The Controlling Function - Principles of Management - ثالث ثانوي

عبارت التصليم 3.3 The Controlling Function LEARNING OBJECTIVES Once you have completed this lesson, you should be able to: 3.3.1 List the three basic steps in the controlling function. 3.3.2 Identify and describe four types of control standards KEY TERMS Quantity Standard Quality Standard Time Standard Profit Cost Standard Variance REALITY CHECK Quality and Quantity? Nourah has been recruited to help turn around the fortunes of a manufacturing business in Medina. The once successful business has recently seen its profits decline notably. The company has re- ceived feedback from the retallers it supplies that its products are not meeting the high standards that they have come to expect it seems that the business has been a victim of its own success. It began as a small producer with a focus on quality and handmade products. As the company has grown and taken more orders, it has struggled to maintain the quality with the quantity now required by customers. Nourah also discovers that the company needs to ensure that the control of its manufacturing activities is dearty organized as it is currently inadequate. Nouran asks the production supervisor what standards are in place and how they are monitored "Originally, I made all the products myself by hand," the produc tion supervisor explains "I could be sure the quality met the high personal standards I expect, and deliver the products on time in a cost-effective way. Now most of my time is spent training others to carry out the work, and we're constantly under pressure to fulfill orders. I'm frustrated because I feel I'm losing control of the pro- duction process and either the quality suffers or we overspend on bringing in temporary skilled craftspeople to complete an order" "What you need is a designated system of control," says Nourah. Lesson 3.3 The Controlling Function 153

ارت التعليم "I can help you formalize your standards, which should help in identifying issues and taking corrective action. Setting standards and monitoring production is essential for a business of this size it will help us to allocate resources more effectively" What's Your Reaction? What do you think Nourah means by this? Do you think she is right and how could they go about using stand- ards to improve the production process? LO 3.3.1 Understanding Controlling "Employee absences have increased by 3% this year." "Maintenance costs are down an average of SAR 300 per vehicle." "Salespeople have increased new customer orders by 12.3% in a three-year period." "An average of 16 additional employees per month are enrolling in the company's wellness program." "Adjustments to the product assembly computer program have re- duced defects by 30%" These statements provide very valuable information to managers. With the proper information, managers can tell how well activities are being performed. Reviewing performance is one part of the fifth management function-controlling. Managers must be able to deter- mine if performance meets expectations. When expectations are being met, the manager can recognize employees for their success and even reward them when possible If performance problems are occurring, managers need problem-solving skills to develop good solutions. Management as a Continuous Process All managers perform five management functions. Planning involves setting goals and directions for the business. Organizing deals with obtaining and arranging resources so the goals can be met. Staffing involves bringing the right people to the task. Directing is guiding and supporting the team so they can work effectively. Controlling is 154 Chapter 3 Staffing, Directing, and Controlling

determining whether goals are being met and what actions to take if performance falls short of the goals. Although each of the functions has a unique purpose and includes a specific set of activities, they are all related. Planning improves if there is an effective organization to provide information to managers. Without effective planning, it is difficult to decide how to organize a business and what resources are needed. Staffing and directing are impossible without plans and difficult with a poorly designed organization. Con- trolling cannot be carried out unless the company has specific goals and plans. Figure 3-6 shows that management is a continuous process and that each function supports the others. Controlling provides the information needed to improve the management process and business operations. وبارت التعليم The Management Functions Planning Organizing 0 Directing Figure 3-6 The Management Functions The five functions of management are directly related. The way in which one is performed affects each of the others Lesson 3.3 The Controlling Function 155

ارت التعليم 156 The Steps in Controlling Controlling involves three basic steps as illustrated in Figure 3-7: 1. setting standards to help meet each of the company's goals 2. measuring and comparing performance against the established standards to see if performance met the goals 3. taking corrective action when performance falls short of the standards. STEP Setting standards 1 STEP Measuring and comparing performance 2 EM STOP Taking corrective action 3 Figure 3-7 The Control Process The controlling process can be structured into a series of three distinct stages. Consider the following example. A business has a goal to manufac ture and deliver to a customer 1,000 made-to-order rugs by a specific date. The standard is to produce 25 rugs each day for 40 consecutive days. During the first 10 days, only 200 rugs are produced, or an aver age of 20 rugs a day. Because production is 50 rugs below the stand- ard-250 rugs in 10 days-the managers must take action to increase production during the remaining 30 days. The corrective action may include scheduling overtime work or assigning more workers to the task. Even as they take action, the managers should carefully study the manufacturing process to see why the standard that was originally sel could not be met Chapter 3 Staffing, Diacony, and Controlling

