CONTROLLING

GROUP 6

1. MARTINA CARISSA DEWI (1506205018)

2. I PUTU GISNA DA SILVA KUSUMA (1506205069)
3. CARISSA LORENS M.R (15062050152)
4. MADE WAHYU DHARMAWAN (1506205017)
5. I GUSTI AYU TARA LAKSEMIYASA DITHA (1506205009)
 Preface

First at all, give thanks for Gods love and grace for us.

Thanks to God for helping us and give us chance to finish this assighment timely. And
we would like to say thank you to Maam Dewi as the lecturer that always teaches us and give
much knowledge about management so well.

This assignment is the one of English task that composed of Controlling (2) I realized
this assignment is not perfect. But we hope it can be useful for us. Critics and suggestion is
needed here to make this assignment be better.

Thank you.
Steps in Organizational Control
The control process involves carefully collecting information about a system, process, person,
or group of people in order to make necessary decisions about each. Managers set up control
systems that consist of four key steps:

1. Establish standards of performance, goals, or targets against which performance is to be

evaluated.

Within an organization's overall strategic plan, managers define goals for organizational
departments in specific, operational terms that include standards of performance to compare with
organizational activities. Standards are criteria against which results are measured. They are
norms to achieve the goals. Standards are usually measured in terms of output. They can also be
measured in non-monetary terms like loyalty, customer attraction, goodwill etc. Some of the
standards are as :

a. Time standards : The goal will be set on the basis of time lapse in performing a task.
b. Cost standards : These indicate the financial expenditures involved per unit, e.g. material
cost per unit, cost per person, etc.
c. Income standards : These relate to financial rewards received due to a particular activity like
sales volume per month, year etc.
d. Market share : This relates to the share of the company's product in the market.
e. Productivity : Productivity can be measured on the basis of units produced per man
hour etc.
f. Profitability : These goals will be set with the consideration of cost per unit, market
share, etc.

2. Measure actual performance.

Most organizations prepare formal reports of performance measurements that managers

review regularly. Measurement involves comparison between what is accomplished and what
was intended to be accomplished. The measurement of actual performance must be in the units
similar to those of predetermined criterion. The unit or the yardstick thus chosen be clear, well-
defined and easily identified, and should be uniform and homogenous throughout the
measurement process.These measurements should be related to the standards set in the first step
of the control process. For example, if sales growth is a target, the organization should have a
means of gathering and reporting sales data.
In practice managers can measure or evaluate two things :
a. The actual outputs that result from the behavior of their members
All mangers develop a system of output control for their organizations. First,
they choose the goals or output performance standards or targets that they think
will best measure efficiency, quality, innovation, and responsiveness to customers.
Then, the measure to see whether the performance goals and standards are being
achieved at the corporate, divisional, functional and individual employee levels of
 the organization. The three main mechanisms that managers use to assess output or
performance are financial measures, organizational goals, and operating budgets.

b. The behavior themselves

Organizational structure by itself does not provide any mechanism that motivates
managers and non managerial employees to behave in ways that make the
structure work or even improve the way it works hence needed for control. Put another
way, managers can develop an organizational structure that has the right
grouping of divisions and functions, and an effective chain of command, but it will
work as designed only if managers also establish control systems that motivate and
shape employee behavior in ways that match this structure. Output control is one
method of motivating employees; behavior control is another method. So, the three
mechanisms of behavior control that managers can use to keep subordinates on track
and make organizational structure work as they are designed to work are: direct
supervision, management by objectives, and rules and standard operating procedures

3. Compare actual performance against chosen standards of performance.

This step compares actual activities to performance standards. When managers read computer
reports or walk through their plants, they identify whether actual performance meets, exceeds, or
falls short of standards. Typically, performance reports simplify such comparison by placing the
performance standards for the reporting period alongside the actual performance for the same
period and by computing the variancethat is, the difference between each actual amount and
the associated standard.

