Control Process in Management

Topics: Inventory, Working capital, Ratio Pages: 8 (1353 words) Published: March 25, 2013

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4 main steps in control process in management

4 main steps in control process in management are:

Control as a management function involves the following steps:

1. Establishing standards:

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. Measuring performance

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.

The performance can be measured by the following steps:

(a) Strategic control points:

It is not possible to check everything that is being done. So it is necessary to pick strategic control points for measurement. Some of these points are:

(i) Income:

It is a significant control point and must be as much per unit of time as was expected. If the income is significantly off form the expectation then the reasons should be investigated and a corrective action taken.

(ii) Expenses:

Total and operational cost per unit must be computed and must be adhered to. Key expense data must be reviewed periodically.

(iii) Inventory:

Some minimum inventory of both the finished product as well as raw materials must be kept in stock as a buffer. Any change in inventory level would determine whether the production is to be increased or decreased.

(iv) Quality of the product:

Standards of established quality must be maintained especially in food processing, drug manufacturing, automobiles, etc. The process should be continuously observed for any deviations.

(v) Absenteeism:

Excessive absenteeism of personnel is a serious reflection on the environment and working conditions. Absenteeism in excess of chance expectations must be seriously investigated.

(b) Meclzanised measuring devices:

This involves a wide variant of technical instruments used for measurement of machine operations, product "quality for size and ingredients and production processes. These instruments may be mechanical, electronic or chemical in nature.

(c) Ratio analysis:

Ratio analysis is one of the most important management tools. It describes the relationship of one business variable to another.

The following are some of the important ratios:

i) Net sales to working capital:

The working capital must be utilised adequately. If the inventory turnover is rapid then the same working capital can be used again and again. Hence for perishable goods, this ratio is high. Any change in ratio will signal a deviation from the norm.

ii) Net sales to inventory:

The greater the turnover of inventory, generally, the higher the profit on investment.

iii) Current ratio:...
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