Controllin G: BSME-3A Group 1

Chapter 9:
Controllin
g
BSME-3A Group 1
Presentation Outline
 What is Controlling?
Importance of Controlling
Steps in the Control Process
Types of Control
Components of the Organizational Control Systems
Strategic Control Systems
Identifying Controlling Problems
CHAPTER 9: CONTROLLING BSME-3A GROUP 1
Objectives
At the end of this presentation the participants are expected:
To understand the meaning and importance of controlling;
To identify the steps in the control process;
To classify different types of controls;
To recognize the components of organizational control system;
To familiarize the strategic control systems;
To know how to spot out the problems in a control system.
CONTROLLING

The Tragedy at Ozone Disco
The tragedy that happened at the Ozone Disco in
March 18, 1996 clearly manifested management’s
lack of control over day-to-day operations of the firm.
Even the failure to detect the violations in the building
code spells the lack of effective government control.
The Ozone Disco tragedy is known as the worst fire
in Philippine history.

What is Controlling?
Controlling
◦ –refers to the “process of ascertaining whether organizational objectives
have been achieved; if not, why not; and determining what activities
should then be taken to achieve objectives better in the future.”
Control
◦ –refers to the actions made to ensure that activities performed match the
desired activities and goals that have been set.

The Role of Controlling
Planning- to set direction
• Decide where you want to go
• Decide how to best go about it
Organizing - to create structures Leading – to inspire effort
Controlling – to ensure results

• To measure performance.
• Take corrective actions.

Importance of Controlling
Deviations, mistakes, and
shortcomings happen inevitably. Proper
control measures minimizes the ill effects
of such negative occurrences.
When controlling is properly
implemented , it will help the
organization achieve its goal in the most
efficient and effective manner possible.

Importance of Controlling
The various reasons for the importance of controlling are listed
below:
 Accomplishing organizational goals;  Simplifies supervision
 Judging accuracy of the standards;  Corrective action
 Improves efficiency;  Better planning
 Improve employee motivation;
 Ensuring order and discipline;

Steps in the Control Process
Establish performance
objectives and
1. Establishing performance objectives standards
and standards.
Measure actual
2. Measuring actual performance. performance
Do
nothing
3. Comparing actual performance to Does actual
performance
objectives and standards. match the
standards?
Yes
No
4. Taking necessary action based on the
Take
results of the comparisons. corrective
action.

Establishing Performance Objectives and Standards
In controlling, what has to be achieved must first be determined.
Examples of such objectives and standards are as follows:
A. Sales Target;
B. Production Targets;
C. Worker attendance;
D. Safety record;
E. Supplies used.

Once objectives and standards are established, the measurement of
performance will be facilitated. After the performance objectives and
standards are established, the methods for measuring performance must
be designed.
Measuring Actual Performance
There is a need to measure actual performance so that when
shortcomings occur, adjustments could be made.

Comparing Actual Performance to Objectives and Standards
Once actual performance has been determined, this will be compared
with what the organization seeks to achieve.
Taking Necessary Action
The purpose of comparing actual performance with the desired result is to
provide management with the opportunity to take corrective action when
necessary.

Types of Control
Relation to Operation
Control consists of three PRE-
OPERATION Feedforward Control
distinct types, namely: PHASE
1. Feedforward control;
ACTUAL
2. Concurrent control; OPERATION Concurrent Control
PHASE
3. Feedback control.
POST
OPERATION Feedback Control
PHASE

Types of Control
Feedforward Control
This type of control provides the assurance that the required human and
nonhuman resources are in place before operations begins.
Example: The manager of a chemical manufacturing firm makes sure that
the best people are selected and hired to fill jobs. Materials required in the
production process are carefully checked to detect defects. The foregoing
control measures are designed to prevent wasting valuable resources. If
these measures are not undertaken, the likelihood that problems will occur is
always present.
Types of Control
Concurrent Control
It is undertaken when operations are already ongoing and activities to
detect variances are made.
Example: The manager of construction firm constantly monitors the
progress of the company’s projects. When construction is behind schedule,
corrective measures like hiring of additional manpower are made.

Types of Control
Feedback Control
It’s undertaken when information is gathered about a completed activity
and in order that evaluation and steps for improvement are derived.
Example: A supervisor who discovers that continuous overtime work for
factory workers lowers the quality of output. The feedback information
obtain leads to some

Components of Organizational
Control Systems
Organizational control systems consist of the following:
Strategic Plan
The operating budgets
Performance appraisals
Statistical reports
Policies and procedures

Control Systems
Strategic Plan
A strategic plan provides control mechanism for the organization. When
there are indications that activities do not facilitate the accomplishment of
strategic goal, these are either, set aside, modified or expanded.
The Operating Budget
An operating budget indicates the expenditures revenues, or profits
planned for some future period regarding operations.