وزارة التعليم As another example, the manager of a clothing store wants to make sure that a new line of abayas sell rapidly. The standard is to sell 30% of all the abayas in the line within one month. If the store sells only 20%, the manager must take corrective action. The manager may choose to increase the advertising for the abayas, give salespeople a higher commission for selling that style, or mark down the price to sell more. The manager will also want to use this information when planning pur- chases in the future. In each example, the managers set a standard based on the work to be accomplished. Then they compared performance against the stand- ard to see if the company's goals could be met. Finally, if performance was not meeting the standard, the managers had to determine how to correct the problem. Note that in both examples the managers did not wait long to begin measuring performance. Controlling activities should be carried out before the problem is too big or too expensive to correct. ? CHECKPOINT What are the three basic steps in controlling? Why would a manufacturer of rugs need a process of control? Lesson 3.3 The Contrailing Function 157

التعليم 158 LO 3.3.2 Setting Control Standards Managers can determine reasonable standards by studying the task, using their past experience, gathering industry information, and asking for input from experienced workers. The standards become the means for judging success and for applying controls. Types of Control Standards The standards used to control business operations depend on the type of business, its size, and the activities being controlled. The major types of standards are quantity, quality, time, and cost standards.. Quantity Standards A quantity standard establishes the expected amount of work to be completed. Quantity standards take different forms, depending on the tasks. Production managers may specify the minimum number of units to be produced each hour, day, or month by individual workers or groups of workers. Sales managers may establish the number of prospective customers that sales representatives must contact daily or weekly. A manager of administrative services may establish a minimum number of forms to be completed or number of lines of information to be keyed in an hour by information-processing personnel. The quotas Hessa established for her employees in the telemarketing department described in Section 3.1 are examples of quantity standards. Quality Standards Quantity standards alone are often not enough to judge an employ- ee, a product, or a service. A fast worker, for example, can be very careless, or a slow worker can be extremely careful. Thus, as highlight- ed in the Reality Check at the start of this lesson, the quality of the work performed is often just as important as the quantity produced. A quality standard describes expected consistency in production or performance. Chapter 3 Staffing, Directing, and Controlling

قرارت التعليم Perfection-having no errors-may be the only acceptable standard for some products and services. An automobile battery that does not work cannot be sold. An invoice with pricing errors cannot be sent to a customer. Perfection is the standard, but it may not always be practical or cost-effective to develop procedures to check every finished product. On an assembly line where thousands of products are produced every hour, sampling a few products each hour may be enough to identify when quality problems occur so corrective action can be taken. Time Standards Time standards are closely related to quantity and quality standards. Most business activities can be measured by time. A time standard is the established amount of time needed to perform an activity. The amount of time it takes to perform an activity has an effect on costs, the quantity of work performed, and often on the quality of the work. Time standards are more important to some businesses than to others. Building contractors, such as the Reality Check example in Section 3.2, for example, normally have strict time schedules. If they do not meet the schedules, they suffer an immediate financial loss. If an office tower is not completed on time, the builder must usually pay a financial penalty. Similarly, a baker who does not have fresh bread ready for the morning rush will lose a major portion of the day's sales. Other businesses may not see the immediate financial loss, but failure to maintain time stand- ards will result in fewer products being produced, poor coordination of activities between departments, or other problems. Cost Standards An important measure of the success or failure of a firm is financial prof- it or loss. Profit equals income minus costs. Therefore, managers can increase profits by either (1) increasing sales revenue or (2) decreasing costs Not all managers or employees are directly connected with work that increases sales. However, most employees and managers do influ- ence costs. Wasting material or taking more time than necessary to perform a task adds to the cost of doing business. Increased costs, without a proportionate increase in sales, decrease profit. Businesses Lesson 3.3 The Controlling Function 159

Management Matters There's an app for that too On a large scale computer app Instantaneously track everything in a busines, from the hourly production of oil wells to the Sales of specific colors of fabric in early store of a worldwide retal business. At any time managers canals that lopate to make production decivors and update sales foret. In the same way cell phone users can track mhutes uned, text messages vent, or amount of lata downloa led low their phone. Some plans for Menet use require users to pay for each service while others set limwrs and charge customers when they exceed the plan Sunie plaps allow users to check then wave only directly on their phones. The Information can be used in car trolling expenses. Knowing the current status of your account can help you make better deci- sions on whether to send a text message to all your friends or download a new song What Do You Think? must be cost-conscious at all times. A cost standard, or the predetermined cost of per- forming an operation or providing goods or services, is an effective way of helping busi- nesses maintain profitability. Generally, businesses pay more attention to cost controls than to any other type of control. The control devices used, as a result, are numerous. One of the main purposes of the accounting department is to provide detailed cost information. Most managers. however, act as cost controllers in some way. Increasingly, employee work teams and indi- vidual employees are assigned responsibility for cost controls. The most widely used tool for controlling costs is the budget. Like schedules and standards, budgets are also planning devices. When a budget is prepared, it is a planning device; after that, it is a controlling device. Actual cost information is collected and com: pared with budgeted amounts. These com pansons permit judgments about the success of planning efforts and provide dues for making changes that will help the company reach its financial goals. Managers need to monitor costs regularly. When budget prob- lems are identified early, managers have time to take corrective action Deves abcess to Information help you make better decr Sent? What type of informaticil nan help you back to Bulter better near your time or imYour YouT phical heart Measuring and Comparing Performance Once standards have been established, they are used to determine effective performance. Managers gather information on all parts of business operations for which they are responsible. They compare that information against the standards to determine if performance is meeting the standards. A variance is a difference between current per- التعليم 160 Chapter 3 Staffing, Direcony, and Controlling

