What is Controlling?

Importance of Steps in the Control

Controlling 01 02 Process

Components of
Types of Control 03 04 Organizational
Control Systems

Identifying
Strategic Control
05 06 Control
Systems
Problems
What is Controlling?

It is a process of
ascertaining whether
organizational objective
have been achieved; if not,
then why; and determining
what activities should then
be taken to achieve
objectives better in the
future.
 CONTROLLING

Henry Fayol, 1916 EFL Brench Harold Koontz

“Pointing out Checking current Measurement

mistakes that performance against and correction
may be rectified pre-determined of
and prevented standards contained performance
from recurring” in the plans
IMPORTANCE
OF
CONTROLLING

GOAL
 When controlling is properly implemented,
it will help the organization achieve its goal in
the most efficient and effective manner
possible.
 Efficient – capable of
producing desired results
without wasting materials,
time, or energy

Effective – producing a
result that is wanted
Deviations
Mistakes Unnecessary
Expenditures
Shortcomings

Increase cost of
producing goods
& services
 Proper control
measures minimize the ill
effects of such negative
occurrences
 Is a system that encompasses all aspects of
managing a company’s inventories; purchasing,
shipping, receiving, tracking, warehousing and
storage, turnover, and reordering.
 100
pieces/worker
PLANNING
CONTROLLING

ORGANIZING

LEADING
 PLANNING
P C CONTROLLING

ORGANIZING O L LEADING
STEPS IN THE CONTROL
PROCESS
 COMPARING
ESTABLISHING TAKE
ACTUAL
PERFORMANCE NECESSARY
MEASURING PERFORMANCE
OBJECTIVES ACTION BASED
PERFORMANCE TO
AND ON
OBJECTIVES
STANDARDS COMPARISONS
AND STANDARD
 ESTABLISHING
PERFORMANCE
OBJECTIVES AND
STANDARDS
SALES TARGETS
PRODUCTION TARGETS
 WORKER
ATTENDANCE
SAFETY RECORD
SUPPLIES USED
 COMPARING
ESTABLISHING TAKE
ACTUAL
PERFORMANCE NECESSARY
MEASURING PERFORMANCE
OBJECTIVES ACTION BASED
PERFORMANCE TO
AND ON
OBJECTIVES
STANDARDS COMPARISONS
AND STANDARD
 COMPARING
ESTABLISHING TAKE
ACTUAL
PERFORMANCE NECESSARY
MEASURING PERFORMANCE
OBJECTIVES ACTION BASED
PERFORMANCE TO
AND ON
OBJECTIVES
STANDARDS COMPARISONS
AND STANDARD
COMPARING ACTUAL
PERFORMANCE TO
OBJECTIVES AND
STANDARDS
 COMPARING
ESTABLISHING TAKE
ACTUAL
PERFORMANCE NECESSARY
MEASURING PERFORMANCE
OBJECTIVES ACTION BASED
PERFORMANCE TO
AND ON
OBJECTIVES
STANDARDS COMPARISONS
AND STANDARD
 1. HIRE ADDITIONAL
PERSONNEL

” 33
2. USED ANOTHER
EQUIPMENT

” 34
 3. REQUIRE
OVERTIME

” 35
 DO NOTHING

YES
MEASURE TAKE
ACTUAL CORRECTIVE
PERFORMANCE NO ACTION

ESTABLISH DOES ACTUAL

PERFORMANCE PERFORMANCE
OBJECTIVES AND MATCH THE
STANDARDS STANDARDS?
 Concurrent
Control

Types
of Feedback
Control Control

Feed-
forward
Control
 Pre- Feed-
Operations forward
Phase Control

Types Of
Control Actual Concurrent
and their Operations Control
Phase
Relation to
Operations

