Return on Investment
 Measures both the absolute and the relative success of a company or
company unit by the ratio of earnings to investment of capital
 Bureaucratic and Clan Control
 Bureaucratic – Characterized by the wide use of rules, regulations,
policies, procedures, and formal authority
 Clan – Based on norms, shared values, expected behavior, and other
cultural variables

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Requirements of Effective Controls
 Tailoring Controls to Plans and Positions
 Reflect the organization structure, showing who is responsible for the
execution of plans and for any deviation from them and should be
tailored to positions
 Tailoring Controls to Individual Managers
 Individual Managers carry out their function of control
 Designing Controls to Point up Exceptions at Critical
Points
 Efficient control requires that managers look for exceptions, while
effective control requires that managers pay primary attention to
things that are most important
 Seeking Objectivity of Controls
 Manager’s or a Subordinate’s personality may influence judgments of
performance and make them less accurate

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Requirements of Effective Controls contd….
 Ensuring Flexibility of Controls
 If controls are to remain effective despite failure or unexpected
changes of plans, they must be flexible
 Fitting the Control System to the Organizational Culture
 Generalized and permissive control system will hardly succeed
 Achieving Economy of Controls
 Controls must be worth their costs
 Establishing Controls that Lead to Corrective Action
 An adequate control system will disclose where failures are occurring
and who is responsible for them, as well as ensuring that corrective
action is taken

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The Budget as a Control Device
 Budgeting
 The formulation of plans for a given future period in numerical terms
 Financial terms – as in revenue and expense as well as capital budgets
 Non-Financial terms – as in budgets of direct – labor – hours,
materials, physical sales volume etc.,
 Dangers in Budgeting
 Unwise decisions to meet the budget
 Not invest in R & D, Capital investment for productivity etc.,
 Zero – Base Budgeting
 Dividing enterprise programs into packages composed of goals,
activities, and needed resources and calculating the costs for each
package from zero
 Advantage – it forces managers to plan each program package afresh

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Time – Event Network Analyses
 Techniques designed to assess how the parts of a program fit
together during the passage of time and events
 Gantt Charts
 A bar chart that shows the time relationships between the “events” of
a production program
 Total program goals – regarded as interrelated supporting plans
 Picking out the more critical elements of a plan to watch carefully
 Milestone Budgeting
 Identifiable segments
 Break a project down into controllable pieces and then carefully
follow them

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Time – Event Network Analyses contd….
 Program Evaluation and Review Technique (PERT)
 A time – event network analysis system in which the various events in
a program or project are identified, with a planned time established
for each
 Relationships of each event to the other events
 Event – a supporting plan whose completion can be measured at a
given time
 Activity time – time required to accomplish an event
 Critical Path – Sequence of events that takes the longest time and that
has zero (or the least) slack time
 Identifying it at the start makes possible close monitoring of this
particular sequence of events to ensure that the whole program is on
schedule

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Strength and Weaknesses of PERT
 Strengths
 It forces managers to plan and how the pieces fit together
 Subordinate manager must plan the event for which he or she is
responsible
 It concentrates attention on critical elements that may need
correction
 Makes possible a kind of forward – looking control
 Able to take action at the right spot and at right time
 Weaknesses
 Not useful when a program is no reasonable
 Two or more groups of people to work on an event when costs
permit
 Time only, not on costs

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Information Technology
 Management Information System
 A formal system of gathering, processing, and dispersing information
internal and external to the enterprise in a timely, effective, and efficient
manner to support managers in their jobs
 Communication and the Management Information System (MIS) are the
linkage that makes managing possible
 Expansion of Basic data
 Managers need all kinds of nonaccounting information about the external
and internal operations
 Information should be qualitative as well as quantitative
 Information Indigestion and Intelligence Services
 Information overload is solved by the development of intelligence experts
 Managing by the numbers
 Attempts are made to model workers in large organizations by using
concepts such as “numerati”
 The idea is to build mathematical models of people in a large organization

