1. 20
Ready Notes
The Controlling
Process
For in-class note taking, choose Handouts
or Notes Pages from the print options, with
three slides per page.
Slide content created by Joseph B. Mosca, Monmouth University.
Copyright © Houghton Mifflin Company. All rights reserved.

2. Why Control?
• Control is an issue every
manager faces.
• How does control help
the manager?
– Control is a process to
regulate organizational
activities to make them
consistent with
established:
• Plans
• Targets
• Standards
Copyright © Houghton Mifflin
20 - 2

3. What Is the Purpose of Control?
• It is one of the four
basic management
functions and has four
basic functions. What
are the functions?
– Adapts to change.
– Limits accumulation of
error.
– Helps coping with
complexity.
– Helps minimize costs.
Copyright © Houghton Mifflin
20 - 3

4. The Purpose of Control
Adapt to
environmental change
Limit the
accumulation of error
Control helps the organization
Cope with organizational
complexity
Copyright © Houghton Mifflin
Minimize costs
20 - 4

5. Name the Levels of Control?
• Operational control:
– Focuses on the processes used to transform
resources into products or services.
• Financial control:
– Concerned with financial resources.
• Structural control:
– How the elements of structure are serving the
intended purposes.
• Strategic control:
– How effective are the functional strategies helping
the organization meet its goals.
Copyright © Houghton Mifflin
20 - 5

6. Figure 20.2: Levels of Control
Copyright © Houghton Mifflin
20 - 6

7. Who Is Responsible for Control?
• Control rests with all
managers.
• Large corporations
have a controller.
• What does a
controller do?
– Helps line managers
with their control
activities.
Copyright © Houghton Mifflin
20 - 7

8. What Are the Steps in the Control Process?
• Establish standards.
• Measure performance.
• Compare performance against
standards.
• Determine need for corrective action.
• The sub-steps:
– Maintain status quo.
– Correct deviation.
– Change standards.
Copyright © Houghton Mifflin
20 - 8

9. Figure 20.3: Steps in the Control Process
Copyright © Houghton Mifflin
20 - 9

10. What Does Preliminary Control Monitor?
• It attempts to monitor quality and
quantity of:
– Financial resources.
– Material resources.
– Human resources.
– Information resources.
• Why?
– Before they become part of the system.
Copyright © Houghton Mifflin
20 - 10

11. What Is the Purpose of Screening Controls?
• They focus on how
inputs are being
transformed into
outputs.
• They also rely
heavily on feedback
processes during
the transformation
process.
Copyright © Houghton Mifflin
20 - 11

12. What Do Postaction Controls Focus On?
• Focus is on outputs from
the organizational system.
• What do they monitor?
– They monitor the output
results of the organization
after the transformation
process is complete.
– (see Figure 20.4 illustration)
Copyright © Houghton Mifflin
20 - 12

13. Figure 20.4: Forms of Operational Control
Copyright © Houghton Mifflin
20 - 13

14. What Are the Reasons for Financial Controls?
• They control the financial resources as
they flow into the organization.
• Then they are held by the organization.
• Then they flow out of the organization.
• Businesses must manage their finances
so that revenues are sufficient to cover
expenses and still return a profit.
Copyright © Houghton Mifflin
20 - 14

15. What Is a Budget?
• It is a plan expressed in numerical
terms.
• What is the time frame for a budget?
– Usually a year, but sometimes broken
down into quarters and months.
• Budgets are quantitative in nature and
provide yardsticks for measuring
performance and facilitating
comparisons.
Copyright © Houghton Mifflin
20 - 15

16. What Are the Types of Budgets?
• Types of budget:
– Financial
– Operating
– Non-monetary
Copyright © Houghton Mifflin
• What the budget
shows:
– Sources and use of
cash.
– Operations in
financial terms.
– Operations in nonfinancial terms.
20 - 16

17. Copyright © Houghton Mifflin
20 - 17

18. Developing Budgets
Operating
Unit
Budget
Request
Division
Budget
Request
Copyright © Houghton Mifflin
Organizational
Budget Prepared
by Budget
Committee
Approved by
Budget
Committee
20 - 18

19. Figure 20.5: Developing Budgets in
Organizations
Copyright © Houghton Mifflin
20 - 19

20. Other Tools for Financial Control
Financial Statement:
A profile of
some aspect of an
organization’s financial
circumstances.
Income Statement: A
summary of financial
performance over a period of
time, usually one year.
Balance Sheet: List of assets
and liabilities of an
organization at a specific
point in time, usually the last
day of the fiscal year.
Ratio Analysis: The
calculation of one or more
financial ratios to assess
some aspect of the
organization’s financial
health.
Audit: An independent appraisal of an organization’s
accounting, financial, and operational system.
Copyright © Houghton Mifflin
20 - 20

21. What Is Bureaucratic Control?
• A form of organizational
control characterized by
formal and mechanistic
structural
arrangements.
• What is clan control?
– An approach to
organizational control
characterized by informal
and organic structural
arrangements.
Copyright © Houghton Mifflin
20 - 21

22. Figure 20.6: Organizational Control
Copyright © Houghton Mifflin
20 - 22

23. What Is Meant by Strategic Control
• Control aimed at
ensuring that the
organization is
maintaining an
effective alignment
with its environment
and moving toward
achieving its
strategic goals.
Copyright © Houghton Mifflin
20 - 23

24. Characteristics of Effective Control
• Integration with
planning
• Flexibility
• Accuracy
• Timeliness
• Objectivity
Copyright © Houghton Mifflin
20 - 24

25. What Influences Resistance to Control?
• Over-control
• Inappropriate focus
• Rewards for
inefficiency
• Too much
accountability
Copyright © Houghton Mifflin
20 - 25

26. How Can Resistance to Control Be
Overcome?
• When employees are
involved with planning
and implementing the
control system, they are
less likely to resist.
• Verification procedures
need to be developed to
provide checks and
balances in order for
managers to verify the
accuracy of
performance indicators.
Copyright © Houghton Mifflin
20 - 26