Post Feedback
Operations Control
Phase
 Feed-forward Control

When the management anticipates problems

and prevents their occurrence the type of control
measure undertaken is called feed forward control.
This control provides the assurance that the
required human and nonhuman resources are in
place before the operations begin.
 Pre- Feed-
Operations forward
Phase Control
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
 Concurrent Control

When operations are already ongoing and

activities, to detect variances are made, concurrent
control is said to be undertaken.
It is possible that deviations from standards will
happen in the production process. When such deviation
occur, adjustments are made to ensure compliance with
requirements. Information on the adjustments are also
necessary inputs in the pre-operation phase.
 Pre-
Operations
Phase

Actual Concurrent
Operations Control
Phase
 The manager of construction firm
constantly monitors the progress of the
company’s projects. When construction is
behind schedule, corrective measures like
the hiring of additional manpower are made.
The production manager of an
electronics manufacturing firm inspects
regularly the output consisting of various
electronics products coming out of the
production line.

4
4
Feedback Control

When information is gathered about

a completed activity, and in order that
evaluation and steps for improvement are
derived, feedback control is undertaken.
Feedback controls validates
objectives and standards. If
accomplishments consist only of a
percentage of standard requirements, the
standard may be too high or inappropriate.
 Pre-
Operations
Phase

Actual
Operations
Phase

Post Feedback
Operations Control
Phase
 The supervisor who discovers that
continuous overtime work for factory workers
lowers the quality of output. The feedback
information obtained leads to some adjustment in
the over time schedule.
 Concurrent Control
• Monitoring
processes
• Adjusting ongoing
activities

PRODUCTIVE
INPUTS PROCESSES and OUTPUTS
ACTIVITIES
COMPONENTS OF ORGANIZATIONAL
CONTROL SYSTEMS
STRATEGIC THE OPERATING STATISTICAL
PLANS BUDGET REPORTS

LONG RANGE PERFORMANCE POLICIES AND

FINANCIAL PLAN APPRAISALS PROCEDURES
 STRATEGIC PLANS
A Strategic plan
provides the basic control LONG RANGE FINANCIAL PLAN
mechanism for the
organization. A financial plan
Some activities recommends a direction for
are set aside, modified or financial activities.
expanded Engineering firm will
require longer term financial
plan.

THE OPERATING BUDGET

An operating budget PERFORMANCE
indicates the expenditures, APPRAISALS
revenues or profits planned for
some future period regarding Performance
operations. appraisals measures
employee performance.

Statistical
reports pertain to those
that contain data on various
developments within the
firm.
STATISTICAL REPORTS
1. Labor Efficiency Rates

2. Quality Control Rejects

3. Accounts Receivable

4. Accounts Payable

5. Sales Report

6. Accident Report

7. Power Consumption Report

 POLICIES AND
PROCEDURES
Policies refers to “the
framework within which the
objectives must be pursued.”
Procedures is “a plan that
describes the exact series of
actions to be taken in a given
situation.”
 STRATEGIC PLANS
A Strategic plan
provides the basic control LONG RANGE FINANCIAL PLAN
mechanism for the
organization. A financial plan
Some activities recommends a direction for
are set aside, modified or financial activities.
expanded Engineering firm will
require longer term financial
plan.

THE OPERATING BUDGET

An operating budget PERFORMANCE
indicates the expenditures, APPRAISALS
revenues or profits planned for
some future period regarding Performance
operations. appraisals measures
employee performance.

Statistical POLICIES AND

reports pertain to those PROCEDURES
that contain data on various
Policies refers to “the
developments within the
framework within which the
firm.
objectives must be pursued.”
STATISTICAL REPORTS Procedures is “a plan that
describes the exact series of
actions to be taken in a given
situation.”
STRATEGIC CONTROL SYSTEMS
STRATEGIC CONTROL SYSTEMS

FINANCIAL
ANALYSIS

FINANCIAL RATIO
ANALYSIS
 FINANCIAL ANALYSIS
Is the process of evaluating businesses, projects,
budgets and other finance-related entities to determine
their performance and suitability.
 BALANCE
SHEET

FINANCIAL STATEMENTS – are a structured

financial representation of the financial position
and financial performance of the entity.

