3.4 Most Common Methods and
Techniques for Controlling
What are the most common methods and techniques for controlling?
3.4.1 The Traditional Control Devices (the Budget)
A widely used device for managerial control is the
budget. Indeed, it has sometimes been assumed that budgeting is the device
for accomplishing control.
Budgeting is the formulation of plans for a given
future period in numerical terms. Thus budgets are statements of
anticipated results, in financial terms - as in revenue and
expense and capital budgets - or in no financial terms - as in
budgets of direct- labor hours, materials, physical sales volume
or units of production.
Through numerical statement of plans and breaking of these
plans into components consistent with the organization
structure, budgets force and correlate planning and allow
authority to be delegated without loss of control.
However, there are many types of budgets such as:
Revenue and expense budgets
Time, space, material, and product
Capital expenditure budgets
Balance sheet budgets
Zero- base budgeting
3.4.2 The Traditional no Budgetary Control Devices
There are, of course, many traditional control devices not
connected with budgets, although some may be related to, and
used with, budgetary controls. Among the most important of these
are: statistical data, special reports and analysis, analysis of
break- even points, the operational audit, and the personal
i) Statistical data:
Statistical analyses of innumerable aspects of a business
operation and the clear presentation of statistical data,
whether of a historical or forecast nature are, of course,
important to control. Some managers can readily interpret
tabular statistical data, but most managers prefer presentation
of the data on charts.
ii) Break- even point analysis:
An interesting control device is the break even chart. This
chart depicts the relationship of sales and expenses in such a
way as to show at what volume revenues exactly cover expenses.
Break- because it emphasizes the marginal concept.
iii) Operational audit:
Another effective tool of managerial
control is the internal audit or, as it is now coming to
be called, the operational audit. Operational auditing, in
its broadest sense, is the regular and independent appraisal, by
a staff of internal auditors, of the accounting, financial, and
other operations of a business.
iv) Personal observation:
In any preoccupation with the devices of managerial control,
one should never overlook the importance of control through
3.4.3 The Advanced and Quantitative Techniques and
a) Program Evaluation and Review Technique (PERT)
b) Control Through Return-on Investment (ROI)
c) Just-In-Time Inventory Control (JIT)
It is a technique for reducing inventories to a minimum by
arranging for production components to be delivered to the
production facility “just-in-time” to be used.
JIT works best in companies that manufacture relatively
standardized products for which there is consistent demand.
ratio is a relationship between two numbers that is calculated
by dividing one number into the other.
Ratio analysis is the process of generating information that
summarizes the financial position of an organization through the
calculation of ratios based on various financial measures that
appear on the organization’s balance sheet and income
Management by Objective and Appraisal by
In MBO, the manager assigns a specialized set of objectives and
action plans to workers and then rewards those workers on the
basis of how close they come to reaching their goals. This
control technique has been implemented in corporations intent on
using an employee-participative means to improve productivity.
Decision Tree Analysis
is a statistical and graphical multi phased decision making
technique that can be used in controlling.
Computer-Aided Design (CAD)
Computer-Aided Manufacturing (CAM)
Total Quality Management (TQM)
Refers to a quest in an organization, TQM expands the
traditional view of quality–looking only at the quality of the
final product or services – to looking at the quality of every
aspects of the process that produces the product or service.
TQM systems are intended to prevent poor quality from
occurring. Successful TQM programs are built through the
dedication and combined efforts of everyone in the organization.
points to be remembered
Control is the task of ensuring that the
activities are providing the desired results.
The control process involves:
Setting the target (criteria).
Measuring the actual performance.
Taking the corrective actions.
There are many prerequisites for developing any
controlling system, among them is that the important of:
Control requires plans, as plans become the
standards by which desired actions are measured.
The basic control processes are:
The establishment of standards.
The measurement of performance.
Comparing measured performance to stated
Taking corrective action.
There are many types of control, among them:
Con current control.
Pre control or feed-forward control refers to the
control that takes place before work is performed.
Concurrent control refers to the control that
takes place as work is being performed.
Feedback control refers to the control that
concentrates on the past organizational performance.
Control must be tailored to:
Plans and positions.
The individual managers and their
The needs for efficiency and effectiveness.
Control should be objective, flexible, and
There are many barriers to successful controlling:
Control activities can create an
undesirable overemphasis on short-term objectives.
Control activities can increase employees
frustration with their jobs and this in turn will decrease the
Control activities can encourage the
falsification of reports.
Control activities can be perceived as the
goals of the control process rather than the means by which
corrective action is taken.
The most common methods and techniques for
controlling. Among the traditional control devices the budget.
Among the most non budgetary control devices: the
statistical data, the break even point analysis, the operational
audit the personal observation.
The advanced and quantities techniques and devices
for control are:
PERT (program evaluation and review
Control through return on investment (ROI)
Just in time (JIT) system.
Management by objectives and appraisal by
Decision Tree analysis.
Computer aided design (CAD).
Computer aided manufacturing (CAM).
Total quality management (TQM).