assignment 216

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JOHN R. SCHERMERHORN, JR. MANAGEMENT 12th Edition

Chapter 9

Fundamentals of Control

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Planning Ahead — Chapter 9 Study Questions

Why and how do managers exercise control?

What are the steps in the control process?

What are the common control tools and techniques?

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Chapter 9 Learning Dashboard

Managerial Control

Importance of controlling

Types of controls

Internal and external control

The Control Process

Establish objectives and standards

Measure actual performance

Compare results with objectives

Take corrective action

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Chapter 9 Learning Dashboard

Control Tools and Techniques

Project management and control

Inventory control

Breakeven analysis

Financial controls

Balanced scorecards

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Takeaway 1: Managerial Control

Controlling

The process of measuring performance and taking action to ensure desired results

Has a positive and necessary role in the management process

Ensures that the right things happen, in the right way, at the right time

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Figure 9.1 The role of controlling in the management process

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Takeaway 1: Managerial Control

Feedforward controls
Employed before a work activity begins
Ensures that:
Objectives are clear
Proper directions are established
Right resources are available
Goal is to solve problems before they occur

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Takeaway 1: Managerial Control

Concurrent controls (Parallel)
Focus on what happens during work process
Monitor ongoing operations to make sure they are being done according to plan
Goal is to solve problems as they occur

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Takeaway 1: Managerial Control

Feedback controls
Take place after work is completed
Focus on quality of end results
Goal is to solve problems after they occur and prevent future ones

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Figure 9.3 Four steps in the control process

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Takeaway 2: The Control Process

Step 1 — establishing objectives and standards

Output standards

Measure performance results in terms of quantity, quality, cost, or time

Input standards

Measure effort in terms of amount of work expended in task performance

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Takeaway 2: The Control Process

Step 2 — measuring actual performance

Goal is accurate measurement of actual performance results and/or performance efforts

Must identify significant differences between actual results and original plan

Effective control requires measurement

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Takeaway 2: The Control Process

Step 3 — comparing results with objectives and standards

Need for action = Desired Performance –

Actual Performance

Comparison methods:

Historical comparison
Relative comparison
Engineering comparison

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Takeaway 2: The Control Process

Step 4 — taking corrective action

Taking action when a discrepancy exists between desired and actual performance

Management by exception

Giving attention to situations showing the greatest need for action
Types of exceptions
Problem situation
Opportunity situation

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Takeaway 3: Control Tools and Techniques

Project Management

Overall planning, supervision, and control of projects

Projects – unique one-time events that occur within a defined time period
Gantt chart – graphic display of scheduled tasks required to complete a project
CPM/PERT – combination of the critical path method and program evaluation and review technique

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Takeaway 3: Gantt Chart

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Takeaway 3: CPM/PERT Chart

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Takeaway 3: Control Tools and Techniques

Inventory control

Ensures that inventory is only big enough to meet immediate needs

Economic order quantity

Places new orders when inventory levels fall to predetermined points

Just-in-time scheduling

Routes materials to workstations just in time for use

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Takeaway 3: Control Tools and Techniques

Breakeven analysis

Breakeven point

Occurs where revenues just equal costs

Breakeven analysis

Performs what-if calculations under different revenue and cost conditions

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Figure 9.4 Use of breakeven analysis to make informed “what-if” decisions

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Figure 9.5 Basic foundations of a balance sheet and income statement

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Takeaway 3: Control Tools and Techniques

Basic Financial Ratios

Liquidity

The ability to generate cash to pay bills

Leverage

The ability to earn more in returns than the cost of debt

Asset management

The ability to use resources efficiently and operate at minimum cost

Profitability

The ability to earn revenues greater than costs