Controlling

Definition

 Management Control is defined as a process

by which managers ensure that resources
are obtained and used effectively and
efficiently in the accomplishment of an
organisation’s objectives.
Purpose

 The primary purpose of control function is to

ensure that the results, outputs or
organisational activity, i.e. the overall
performance, corresponds to what is
expected in each situation.
 It involves measuring the actual results
against standards, and to take timely
corrective actions if there are deviations.
The Control Process

 Establishing Standards: Standards are criteria of performance,

which may be stated in terms of quantities of products, units of
service, speed, volume of sales, costs, capital expenditure or
profits.
 In health care, controls can be divided into “output controls” and
“activity controls”. Length of stay, bed occupancy, and number of
outpatients visits per speciality are common examples. Other
examples are revenue to expense ratio (to monitor financial
viability)
 Quality of care as monitored through quality assurance activities
is an example of process (activity) control.

Intangible standards

 Where human relationships count in

performance, it is hard to measure what is
“good”, “effective”, or “efficient”.
 Many managerial controls over interpersonal
relationships must be based on intangible
standards.
Measurement of Performance

 The next step in control process is the

measurement of actual performance.
 In health care, there are many activities
where it is difficult to develop accurate
measures of performance because the jobs
are not routinised like assembly line.
Correction of Deviations

 Deviations in performance need correction.

 A negative deviation from standards is an
indication that something is wrong, the cause
of which should be examined.
Control Techniques

 A variety of techniques are in use to help

managers in their controlling function.
 These techniques are also used as tools of
planning.
Budget: the traditional control technique

 Budget, as a control device, is an extension of

planning.
 It is a totalled statement of monetary requirements
and financial consequences.
 As a planning function it can be used effectively in
the control process, because a budget package:
 Stimulates a financial plan
 Acts as a standard to be referred to during the
control process.
Types of Budgets
 Revenue and Expense Budget: This bugdet spells
out plans for revenues and operating expenses.
 It reflects the anticipated income from the sales of
products and services by providing direct patient
care.
 Patient revenues generate from:
 Providing hotel services
 Providing professional services like X-ray, pathology
etc
 Providing other supportive services
Programme Budgeting
 Programme budgeting is the budgeting system
that, contrary to conventional budgeting, describes
and gives the detailed costs of every activity or
programme that is to be carried out in a budget.
 Programme budgeting is the analysis of
expenditure in healthcare programmes, such
as cancer, mental health and cardiovascular
diseases. 
Zero based Budgeting
 Zero-based budgeting is a technique of planning and decision-
making which reverses the working process of
traditional budgeting .
 In traditional incremental budgeting, departmental managers
justify only increases over the previous year budget and what
has been already spent is automatically sanctioned.
 By contrast, in zero-based budgeting, every department function
is reviewed comprehensively and all expenditures must be
approved, rather than only increases.
 No reference is made to the previous level of expenditure. Zero-
based budgeting requires the budget request be justified in
complete detail by each division manager starting from the zero-
base.
 The zero-base is indifferent to whether the total budget is
increasing or decreasing.
Variable Budgeting
Measurement of Performance

 The next step in control process is the

measurement of actual performance.
 In health care, there are many activities
where it is difficult to develop acurate
measures of performance