Modern Control Techniques – My Study Online
Following are the modem techniques of control which are commonly used at present.
I. Return On Investment Control (Roi)
Profits are the measure of overall efficiency of a business. Profit earned in relation to the capital employed in a business is an important control device. If the rate of return on investment (shareholders funds) is quite satisfactory, it will be taken as a yard-stick of good performance. The return on investment can be compared over a period of time as well as with that of other similar concerns. This comparison will show the present performance in relation to earlier periods and also the level of achievement of the concern in comparison to other concerns.
The return on investment is computed by dividing the operating net profit (before interest and tax) by the capital employed in the concern. The following formula is used for this purpose:
Return on Investment
Net Profit before interest and tax / Capital employed
ROI is used to measure the overall efficiency of a concern. It reveals how well the resources of a concern are used, higher the return better are the results.
An important drawback of this method is the determination of capital employed in a concern as this concept is open to conflicting interpretations. Generally capital employed includes equity share capital, preference share capital, free reserves and long-term loans. It means that total assets less current liabilities will form the capital employed.
II. Programme Evaluation and Review Technique (PERT)
Programme evaluation and review technique (PERT) was first developed as a management
tool for coordination and early completion of Polaris Ballistic Missile Project in USA resulting in a reduction of 30 per cent time in project execution. A contemporary of PERT is CPM (Critical Path Method) and was developed in connection with maintenance and construction work. PERT is useful at several stages of project management starting from early planning stages
when various alternative programmes are being considered to the scheduling phase, when time and resources schedules are laid out, to final stage in operation, when used as control device to measure actual versus planned progress. PERT uses network’ as the basic tool of project management and is helpful in completing a project on schedule by co-ordinating different jobs involved in its completion.
III. Management Information System (MIS)
Management information system (MIS) is an approach of providing timely, adequate and accurate information to the right person in the organisation which helps in taking right decisions. So MIS is a planned and organised approach to the transferring of intelligence within an organisation for better management. The information is furnished into useful quantums of knowledge in the form of reports. An effective system of MIS collects data from all possible sources. The information is properly processed and stored for use in future.
MIS is of two types: (i) Management operating system meant for meeting the information
needs of lower and middle level management. The information supplied generally relates to operations
of the business. (ii) Management reporting system which supplies information to top level
management for decision-making. The information is presented in a way which enables management
to take quick decisions.
An MIS should be so desigend which helps management in exercising effective control over all aspects of the organisation.
IV. Management Audit
Management audit is an investigation by an independent organisation to find out whether the management is carried out most effectively or not. In case there are drawbacks at any level then recommendations should be given to improve managerial efficiency. In the words of Leslie R. Howard, “Management audit is an investigation of a business from the highest level downward in order to ascertain whether sound management prevails throughout, thus facilitating the most effective relationship with the outside world and the most efficient organisation and smooth running internally.”
Objectives of Management Audit
Management audit has the following objectives: (1) To see whether the work at all levels is undertaken efficiently or not.
(i) If the management is not done effectively then suitable recomendations are made to tone it up.
(ii) Whether the plans and programmes are executed properly or not? (iv) Suggesting ways and means of increasing managerial efficiency. (v) It also aims to help management at all levels in the effective and efficient discharge of
duties and responsibilities.
(iii) The organisational structure is also reviewed to assess whether it can achieve overall business objectives or not. (vi) Whether the enterprise’s share in the market is increasing or declining and how it stands in comparison to competitors.
Management audit assesses every aspect of managerial performance. In case the management is not able to achieve its objectives then this point is brought to the notice of shareholders or owners. This review will enable the taking up of corrective measures so that the working of the business is improved.
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