Republic of the Philippines

BATANGAS STATE UNIVERSITY

CHEMICAL AND FOOD ENGINEERING DEPARTMENT

IE-530

Engineering Management

Bautista, Joel

Bernales, Nina Beatriz

Bersabe, Julius

Bobadilla,Krislee

Mendoza, Eunice Mae

CHE-5201
 A. SYSTEMS AND PROCESS OF CONTROLLING

CONTROLLING

Setting plan, establishing the structure and directing the people do not guarantee that every thing
in the organization is going on well. Control is making sure that something happens the way it
was planned to happen. As implied in this definition, planning and controlling are inseparable
functions. Controlling is also the task of ensuring that the activities are providing the desired
results.

IMPORTANCE OF CONTROLLING

o Plans rarely go smoothly. Most plans are executed by people and people vary in their abilities,
motivations and honesty.

• Plans become outdated and require revisions.

• For these reasons control is an important management function.

o Control means controlling every task in an organization – whether it is large, or delegated to

o Thus for every task delegated, there has to be a control system that ensures completion of
performances in line with the plans

PREREQUISITES OF CONTROL SYSTEM

CONTROL REQUIRES PLANNING:

All meaningful control techniques are planning techniques. It is worthless to design control plans
without taking in account how well the plans are made.

CONTROL REQUIRES ORGANIZATION STRUCTURE:

Purpose of control is to measure activities and take action to assure that plans are being
accomplished. Control of activities operates through people. Therefore a major prerequisite of
control is the existence of an organizational structure.

SYSTEM OF CONTROLLING

• Contrived Randomness works by unpredictable processes/combinations of people to deter

• Competition works by fostering rivalry among individuals

• Oversight works by monitoring and direction of individuals from a point of authority

• Mutuality works by exposing individuals to horizontal influence from other individuals

CONTROL PROCESS

A basic control process involves mainly these steps:

1. ESTABLISHMENT OF STANDARDS

Plans can be considered as the criteria or the standards against which we compare the actual
performance in order to figure out the differences.

Standards could be set on the basis of:

 Profitability standards: How much company would like to make as profit over a given period of
time.

 Market position standards: Standards indicate the share of total sales in the market.
  Productivity standards: How much various segments should produce.

 Employee attitude standards: Indicates what type of attitude the company managers should have
to strive.

 Social responsibility standards: Making contributions to the society.

 Short range goal: Standards that set a balance between the short range and long range goals

These are the standards an organization sets at the beginning of a control process.

2. MEASUREMENT OF PERFORMANCES AND COMPARING PERFORMANCES

Measurement of performance is an important procedure of the control process, the deviations can
be detected in advance by taking appropriate actions.

3. COMPARING MEASURED PERFORMANCES TO SET STANDARDS:

A standard is the level of activity established to serve as a model for evaluating organizational
performance. Performance evaluated can be for the organization as a whole or for some
individuals working within the organization. In simple terms, standards are the evaluations that
determine an organizations performance is sufficient or inadequate.

4. TAKING CORRECTIVE ACTION

After the actual performance has been measured and compared with the established standards, the
next step is to take corrective action if necessary. Corrective action is managerial activity aimed
at bringing organizational mistakes that hinder organizations performance. Before taking
corrective actions, managers should make sure that the standards are properly established and that
their measurements of performance are valid and reliable.

REQUIREMENTS FOR ADEQUATE CONTROL

• Control should be tailored to plans and positions.

• Control must be tailored o individual managers and their responsibilities.

• Control should point up exceptions as critical points.

• Control should be objective.

• Control should be flexible.

• Control should be economical.

• Control should lead to corrective actions.

TYPES OF CONTROL

• Pre Control takes place before the work is performed. It is also known as FEED-FORWARD
Control. Pre control focuses on eliminating predicted problems.

• Concurrent Control refers to the control that takes place as work is being performed.

• Feedback Control refers to the control that concentrates on the post organizational performance.