4. Evaluate the result and initiate corrective action if the standards is not being achieved.

When performance deviates from standards, managers must determine what changes, if any,
are necessary and how to apply them. In the productivity and qualitycentered environment,
workers and managers are often empowered to evaluate their own work. After the evaluator
determines the cause or causes of deviation, he or she can take the fourth stepcorrective action.
The most effective course may be prescribed by policies or may be best left up to employees'
judgment and initiative.
These steps must be repeated periodically until the organizational goal is achieved. These 4
steps in controlling process are shown in the picture below :
Effective Organizational Control Systems

Controls at every level focus on inputs, processes and outputs. It is very important to

have effective controls at each of these three stages. Effective control systems tend to have

certain common characteristics. The importance of these characteristics varies with the situation,
but in general effective control systems have following characteristics :

1. Accuracy:
Effective controls generate accurate data and information. Accurate information is essential for

effective managerial decisions. Inaccurate controls would divert management efforts and

energies on problems that do not exist or have a low priority and would fail to alert managers to
serious problems that do require attention.

2. Timeliness:
There are many problems that require immediate attention. If information about such problems

does not reach management in a timely manner, then such information may become useless and

damage may occur. Accordingly controls must ensure that information reaches the decision
makers when they need it so that a meaningful response can follow.

3. Flexibility:
The business and economic environment is highly dynamic in nature. Technological changes

occur very fast. A rigid control system would not be suitable for a changing environment. These
changes highlight the need for flexibility in planning as well as in control.

Strategic planning must allow for adjustments for unanticipated threats and opportunities.

Similarly, managers must make modifications in controlling methods, techniques and systems as

they become necessary. An effective control system is one that can be updated quickly as the
need arises.
4. Acceptability:
Controls should be such that all people who are affected by it are able to understand them fully

and accept them. A control system that is difficult to understand can cause unnecessary mistakes
and frustration and may be resented by workers.

Accordingly, employees must agree that such controls are necessary and appropriate and will not

have any negative effects on their efforts to achieve their personal as well as organizational
goals.

5. Integration:
When the controls are consistent with corporate values and culture, they work in harmony with

organizational policies and hence are easier to enforce. These controls become an integrated part
of the organizational environment and thus become effective.

6. Economic feasibility:
The cost of a control system must be balanced against its benefits. The system must be

economically feasible and reasonable to operate. For example, a high security system to

safeguard nuclear secrets may be justified but the same system to safeguard office supplies in a
store would not be economically justified. Accordingly the benefits received must outweigh the
cost of implementing a control system.

7. Strategic placement:
Effective controls should be placed and emphasized at such critical and strategic control points
where failures cannot be tolerated and where time and money costs of failures are greatest.

The objective is to apply controls to the essential aspect of a business where a deviation from the

expected standards will do the greatest harm. These control areas include production, sales,
finance and customer service.
8. Corrective action:
An effective control system not only checks for and identifies deviation but also is programmed

to suggest solutions to correct such a deviation. For example, a computer keeping a record of

inventories can be programmed to establish if-then guidelines. For example, if inventory of a

particular item drops below five percent of maximum inventory at hand, then the computer will
signal for replenishment for such items.

9. Emphasis on exception:
A good system of control should work on the exception principle, so that only important

deviations are brought to the attention of management, In other words, management does not

have to bother with activities that are running smoothly. This will ensure that managerial

attention is directed towards error and not towards conformity. This would eliminate unnecessary
and uneconomic supervision, marginally beneficial reporting and a waste of managerial time.
Tools for measuring Organizational Performance

1) Feedforward/Concurrent/Feedback Controls
Managers can implement controls before an activity begins, during the time the activity is going
on, and after the activity has been completed. The first type is called feedforward control; tge
second, concurrent control; and the lat, feedback control.

