Ch 7 controlling

7.1. Meaning of control
• Controlling is the process of ensuring that
actual activities conform to planned
activities.
• “Controlling means the process of
gathering and ‘feeding back’ information
about performance so that decision makers
can compare actual results and decide what
to do about any apparent discrepancies or
problems”.

… cont’d
• Controlling is the measurement and
correction of performance in order to make
sure that enterprise objective and plans are
accomplished.
From that point, control consists of a series
of steps intended to help ensure that actual
performance conforms to expected
performance

7.2. Control process
• One can notice that the forth definition given
above divides the controlling function into
four steps:
1) establishing performance standards,
2) measuring actual performance,
3) comparing actual performance to
established standards and
4) taking corrective action, if necessary.

7.3. Types of control
1. FEED FORWARD CONTROL - is a
preliminary control that takes place
before operations begin and includes
the development of policies,
procedures and rules that are designed
to ensure that planned activities will be
carried out properly. It is a future
directed control method.

2. CONCURRENT CONTROL- is the heart
of any operating control system.
Concurrent control takes place during the
action phase of carrying out the plans and
includes direction, monitoring and
adjusting the activities as they occur

3. FEEDBACK CONTROL - measures outputs of a
process and feed into the system or inputs
for corrective action to obtain desired
outputs.
- Managers measure actual performance,
compare the measurement with actual
standards, and identify and analyze deviations.
- They develop a progress for corrective action
and implement it to achieve the desired
performance.

7.4 Techniques of control
• The methods and systems can take many
forms and can be intended for various forms:
budgetary methods, non budgetary control
devices and modern methods.
a) Budgetary Methods:
b) Non Budgetary Control Methods:
c) Modern Methods of Control

a) Budgetary Methods:
budgets are formal quantitative statements of
the resources set aside for carrying out planned
activities over given periods of time.
• Operating Budgets
The most common types of operating budgets
are
- the expense,
- revenue and
- profit budgets.

• Variable Budget: are cost schedules that
show how each cost should vary as the level of
output varies.
They are used where operations are repetitive,
where there are a large number of different
expenses and where these expenses can be
accurately estimated.
Three types of costs are considered when
developing variable budgets: Fixed, Variable,
and semi-variable costs.

• Zero Base Budgeting: The enterprise’s
programs are divided into packages composed
of goals and activities and then costs are
calculated from the base.
By starting the budget of each package from
base zero, costs are calculated afresh for each
budget period, without referring the changes
from the previous period.

b) Non Budgetary Control Methods:
• Statistical Data: Statistical analysis with wider
application of tools and techniques, and the
clear presentation of statistical data, whether of
a historical or a forecast nature, are important to
control.
• Special Reports and Analysis: For control
purposes, special reports and analyses help in
particular problem areas.

• Auditing: Auditing validates the honesty and
fairness of financial statements to provide a critical
basis for management decisions.
It is a process of appraisal.
External audit is largely a verification process
involving the independent appraisal of the
organization’s financial accounts and statements.
The audit is conducted by accounting personnel
employed by an outside firm or by chartered
accountants.
Internal audit or operational auditing is carried out
by members of the organization

• Personal Observation: Managers have the risk
of seeing that enterprise’s objectives are
accomplished by people and go to the area of
activities and taking notice of what is being
done. This is nothing but “Management by
Walking Around”.

c) Modern Methods of Control
• Program Evaluation and Review Technique
(PERT):
• Management Information system
• Computers:

Effective control system
• Focus on critical points
• Integration
• Acceptability
• Timeliness
• Economic Feasibility
• Accuracy
• Comprehensibility
• Tailoring controls to plans and positions
• Tailoring controls to individual managers

Ch 7 controlling

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Ch 7 controlling