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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