January 1, 2015

The System and Process of Controlling - Review Notes

Control process starts with plans or standards.

So establishment of plans or standards is the starting point.
Then performance needs to be measured.
For taking care of the deviations which are going to effect the plans if not attended to, planning and managerial actions are to be taken.

Ten Requirements of Adequate Controls - Measurement and Actions

1. Controls must reflect the nature and needs of the activity to be controlled.
2. Controls should report deviations promptly.
3. Controls should be forward looking.
4. Controls should point up exceptions at critical points.
5. Controls should be objective.
6. Controls should be flexible
7. Controls should reflect organizational pattern.
8.Controls should be economical
9. Controls should be understandable
10. Controls should indicate corrective action.

Basic Control Process

Establishment of Standards for Output and Standard Operating Practices and Other Plans
Observation and Measurement of Performance
Correction of Deviations
Control as a Cybernetic System - Norbert Wiener discovered that many systems in nature that achieve targets use some of their energy to measure and compare performance with a standard. They have feedback component. Social systems designed by men also need feedback component to achieve as per the plan.

Forward Looking Controls

Now more popular as risk management, Hazard analysis etc.

Critical Control Points

Types of Critical Standards

1. Physical
2. Cost
3. Capital
4. Revenue
5. Program
6. Intangible

Budget - An Important Control Device

Concept of Budgeting
Purpose of Budgeting
Types of Budget as parts of Master Budget
     Revenue and expense budgets
     Time, space, material and product budgets
     Capital expenditure budget
     Cash budgets
     Balance sheet budgets
     Budget summaries
Variable Budgets

Dangers in Budgeting and Budgetary Control
Alternative and Supplementary Budgets
Making Budgetary Control Work

Traditional Nonbudgetary Controls

Statistical Data
Special Reports and Analysis
Break-even Point Analysis
Internal Audit
Personal Observation


Emch, A.F., "Control means action," Harvard Business Review, vol, 32, no. 4, pp. 92-98, July 1954.

Updated  1 Jan 2015, 11 Dec 2011.

MBA Core Management Knowledge - One Year Revision Schedule

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