UNIT V.pptx Principles of Management Anna Univ

Unit 5

1. UNIT V CONTROLLING

2. A process of monitoring performance and taking action to ensure desired results. It sees to it that the right things happen, in the right ways, and at the right time. Knootz and O'Donnel : - “The measurement and correction of the performance of activities of subordinates in order to make sure that enterprise objectives and plan devised to attain them are being accomplished."

3. Characteristics of controlling End Function Continuous process Dynamic process Action Oriented Forward looking Exercised at all levels Management Function

4. Process of Controlling

5. Establishing Control Standards Measurable or tangible Those standards which can be measured and expressed quantitatively are called as measurable standards. They can be in form of cost, output, expenditure, time, profit, etc. Non-measurable or intangible There are standards which cannot be measured quantitatively. For example- performance of a manager, deviation of workers, their attitudes towards a concern . These are called as intangible standards.

6. Measurement of Performance Measurement of tangible performance is easy as it can be expressed in units, cost, money terms, etc. Intangible performance can be measured only by- Attitude of the workers, Their morale to work, The development in the attitudes regarding the physical environment, and Their communication with the superiors.

7. Comparing Actual with Standard Deviation can be defined as the gap between actual performance and the planned targets. The manager has to find out two things here- extent of deviation and cause of deviation. Extent of deviation means that the manager has to find out whether the deviation is positive or negative or whether the actual performance is in conformity with the planned performance.

8. Correction of Deviation Once the causes and extent of deviations are known, the manager has to detect those errors and take remedial measures for it. There are two alternatives here- Taking corrective measures for deviations which have occurred; and After taking the corrective measures, if the actual performance is not in conformity with plans, the manager can revise the targets .

9. 9 TYPES OF CONTROL

10. 10 WHAT IS BUDGETARY CONTROL ? Budgetary control is the use of the comprehensive system of budgeting to aid management in carrying out its functions like planning, coordination and control. This system involves: Division of organization on functional basis into different sections known as a budget centre . Preparation of separate budgets for each “budget centre ”. Consolidation of all functional budgets to present overall organizational objectives during the forthcoming budget period. Comparison of actual level of performance against budgets. Reporting the variances with proper analysis to provide basis for future course of action.

11. 11 CLASSIFICATION OF BUDGETS ACCORDING TO ACCORDING TO ACCORDING TO TIME FUNCTION FLEXIBILITY Long term budget 1. Sales budget 1. Fixed budget Short term budget 2. Production budget 2. Flexible budget 3. Cost of Production budget 4. Purchase budget 5. Personnel budget 6. R & D budget 7. Capital Expenditure budget 8. Cash budget 9. Master budget

12. Purchase Budget

13. Production Budget

14. Direct Labour Cost Budget

15. 17 1. SALES BUDGET: Sales budget is the most important budget based on which all the other budgets are built up. This budget is a forecast of quantities and values of sales to be achieved in a budget period. 2. PRODUCTION BUDGET: Production budget involves planning the level of production which in turn involves the answer to the following questions: What is to be produced? When is it to be produced? How is it to be produced? Where is it to be produced?

16. 18 3. COST OF PRODUCTION BUDGET: This budget is an estimate of cost of output planned for a budget period and may be classified into – Material Cost Budget Labour Cost Budget Overhead Cost Budget 4. PURCHASE BUDGET: This budget provides information about the materials to be acquired from the market during the budget period.

17. 19 CAPITAL EXPENDITURE BUDGET: T his is an important budget providing for acquisition of assets necessitated by the following factors: a. Replacement of existing assets. b. Purchase of additional assets to meet increased production c. Installation of improved type of machinery to reduce costs. CASH BUDGET: This budget gives an estimate of the anticipated receipts and payments of cash during the budget period. Cash budget makes the provision for minimum cash balance to be maintained at all times.

18. 20 FLEXIBLE BUDGET: CIMA defines this budget as one “ which, by recognising the difference in behaviour between fixed and variable costs in relation to fluctuations in output, turnover or other variable factors such as number of employees, is designed to change appropriately with such fluctuations”. PERFORMANCE BUDGETING: These days budgets are established in such a way so that each item of expenditure is related to specific responsibility centre and is closely linked with the performance of that standard.

19. 21 ZERO BASE BUDGETING: The zero base budgeting is not based on the incremental approach and previous figures are not adopted as the base. Zero is taken as the base and a budget is developed on the basis of likely activities for the future period. A unique feature of ZBB is that it tries to help management answer the question, “Suppose we are to start our business from scratch, on what activities would we spent out money and to what activities would we give the highest priority?”

20. NON-BUDGETARY CONTROL TECHNIQUES Statistical data Break- even point analysis Operational audit GANTT CHART

21. Break- even point analysis

22. GANTT CHART

23. Use of computers and IT in Management control

24. PRODUCTIVITY Productivity refers to the ratio between the output from production processes to its input. Productivity may be conceived of as a measure of the technical or engineering efficiency of production. As such quantitative measures of input, and sometimes output, are emphasized.

25. Types Physical Productivity Functional Productivity Economic Productivity

26. PURCHASE CONTROL Purchase control is an element of material control. Material procurement is known as the purchase function. The functional responsibility of purchasing is that of the purchase manager or the purchaser. Purchasing is an important function of materials management because in purchase of materials, a substantial portion of the company's finance is committed which affects cash flow position of the company.

27. Advantages Continuous availability of materials Purchasing of right quantity Purchasing of right quality Economy in purchasing

28. MAINTENANCE CONTROL Maintenance department has to excercise effective cost control, to carry out the maintenance functions in a pre-specified budget

29. TYPES OF MAINTENANCE Predictive Maintenance Routine Maintenance Breakdown Maintenance Preventive Maintenance Planned Maintenance Running-in Maintenance Shut down Maintenance

30. Preventive Maintenance It is an activity which prevents breakdowns, cuts operating costs, and improve output/quality of the product. Corrective Maintenance Also known as Breakdown maintenance, it implies that repairs are made after the equipment is failed and can not perform its normal function anymore.

31. Predictive Maintenance It involves the identification of future problems before they occur. Vital Attributes inspection. Use of sensitive instruments. Why Predictive? The cost of Preventive and Breakdown can be reduced by using predictive maintenance.

32. Corrective Maintenance Also known as Breakdown maintenance, it implies that repairs are made after the equipment is failed and can not perform its normal function anymore.

33. Planned Maintenance It is also known as scheduled maintenance or productive maintenance. Routine Maintenance It includes activities such as periodic inspection, cleaning, lubrication, and repair of production equipments after their service life.

34. Quality Control Quality control is a process that is used to ensure a certain level of quality in a product or service. It might include whatever actions a business deems necessary to provide for the control and verification of certain characteristics of a product or service.

35. PLANNING OPERATIONS An operational planning is a subset of strategic work plan. It describes short-term ways of achieving milestones and explains how, or what portion of, a strategic plan will be put into operation during a given operational period, in the case of commercial application, a fiscal year or another given budgetary term.

36. An operational plan draws directly from agency and program strategic plans to describe agency and program missions and goals, program objectives, and program activities. Like a strategic plan, an operational plan addresses four questions: • Where are we now? • Where do we want to be? • How do we get there? • How do we measure our progress?