The administrative control techniques are methodologies that collect and use information to evaluate the performance of the different organizational resources, such as human, physical, financial and also the organization as a whole, in light of the organizational strategies pursued.
Management is both an art and a science. The administration and its functions continue to evolve to keep up with the times. The administrative control function also progresses over time, so new techniques continue to emerge.
Control is a fundamental administrative function. It serves to regulate organizational activities, and compares actual performance with expected organizational standards and objectives.
Control techniques provide the type and amount of information necessary to measure and monitor performance. Information from various controls must be tailored to a specific management level, department, unit, or operation.
To ensure complete and consistent information, companies often use standardized reports, such as financial, status, and project reports. However, each area within an organization uses its own specific control techniques..
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They are techniques that have been used in the field of business organization for a long period of time and are still in use..
This is the most traditional control technique. Allows a manager to collect first-hand information on employee performance.
It also creates psychological pressure on employees to perform better and thus achieve their goals well, since they are aware that they are being personally observed in their work.
However, it is a time-consuming exercise and cannot be used effectively for all kinds of jobs..
It is the general analysis of reports and data, which are used in the form of averages, percentages, indicators, correlations, etc. In different aspects. They present information on the organization's performance in the various areas.
This type of information is useful when it is presented in different forms, such as charts, graphs, tables, etc. Allows managers to read them more easily and facilitates performance comparisons with established standards and with previous periods.
It is used to study the relationship between costs, volume and profits. Determines the general framework of probable gains and losses for different levels of activity by analyzing the general position.
The volume of sales in which there are no gains or losses is known as the breakeven point. This can be calculated with the help of the following formula:
Break-even point = Fixed costs / (Sales price per unit - variable costs per unit).
Through this analysis, a company can control its variable cost and can also determine the level of activity at which it can achieve its profit target..
Under this technique, different budgets are prepared for the different operations that must be carried out in an organization..
These budgets act as standards to compare them with the actual results and thus take the necessary actions to achieve the organization's objectives..
Therefore, the budget can be defined as a quantitative statement of the expected result, prepared for a defined period of future time, in order to obtain a certain objective. It is also a statement reflecting the policy for that particular period..
Helps establish coordination and interdependence between various departments. For example, the purchase budget cannot be prepared without knowing the quantity of materials required. That information comes from the production budget. The latter in turn is based on the sales budget.
The budget should be flexible so that later the necessary changes can be easily made in it, according to the requirements of the prevailing environment..
- Sales budget: it is a statement of what an organization expects to sell in terms of quantity and value.
- Production budget: is a statement of what an organization plans to produce in the budgeted period. It is made from the sales budget.
- Materials budget - is a statement of the estimated quantity and cost of materials needed for production.
- Cash Budget: These are the forecasted cash inflows and outflows for the budgeted period. Corresponds to projected cash flow.
- Capital budget: is the estimated spending on major long-term assets, such as a new factory or major equipment.
- Research and development budget: these are the estimated expenses for the development or refinement of products and processes.
These techniques provide a new way of thinking and give new ways of being able to control the various aspects of an organization..
Provides the basics to determine whether or not the capital invested in the business has been used effectively to generate a reasonable return.
ROI acts as an effective monitoring device to measure the overall performance of an organization, or its individual departments or divisions. It also helps departmental managers discover issues that negatively affect ROI..
The formula used for its calculation is: Return on investment = (Net income / Total investment) x 100.
Net income before or after taxes can be used to calculate ROI. Total investment includes investment in fixed assets, as well as working capital invested in the business.
It is a technique used to analyze the financial statements of a commercial company by calculating different indicators.
The indicators most used by organizations can be classified into the following categories:
They are calculated to know the short-term financial position of the business and its ability to pay short-term liabilities. It includes the current indicator and the quick indicator:
- Current indicator = Current assets / Current liabilities.
- Quick indicator = Cash + Invoices receivable / Current liabilities.
They are calculated to determine the long-term creditworthiness of the business and its ability to pay off long-term debts. It includes the debt indicator, the property indicator, the interest coverage indicator, etc..
- Debt indicator = Debt to creditors / Shareholders' fund.
- Ownership indicator = Shareholders' fund / Total assets.
They help to analyze the profitability position of a business. For example, the gross profit indicator, the net profit indicator, the trade indicator, etc..
- Gross profit indicator = Gross profit / Net sales × 100.
- Net profit indicator = Net profit / Net sales x 100.
They help to know if resources are used effectively to increase the efficiency of business operations. For example, inventory turnover indicator, debtor turnover indicator, fixed asset turnover indicator, and so on. Higher turnover indicates better use of resources.
- Inventory turnover indicator = Cost of merchandise sold / Average inventory.
- Debtor turnover indicator = Net credit sales / Average accounts receivable.
It is an accounting system in which the general participation of the different sections, divisions and departments of an organization is configured as "responsibility centers".
The head of each center is responsible for achieving the goal set for his center. Responsibility centers can be of the following types.
Refers to the department of an organization whose manager is responsible for the cost incurred in the center, but not for the income.
For example, the production department of an organization can be classified as a cost center.
Refers to a department that is responsible for generating revenue. For example, the marketing department.
Refers to a department whose manager is responsible for both costs and revenues. For example, the repair and maintenance department.
He is responsible for the profits as well as the investments made in the form of assets. To judge the performance of the investment center, the return on investment is calculated and compared with similar data from previous years for the center itself and for other similar companies..
It refers to a systematic evaluation of the general performance of the management of an organization. The objective is to review the efficiency and effectiveness of the administration and improve its performance in future periods..
Judge the overall performance of managing an organization. Its basic purpose is to identify deficiencies in the performance of management functions. It also guarantees the updating of existing management policies.
Ensures the required modification in existing management policies and techniques, according to changes in the environment.
Continuous monitoring of management performance helps improve the control system.
PERT (Scheduled Review and Evaluation Technique) and CPM (Critical Path Method) are important network techniques, useful for planning and control.
These techniques help to perform various management functions such as planning, scheduling and implementing projects of a specific duration, which involve the performance of a variety of complex, diverse and interrelated activities..
They are used to calculate the total expected time required to complete a project, and can identify bottleneck activities that have a critical effect on the project completion date.
Consequently, these techniques are quite interrelated and address factors such as time scheduling and resource allocation for these activities..
Provides accurate, timely and up-to-date information to make various management decisions. Therefore, it is an important communication tool, as well as a very useful control technique..
This tool provides information to managers so that they can take appropriate corrective action in the event of deviations from the standards..
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