Control Systems
Performance Appraisals
Performance appraisals performance appraisals measures employee
performance, as such it provides employee with a guide in how to do their
jobs better in the future.
Policies and procedures
Policies refer to “the framework within which the objectives must be
pursued” a procedure is “a plan that describes the exact series of actions to
be taken in a given situation”
Control Systems
Statistical Reports
Statistical reports pertain to those that contain data on various
developments within the firm. Among the information which may be found
in a statistical report pertains to the following:
 Labor efficiency rates  Accounts payable
 Quality control rejects  Sales reports
 Accounts receivable  Power consumption report

Strategic Control Systems
To be able to assure accomplishment of the strategic objectives of the company, strategic
control systems becomes necessary. These systems consist of the following:
Financial Analysis
 Evaluates finance transaction(budgets and projects) for performance and suitability.
Simple approach.
Balance Sheet (gross income, expense and profit).
Financial Ratio Analysis

Complex and quantitative approach.
One account is paired with another to constitute a ratio.
(Types of Financial Ratio Analysis)

Liquidity Ratio - ability to pay current debt obligations.
 Current Ratio - measures a company's ability to pay off its current liabilities with
current asset (liquid asset).

 Acid- test ratio - measures of a company's ability to meet its short-term obligations with
its most liquid assets.
◦


Efficiency Ratio - shows how effectively a certain assets or liabilities are being used in the
production of goods/ services .
 Inventory Turnover Ratio - used to quantify a company's effectiveness in collecting its
accounts receivable.

 Fixed Asset Turnover - measures of a company's ability to generate net sales from its
fixed-asset investments.
◦


Financial Leverage Ratio - measures the value of equity in a company by analyzing its
overall debt picture.
 Debt to Total Asset Ratio - measures a company's total debt to its total assets.

 Time Interests Earned Ratio - measures how many times a company can cover its
current interest payments with its available earnings.
◦


Profitability Ratio - measures of how much operating income a company is able to
generate.
 Profit Margin Ratio - measures of remaining from sales after all expenses have been
paid.

 Return on Assets Ratio - measure of how effective a company is deploying assets to
generate sales and profits.
◦

 Return on Equity Ratio - ability to earn a return on its equity investments.
◦

Identifying Control Problems
Recognizing the need for control is one thing, actually implementing it is
another. When operations become complex, the engineer manager must
consider useful steps in controlling. The following shows three approaches
as mentioned by Kreitner:
1. Executive Reality Check
2. Comprehensive Internal Audit
3. Symptoms of Inadequate Control

Executive Reality Check
It is intended to help executive-level candidates manage expectations by
knowing the reality of the current market or operation. This is an action to
be done by an engineer manager or executive to be exposed in certain
realities and conditions in the companies hence, the term “reality check”.
This is often done by letting the engineer manager perform the work of his
laborers.

Comprehensive Internal Audit
The primary purpose of a comprehensive audit is to ascertain the
economy, efficiency and effectiveness of an organization's operations and
use of resources. Comprehensive audits are also called "value for money"
audits and are designed to be wide ranging and thorough, integrating
financial auditing, corporate compliance, operational audit procedures and
management reviews.

Symptoms of Inadequate Control
If comprehensive internal audit cannot be availed of for some reasons,
the use of a checklist for symptoms of inadequate control may be used. This
gives the manager hints and clues on areas where efforts seems to be
lacking. The issues should be addressed accordingly.
It must be noted that behind every symptom is a problem waiting to be
solved. Unless this problem is clearly identified, no effective solution may
be derived.

General checklist of symptoms of inadequate control
An unexplained decline in revenues and profits.
A degradation of service (customer complaints).
Employee dissatisfaction (complaints, grievances, turnover).
Cash shortages caused by bloated inventories or delinquent account receivable.
Idle facilities or personnel.
Disorganized operations (Workflow bottlenecks, excessive paperwork).
Excessive costs.
Evidence of waste and efficiency (scrap, rework).

References
Daniel G. Bachrach, J. R. (n.d.). Chapter 9: Process and Control Systems. Retrieved from Slide
Player: https://slideplayer.com/slide/16067130/
Dorward, L. (n.d.). What Is a Comprehensive Audit? Retrieved from CHRON:
https://smallbusiness.chron.com/comprehensive-audit-17645.html
Guzman, N. D. (2019, March 18). WATCH: The Ozone Disco Tragedy: 25 Years and Still Burning
Our Minds. Retrieved from Esquire:
https://www.esquiremag.ph/culture/lifestyle/ozone-disco-tragedy-1996-a1729-20190318-lfrm
Medina, R. G. (1977). Engineering Management. Manila, Philippines: REX Bookstore Inc.
Tambuli, R. (n.d.). Chapter 9: Controlling. Retrieved from SCRIBD:
https://www.scribd.com/presentation/237934555/Chapter-9-Controlling

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Chapter 9:

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

Organizing - to create structures Leading – to inspire effort

Controlling – to ensure results

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

2. Measuring actual performance. performance

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

Financial Ratio Analysis

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

THANK YOU! **Nothing Follows**

CHAPTER 9: CONTROLLING BSME-3A GROUP 1

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