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Use of Computers in Handling Information
 Impact
 Computer – aided communication impacts not only on decision making
but also on organizational design
 The impact of computers on managers at different
organizational levels
 Supervisory level – Scheduling, daily planning, and controlling of the
operation are just a few uses
 Middle – Level – Responsible for administration and coordination
 Top – Level – Responsible for strategy and overall policy of the
organization
 The Application and Impacts of Microcomputers
 Flexible, Inexpensive and used more quickly
 Applications – Spreadsheets, budget preparation etc.,
 The Twitter Phenomena
 Free social networking service with an author who has followers

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Opportunities and Challenges Created by IT
 Challenges
 Resistance to computer use
 Speech recognition devices
 Telecommuting
 Working at a computer terminal at home instead of commuting to work
 Computer Networks
 The internet – Network of computers and network of networks
 Other type of networks
 Groupware – Software that enables a group of people on a network to
collaborate over long distances at the same time
 Freeware – usually pertains to a fully functional software with no cost to
the user
 Information Security

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Productivity
 Definition
 The output – input ratio within a time period with due consideration
of quality
 Implies measurement
 Quality Measurement in Information age is Wal – Mart

 Productivity Problems
 Greater proportion of less – skilled workers with respect to the total
labor force
 Emphasis on immediate result
 Workers’ attitudes, and government policies and regulations
 Productivity dilemma is the growing affluence of people, which makes
them less ambitious

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Measurement of Productivity
 Skill Workers
 Person on a production line
 Bricklayers, mechanics, and butchers
 Measurement is easy

 Knowledge workers
 Assistant to the manager with planning as his or her main function
 Managers, engineers, and programmers
 Difficult – quality of outputs is often hard to measure

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Production and Operations Management
 Production Management
 Deals with activities necessary to manufacture products
 Expanded as purchasing, warehousing, transportation, and other
operations until a product is available to the buyer

 Operations Management
 Deals with activities necessary to produce and deliver a service as
well as a physical product
 Do not produce a physical output but provide some service as an
output
 Service providers are hospitals, doctors, consultant, airlines,
restaurants, musicians and the great variety of retail stores

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Tools and Techniques for Improving Productivity
 Many tools and techniques available for improving
manufacturing and service operations
 Inventory Planning and control
 Just – in time inventory system
 Outsourcing
 Operations research
 Value engineering
 Work simplification
 Quality circles
 Total quality management
 Lean manufacturing
 CAD & CAM

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Tools & Techniques for Improving Productivity Contd...
 Inventory Planning and Control

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Tools & Techniques for Improving Productivity Contd...
 Just – in – Time Inventory (JIT) System
 The supplier delivers the components and parts to the production
line only when needed and “just in time” to be assembled
 Zero inventory and Stockless production (other names)
 Outsourcing
 The contracting of production and operations to outside vendors that
have expertise in specific areas
 Tool for expanding a company and for maintaining a competitive
position
 Operations Research
 The application of scientific methods to the study of alternatives in a
problem situation, with a view to obtaining a quantitative basis for
arriving at a best solution

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Tools & Techniques for Improving Productivity Contd...
 Value Engineering
 The process of analyzing the operations of the product or service,
estimating the value of each operation, and attempting to improve
that operation by trying to keep costs low at each step or part
 Work Simplification
 The process of obtaining workers’ participation in simplifying their
work
 Training sessions are conducted to teach concepts and principles of
techniques such as time and motion studies, work – flow analyses, and
the layout of the work situation
 Quality Circles
 A group of people from the same organizational area who meet
regularly to solve problems they experience at work

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Tools & Techniques for Improving Productivity Contd...
 Total Quality Management
 Long – term commitment to continuous quality improvement,
throughout the organization and with the active participation of all
members at all levels, to meet and exceed customer expectations
 Lean Manufacturing
 Continuous improvements with strategic breakthroughs
 Aiming at zero defects
 Responsibility for problems rests on everyone, especially management
 Computer – aided Techniques
 Capturing the market quickly is crucial in the very competitive
environment
 Firms can respond more rapidly to the requests of customers with
specific requirements