BARRIERS TO SUCCESSFUL CONTROLLING

Barriers to controlling include:

• Control activities can create undesirable overemphasis on short term production as opposed to
long term production.
 • Control activities can increase employee’s frustration.

• Control can encourage falsification of reports.

B. CONTROL TECHNIQUES AND INFORMATION TECHNOLOGY

TWO TECHNIQUES

 Traditional techniques
 Modern techniques

TRADITIONAL TECHNIQUES

 Personal observation
 Budgeting
 Break-even analysis
 Financial statement
 Statistical data & report
 Setting examples
 Standard costing
 Written instructions

1. PERSONAL OBSERVATION
 This is the most traditional method of control.
 It helps managers to collect first-hand information.
 It also creates a psychological pressure on the employees to perform well as they are aware that
they are being observed personally on their job.
 However it is very time consuming, & not suitable for all kinds of jobs.

2. BUDGETING
 A budget is a statement which reflects future incomes, expenditures & profits of the firm.
 Benefit of budgeting:

1. Standards of performance

2. Planning

3. Predicting the future

4. Financial planning

3. BREAK EVEN ANALYSIS

 It deals with the study of the relationship between costs, volume, & profit.
 It determines the probable profit and losses at different levels of activity.
 The sales volume at which there is no profit, no loss is known as breakeven point.
 It can be calculated as ,

Breakeven point=fixed cost/selling price per unit – variable cost per unit.

4. FINANCIAL STATEMENT

 Financial statements shows financial position of a firm over a period of time, generally one year.
 These are prepared along with last year statements, so that firm can compare its present
performance with last year’s performance & improve its future performance.
 It offers information on ,

1. Liquidity

2. Financial strength
 3. Profitability

Modern Techniques of Managerial Control

Modern techniques of controlling are those which are of recent origin & are comparatively new in
management literature. These techniques provide a refreshingly new thinking on the ways in which
various aspects of an organization can be controlled. These include:

 Return on investment

 Ratio analysis

 Responsibility accounting

 Management audit

 PERT & CPM

1. Return on Investment

Return on investment (ROI) can be defined as one of the important and useful techniques. It
provides the basics and guides for measuring whether or not invested capital has been used
effectively for generating a reasonable amount of return. ROI can be used to measure the overall
performance of an organization or of its individual departments or divisions. It can be calculated as
under-

Net income before or after tax may be used for making comparisons. Total investment includes both
working as well as fixed capital invested in the business.

2. Ratio Analysis

The most commonly used ratios used by organizations can be classified into the following
categories:

 Liquidity ratios

 Solvency ratios

 Profitability ratios

 Turnover ratios

3. Responsibility Accounting

Responsibility accounting can be defined as a system of accounting in which overall involvement of

 Cost center

 Revenue center

 Profit center

 Investment center
4. Management Audit

Management audit refers to a systematic appraisal of the overall performance of the management of
an organization. The purpose is to review the efficiency &n effectiveness of management & to
improve its performance in future periods.

5. PERT & CPM

PERT (programmed evaluation & review technique) & CPM (critical path method) are important
network techniques useful in planning & controlling. These techniques, therefore, help in
performing various functions of management like planning; scheduling & implementing time-bound
projects involving the performance of a variety of complex, diverse & interrelated activities.

Therefore, these techniques are so interrelated and deal with such factors as time scheduling &
resources allocation for these activities.

References:

• https://riskviews.wordpress.com/2011/03/28/systems-of-controlling/

• https://www.slideshare.net/rithikloveboy4u/the-system-and-process-of-controlling

• https://www.toppr.com/guides/business-studies/controlling/meaning-of-controlling/

• https://www.cliffsnotes.com/study-guides/principles-of-management/control-the-linking-
function/the-organizational-control-process

• https://www.slideshare.net/rakeshkumar9275/control-techniques-14552038?fbclid=IwAR3ysm3-
Y92AVc8mNA0dPOF2tz5QEnWynxmLim216qtGJhuam22RwIsE0Ao

• https://www.toppr.com/guides/business-studies/controlling/techniques-of-managerial-
control/