وزارت التعليم formance and the standard. A variance can be positive (performance exceeds the standard) or negative (performance falls short of the stand- ard). Whenever a variance exists, managers must identify the reasons for the difference. If performance has exceeded the standard, it is valuable to under- stand why this has occurred so that it can be repeated. Managers should review why they set the standard lower than the performance that could actually be achieved. In addition, managers should ensure that the positive performance in one area does not have a negative effect on another area. If the company is not performing at the expect- ed level, this may indicate problems between planning and directing activities. Managers need to communicate the problem appropriately with employees, and take corrective action to improve performance. They must also review procedures carefully to avoid the same problem happening in the future. Monitoring all activities for which managers are responsible can take a great deal of time. Managers can use information systems to reduce the amount of time spent on controlling Computers can monitor per- formance and compare it to the standard. When the computer identifies a variance, it generates a variance report for the manager. Through the use of computer monitoring and variance reports, managers can iden- tify problems quickly and begin to take immediate corrective action. ? CHECKPOINT Provide an example of each of the four types of control standards. Lesson 3.3 Thu Contrailing Funcion 161 固

الصليم 162 33 Assessment UNDERSTAND MANAGEMENT CONCEPTS Determine the best answer for each of the following questions. 1. The final step managers take in the controlling process is. a. b bwing pains can help mercompanyara meusina pirformance using stahikea standar chatishing new gol d. foxha comeclive artium when standards are hol met 2. Consistency in products and performance is measured using a a. quantity standard b Quality standard ċtimi itundar d. vost standard THINK CRITICALLY Answer the following questions as completely as possible 3. Do you believe managers should perform each of the management functions in order? Why or why not? 4. Which type of standard do you belleve is the most important when trying to improve the overall effectiveness of a business? Justify your choice. Chapter 3 Staffing, Directing, und Contrilling

FOCUS ON Teamwork Changing the Face of Manufacturing You can't make a mistake when building airplane engines. Jet engines have more than 10,000 parts. When completely assembled, they weigh more than eight tons. Yet a bolt not tightened, a tool left inside the en- gine, or a safety procedure not followed can cost hundreds of lives. One company has used a team approach for over 20 years to produce jet engines. Approximately 200 people assemble the huge engines. But there is only one boss, the plant manager, and one instruction to guide the work of the plant-the date each engine needs to be finished. Beyond that instruction, employees make every decision about how the work will be performed. They hold a record for delivering every engine ordered on schedule for over three years. During that time, they were able to reduce the cost of producing the engine by nearly one-third. How was this plant able to achieve its amazing record with only one manager? Here are some unique characteristics of the organization: Employees are organized into work teams that make almost all decisions. Everyone is on a team, and team meetings are scheduled when all employees are available. Work schedules are flexible Team members can easily adjust their work hours by trading weekday and weekend shifts as needed to meet production schedules, without adding over- time hours. Everyone learns how to do many of the assembly tasks so they can help each other • Teams are responsible for hinng new team members. Team representatives do the interviewing, and they have to agree on the night person. Teams solve problems and often come up with unique but sim- ple solutions. They use consensus building to make a decision, with all the team supporting that decision going forward. ■ Teams are allowed to reorganized themselves as needed to meet changing conditions and requirements. The team environment works. Its unique organization demonstrates that when employees are given the opportunity to work together to manage then work, they do it better than anyone could have imagined.

Teamwork FOCUS ON Think Critically L. How do you believe the flexible work schedules affect employee motivation? What are the advantages and disadvantages of that plan? 2. Discuss reasons why the team problem-solving process seems to result in unique but effective solutions. Are there reasons a solu- tion developed by employees is likely to be more successful than if the same solution was developed by a manager without the input of employees? العلام