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Supply Chain & Value Chain Management
 Supply Chain Management
 SCM – Focuses on the sequence of getting raw materials and
subassemblies through the manufacturing process economically
 Focuses more on the internal process with an emphasis on efficient
flow of resources, such as materials
 Value Chain Management
 VCM – Involves analyzing every step in the process, ranging from the
handling of raw materials to servicing end users, providing them with
the greatest value at the lowest cost
 Similar with an additional concern for the external environment, such
as the customer

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Reporting
 Budget Summaries and Reports
 Resume of the particular company – Sales volume, profit, credit, cost,
purchase and Return on Investment
 Purpose of Budgets and Reports
 Budget summaries and reports are the major tools for top
managements to find out where the deviation has occurred
 Return on Investment (ROI)
 Broadcast measure of overall performance of a business
 Obtain satisfactory return on capital invested
 To measure efficiency

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Advantages and Limitations of ROI
 Advantages
 Shows business efficiency
 Vital role in decision making
 Interdepartmental comparison
 To make effective changes in financial policies

 Limitations
 Inventory valuation and depreciation cannot be measured
 Not the correct judgment of financial analysis
 High rate of ROI, the managers may not be interested in the business
activities due to the fear of decrease in ROI

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International Management
 Definition
 Focuses on the operation of international firms in host countries
 Flow of people, goods, and money, with the ultimate aim of managing
better in situations that involve crossing national boundaries
 Environmental factors differ from domestic firms
 Interact with employees who have different educational and cultural
background and value systems
 Nature and Purpose of International Business
 Engage in transactions across national boundaries
 Joint venture is strategic alliance that is often formed in order to
expand geographically, or to expand the market for products or
services
 Contact between parent firm and host country is affected by several
factors, some are unifying, while others can cause conflicts

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International Management: Cultural and
Country Differences

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Factors
 Unifying effects
 Parent company assists the local company in the development of
human and material resources
 Both partners are integrated into a global organizational structure
with equity and long lasting relationship

 Potentials for conflict

 Nationalistic self – interest
 Socio – cultural differences
 Overpowering economic on a small host company
 Some international corporations have been charged with making
excessive profits
 Hiring the best local peoples and so on

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Multinational Corporations (MNCs)
 Definition
 Have their headquarters in one country but operate in many
countries
 From ethnocentric to geocentric orientation
 Ethno – centric orientation
 The style of the foreign operations is based on that of the parent
company
 Poly – centric orientation
 The foreign subsidiaries are given a great deal of managerial freedom
 Regio – centric orientation
 The foreign operations are staffed on a regional basis
 Geo – centric orientation
 The entire organization is viewed as an independent system operating
in many countries

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Multinational Corporations (MNCs) contd…
 Advantages of multinationals
 Raise money for its operations throughout the world
 Products can be produced most cost – effectively and efficiently
 Better access to natural resources and materials
 Recruiting personnel from a worldwide labor pool

 Challenges for multinationals

 Increasing nationalism
 Lack in managerial, marketing, and technical skills
 Maintaining relationships between the parent and host
 Aware of the value of their natural resources

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Globalization and Liberalization
 Globalization
 View the whole world as one market
 Corporation also has to adapt to national and even local needs
 For example: Developing a drug delivery system

 Liberalization
 It eliminates licensing quantitative restrictions and other regulatory
and discretionary controls
 To accelerate the growth rate of industrial sector and to achieve
export promotion on a large scale
 Gives an enormous boost to private investment in the industrial
sector

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Global Theory of Management
 Theories
 Situational and Contingency approaches
 Motivation and Leadership theory
 Organization behavior
 Technology
 Privatization
 Liberation approach
 Globalization of Business
 Japanese Management
 Characteristics – HR, Job Security, Team work, Promotion, Appraisal
system, Communication, and Decision Making

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