i) FEEDFORWARD CONTROL
Control that takes place before a work activity is done. The key to feedforward control is taking
managerial action beforo a problem occurs. That way, prob;em can be prevented rather than
having to correct them after any damage ( oiir-quality products, lost customers, etc)

ii) CONCURRENT CONTROL

Control tahr takes place while a work activiry s in progress. The best-known form of concurrent
control is direct supervision. Another term for it is management by walking around, which is
when a manager is in the work area omteracting directly with employees.

iii) FEEDBACK CONTROL

The most popular type of contro; relies on feedback. In feedback control, the control takes place
after the activity is done. Feedback controls have two advantages. First, feedback gives
managers meaningful information on how effective their planning efforts were. Second,
feedback can enhance motivation. People want to know how well theyre doing and feedback
provides that information.

2) Financial Controls
Every business wants to earn a profit. To achive this goal, managers need financial control.
For instance, they mihr analyze quarterly income statement for excessive expenses.they
might also calculate financial ratios to ensure that sufficient cash is availableto pay on going
expenses, that debt levels havent become too high, or that asssets aare used
productively.Financial controls that managers can use include financial ratios (liquidity,
leverage, activity, and profitability) and budgets.
3) Information Controls
One information control managers can use an MIS, which provides managers with needed
information regular basis. Other include comprehensive and secure controls such as data
encryption, system firewalls, data back-ups, and so forth that protect the organizations
information.

4) Balanced Scorecard
the balance scorecard approach is a way to evaluate organizational performance from more
than just the financial perspective. A balanced scorecard tupically lokks at fpur areas that
contribute to a componys performance: financial, customer, internal processes, and
people/innovation/growth asstes. According to this approach, managers should develop goals
in each of the four areas and then measure whether the goals are being met.

5) Benchmarking of Best Practices

Managers in such diverse industries as health care, education, and financial services are
discovering what manufacturers have long recognized- the benefits of benchmarking, which
is the search for the practices among competitors or noncompetitors that lead to their superior
performance. Benchmarking should identify various benchmarks, the standards of excellence
against which to measure and compare.
Controlling for Organizational and Employee Performance
To make good decisions, managers in this industry want and need type of information so they
can manage organizational and employee performance. Managers in all tyoes of businesses
are responsible for managing organizational and employee performance.

1) Measure of Organizational Performance

All managers must know which measures will give them the information they neef about
organizational performance. Commonly used ones include organizational productivity,
organizational effwctiveness, and industry rankings.

1. ORGANIZATIONAL PRODUCTIVITY
Productivity is the amount of goods or services produced divided by the inputs
needed to generate that output. Organizations and individual work units wanr to be
productive. They want to produce the most goods and services usin the least amount
of inputs. Outout is measured by the sales revenue an organization receives when
goods are sold. Input is measured by the costs of acquiring and transforming
resources into outputs.

2. ORGANIZATIONAL EFFECTIVENESS
Organizational effectiveness is a measure of how appropriate organizational goals are
and how well those goals are met. Thats the bottom line for managers, and its what
guides managerial decisions indesigning strategies and work activities and in
coordinating the work of employees.

3. INDUSTRY AND COMPANY RANKINGS

Rankings are a popular way for managers to measure their organizations
performance. Rankings are determined by specific performance measures, which are
different for each list.
 2) Controlling for Employee Performance
Since managers manage employees, they also have to be concerned about controlling for
employee performance; making sure employees work effoerts are of the quantity and quality
needed to accomplish organizational goals.

a) DELIVERING EFFECTIVE PERFORMANCE FEEDBACK

Managers need to provide their employees with feedback so that the employees know
where they stand in terms of their work. When giving performance feedback, both parties
need to feel heard, understood, and respected. And if done that way, positive outcomes
can result.

b) USING DISCIPLINARY
Its important for a managers to know what the organizations policies are on discipline.
Disciplinary actions are never easy or pleasant; however, discipline can be need to both
control and correct employee performance, and managers must know how to discipline.