Administrative Controls:

Five major divisions of administrative controls should be considered:

1. Organization.
On the whole, management has failed to realize the value of charting its organization. Too often it is considered mere "efficiency" clap-trap or theory. No instrument of business could be more practical in its intent and accomplishment. The organization chart is a graphic diagram specifying the authority and responsibility of each management function. Thus, the organization chart clears away the fogs of uncertainty. It straightens out the bypaths and circuitous routes in the flow of authority, eliminates overlapping and cross purposes. It rids management of the common causes of dissention and jealousy.


2. Policies, Procedures and Duties.
Once the organization plan is perfected and charted, complete manuals should detail the specific duties of those charged with each function or sub-function. Procedures and policies must be set forth clearly. Thus, repetitive matters of policy and procedures are properly channeled. Many problems, previously referred to top management, become a matter of routine, completely understood and properly controlled by subordinates.

3. Costs.
Substantial wastes remain hidden in many businesses because of the absence of accurate cost finding. Lacking the basis for knowing where costs are excessive and the mechanics for keeping them under constant observation, top management has no adequate means of controlling and fixing the responsibility for excesses. A modern cost system is one of the most important "musts" in business.

4. Budgets.
One of the most severe indictments against top management is its failure to institute an adequate system of budget control. As a result, "half-baked" decisions, whims, snap judgments and intuitions bring grievous wastes reflected in profit and loss statements. How can management hope to plan accurately without knowing what is a reasonable expectation for each phase of the business and without a measurement of accomplishment?

5. Operating Reports.
With a sound system of costs and budgets, management has the basis for effective operating reports. Foremost is the monthly summary of each department which shows actual direct labor cost compared to budget allotment.

Monthly and quarterly reports contrast estimated and actual performance pertaining to production, labor, expense, buildings and equipment. Other reports cover such phases as activity; production labor and burden; idle time; production, labor, materials and manufacturing costs; estimated vs. actual costs. Effective operating reports afford management a direct control of waste.

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