INCOME
STATEMENT
B
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I
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 FINANCIAL RATIO ANALYSIS

Is a mathematical comparison of financial statement accounts or

categories.
 FINANCIAL RATIO ANALYSIS

LIQUIDITY 01

02 EFFICIENCY

FINANCIAL LEVERAGE 03

04 PROFITABILITY
 LIQUIDITY
1 These ratios assess
the ability of a company to
4 meet its obligations

CURRENT RATIO 01
3

2
ACID-TEST RATIO 02
 CURRENT RATIO
This shows the extent to
which current assets of the
company can cover its
current liabilities.
Current Ratio = Current assets
Current liabilities
ACID-TEST RATIO
This is a measure of the
firm’s ability to pay-off short-
term obligations with the use
of current assets and without
relying on the sale of
inventories.
Acid-test ratio =
Current assets – inventories
Current liabilities
 INVENTORY
01 TURNOVER RATIO
4

02 FIXED TURNOVER
1
RATIO

3
2 These ratios show
how effectively certain assets
2 or liabilities are being used in
the production of goods and
services

EFFICIENCY
 INVENTORY TURNOVER RATIO
This ratio measures the number of times an inventory
is turned over (or sold) each year
Cost of goods sold
Inventory turnover ratio=
Inventory

FIXED TURNOVER RATIO

This ratio is used to measure utilization of the
company’s investment in its fixed assets, such as its plant and
equipment
Fixed turnover ratio = Net sales
Net fixed assets
 4
DEBT TO TOTAL
ASSETS RATIO 01
1

TIMES INTEREST
02 3
EARNED RATIO

3 This is group of ratios

designed to assess the
balance of financing obtained
through debt and equity
sources FINANCIAL
LEVERAGE
 DEBT TO TOTAL ASSETS RATIO
This ratio shows how much of the firm’s assets are
financed by debt.
Debt to total assets ratio = Total Debt
Total Assets

TIMES INTEREST EARNED RATIO

This ratio measures the number of times that earnings
before interest and taxes cover of exceed the company’s interest
expense
Profit before tax + interest expense
Times interest earned ratio= Interest expense
 PROFITABILITY
4 These ratios measure
how much operating income or
net income a company is able to
generate in relation to its assets,
owner’s equity, and sales
4

1
PROFIT MARGIN RATIO 01

3
RETURN ON ASSETS 02
RATIO
2

RETURN ON EQUITY 03
RATIO
 PROFIT MARGIN RATIO

This ratio compares the net

profit to the level of sales

Profit margin ratio = Net Profit

Net Sales
 RETURN ON ASSETS RATIO

This ratio shows how much

income the company produces for
every peso invested in assets

Return on assets ratio = Net income

Assets
 RETURN ON EQUITY RATIO

This ratio measures the

returns on the owner’s investment

Return on equity ratio = Net income

Equity
Comprehensive
Internal Audit
 Top managers Independent
periodically work at appraisals of organizational
lower-level jobs to operations and systems are
become more aware of conducted to assess
operations. effectiveness and efficiency.
 A degradation of
service. Disorganized
operations

Employee
dissatisfaction. Excessive
costs.

Cash shortages caused

by bloated inventories Evidence of waste
or delinquent accounts and inefficiency
receivable.
 Top managers Independent It must be noted
periodically work at appraisals of organizational that behind every
lower-level jobs to operations and systems are symptom is a problem
become more aware of conducted to assess waiting to be solved.
operations. effectiveness and efficiency.
 GROUP 4
Andres, Lester
Bernal, Leusalyn
Datul, Vince
Dimabayao, Sheena
Mirador, Lyra Anne G.
Ponio, Celine Joy S.
Santos, Joshua Paul
Ulayan, Francisca Mae L.