Importance of Control in Business Organizations. free essay sample

Define control and discuss the control process and the importance of control in business organizations. * Define control Management  process  in which the (1) actual  performance is compared with planned performance, (2) difference between the two is measured, (3)  causes  contributing to the difference are identified, and (4)  corrective action  is taken to eliminate or minimize the difference Control Process The  control  process  is a continuous flow in Taj between measuring, comparing and action. Naturally Taj follows the four  steps in the  control  process: establishing performance standards, measuring actual performance, comparing measured performance against established standards, and taking corrective action. Step 1:  Establish Performance Standards. Tajs  Standards are created when objectives are set during the planning process. Its  standard  is a guideline established as the basis for measurement. It is a precise, explicit statement of expected results from a product, service, machine, individual, or organizational unit. It is usually expressed numerically and is set for quality, quantity, and time. We will write a custom essay sample on Importance of Control in Business Organizations. or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Tolerance  is permissible deviation from the standard.  ·Ã‚  Time controls  relate to deadlines and time constraints. Material controls  relate to inventory and material-yield controls. Equipment controls  are built into the machinery, imposed on the operator to protect the equipment or the  process. Cost controls  help ensure cost standards are met. Employee performance controls focus on actions and behaviors of individuals and groups of employees. Examples include absences, tardiness, accidents, quality and quantity of work. Budgets control  cost or expense related standards. They identify quantity of materials used and units to be produced.  ·Ã‚  Financial controls  facilitate achieving the organizations profit motive. One method of financial controls is budgets. Budgets allocate resources to important activities and provide supervisors with quantitative standards against which to compare resource consumption. They become  control  tools by pointing out deviations between the standard and actual consumption.  ·Ã‚  Operations  control  methods  assess how efficiently and effectively an organizations transformation processes create goods and services. Methods of transformation controls includeTotal Quality Management  (TQM) statistical  process  control  and the inventory managementcontrol. Statistical  process  control  is the use of statistical methods and procedures to determine whether production operations are being performed correctly, to detect any deviations, and to find and eliminate their causes. A  control  displays the results of measurements over time and provides a visual means of determining whether a specific  process  is staying within predefined limits. As long as the  process  variables fall within the acceptable range, the system is in  control. Measurements outside the limits are unacceptable or out of  control. Improvements in quality eliminate common causes of variation by adjusting the system or redesigning the system. Inventory is a large cost for Taj like other manufacturing firms. The appropriate amount to order and how often to order impact the firms bottom line. The economic order quantity model (EOQ) is a mathematical model for deriving the optimal purchase quantity. The EOQ model seeks to minimize total carrying and ordering costs by balancing  purchase costs, ordering costs, carrying costs  andstock out costs. In order to compute the economic order quantity, the supervisor needs the following information: forecasted demand during a period cost of placing the order, that value of the purchase price, and the carrying cost for maintaining the total inventory.  · The just-in-time (JIT) system is the delivery of finished goods just in time to be sold, subassemblies just in time to be assembled into finished goods, parts just in time to go into subassemblies, and purchased materials just in time to be transformed into parts. Communication, coordination, and cooperation are required from supervisors and employees to deliver the smallest possible quantities at the latest possible date at all stages of the transformation  process  in order to minimize inventory costs. Step 2:  Measure Actual Performance. Supervisors collect data to measure actual performance to determine variation from standard. Written data might include time cards, production tallies, inspection reports, and sales tickets. Personal observation, statistical reports, oral reports and written reports can be used to measure performance. Management by walking around, or observation of employees working, provides unfiltered information, extensive coverage, and the ability to read between the lines. While providing insight, this method might be misinterpreted by employees as mistrust. Oral reports allow for fast and extensive feedback. In Taj computers give supervisors direct access to real time, unaltered data, and information. On line systems enable supervisors to identify problems as they occur. Database programs allow supervisors to query, spend less time gathering facts, and be less dependent on other people. Supervisors have access to information at their fingertips. Employees can supply progress reports through the use of networks and electronic mail. Statistical reports are easy to visualize and effective at demonstrating relationships. Written reports provide comprehensive feedback that can be easily filed and referenced. Computers are important tools for measuring performance. In fact, many operating processes depend on automatic or computer-driven  control  systems. Impersonal measurements can count, time, and record employee performance. Step 3:  Compare Measured Performance against Established Standards. Comparing results with standards determines variation. Some variation can be expected in all activities and therange of variation   the acceptable variance has to be established. Management by exception  lets operations continue as long as they fall within the prescribed  control  limits. Deviations or differences that exceed this range would alert the supervisor to a problem. Step 4:  Take Corrective Action. The supervisor must find the cause of deviation from standard. Then, he or she takes action to remove or minimize the cause. If the source of variation in work performance is from a deficit in activity, then a supervisor can take immediate corrective action and get performance back on track. Also, the supervisors can opt to take basic corrective action, which would determine how and why performance has deviated and correct the source of the deviation. Immediate corrective action is more efficient; however basic corrective action is the more effective.â€Å"The continuous flow of information about projects keeps the long range of planning on the right track. It helps in taking corrective actions in future if the performance is not up to the mark. † The control function helps business management in various ways. It guides the management in achieving pre-determined goals. The control process also ensures the efficiency of various functions. The shortcoming in various fields is also reported for taking corrective measures. Control provides basis for future action. The continuous flow of information about projects keeps the long range of planning on the right track. It helps in taking corrective actions in future if the performance is not up to the mark. It also enables management to avoid repetition of past mistakes. Whenever there is deviation between standard and actual performance the control helps in deciding the future course of action. A decision about follow-up action is also facilitated. Decentralization of authority is necessary in big enterprises. The management cannot delegate authority without ensuring proper control. The targets or goals of various departments are used as a control technique. If the work is going on satisfactory then top management should not feel worried. The management by exception enables top management to concentrate on policy formulation. Various control techniques like budgeting, cost control, pre action approvals etc. allow decentralization without losing control over activities. Control helps in coordination of activities through unity of action. Every manager will try to coordinate the activities of his subordinates in order to achieve departmental goals. Similarly the chief executive also coordinates the functioning of various departments. The control acts as a check on the performance and proper results are achieved only when activities are coordinated. The control system helps in improving organizational efficiency. Various control devices act as motivators to managers. The performance of every person is regularly monitored and any deficiency if present is corrected at the earliest. Controls put psychological pressure on persons in the organization. Everybody knows that his performance is regularly evaluated and he will try to improve upon his previous work. The rewards and punishments are also linked with performance. The employees will always be under pressure to improve upon their work. Since performance measurements one of the important tools of control, it ensure that every person ties to maximize his contribution