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Martin Zralý: ENTERPRISE MANAGEMENT CONTROL

Martin Zralý: ENTERPRISE MANAGEMENT CONTROL. Department of Enterprise Management and Economics Faculty of Mechanical Engineering , Czech Technical University in Prague martin. zraly @fs.cvut.cz Prague 11/2010. What is it about ?. Basic Elements of Enterprise Management Control

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Martin Zralý: ENTERPRISE MANAGEMENT CONTROL

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  1. Martin Zralý:ENTERPRISE MANAGEMENT CONTROL Department of Enterprise Management and Economics Faculty of Mechanical Engineering, Czech Technical University in Prague martin.zraly@fs.cvut.cz Prague 11/2010

  2. What is it about ? • Basic Elements of Enterprise Management Control • Processes - In which way to accept them • Integration in Enterprise Control • Controlling as an Approach to Enterprise Control • Convergent controlling concept • Time - the key factor in contemporary management control • Resources Capacity Utilization • Measurement - Indicators • Summary - Final Conclusions

  3. Basic Elements (Entities) of Enterprise Management Control • Products (incl. services)(set of products, product’s group)  bring money in ! • Processes  create products or support creation and sale of the products • Activities (= parts of processes) • Projects (= campaign to support achievement of targets of the processes or activities) • Resources: • Human • Tangible and Intangible • Finance • Departments (Centres)  Primary:Which features of these elements and at their important connections are decisive and in which way to do measure them?

  4. ( Processes - In which way to accept them ) • Process = purpose-built consequence of activities • Production (money earning) process: … product producing • Supportive process: … preconditions for effectiveness of the P-processes • Example: Processes in a project company: • Production processes • Projects creation,possible more processes if they significantly differ • Calculations • Expert opinions activities (e.g.: somebody else's project assessment) • Supportive processes • Recruitment and retention of the customers (organizing common actions, special offers, identification of the customer’s requirements, etc.) • Motivational for employees • Qualifying for employees • Innovation of the project technologies (incl. bmkg of the competitors, new knowledge assessment,project methodology procedures and recommendations)

  5. Enterprise Control has to be Integrated • In which way to interpret „Integration“ in enterprise control ? = Unifying, harmonizing interconnections of all parts in one cohesive unit • Basic characteristics of the „Integration“ are: self-contained, linking, unifying, interconnection, but also completion • The Aim of the „Integration concept“ in an enterprise control: „In which way can „Integration“ contributes to the ability to achieve the high extent of the control of enterprise processes and results.“ • Integration in technical systems - Examples: • Computers - hardware i software (MS-Office, CAD + simulation prg.) • Machining centres

  6. Why Integration Has to Be Considered as Significant Feature ? • Major reasons for growing importance of Integration: • The number (+ rate) of changes is rapidly growing - turbulent environment (Drucker, etc.) • Product’s complexity and requirements to the product is growing • Process’s complexity is growing • Enterprise size is growing • Product and process costs are growing, namely fixed ones     • Enterprise has to operate as consistent unit • Input changes have to cause adequate changes in processes and in outcome     • Elements in the enterprise control has to be interconnected, possibly unified, …  integrated

  7. Controlling as an Approach to Enterprise Control • Enterprise control has to be kept in fixed framework • Enterprise control has to be developed step by step, no revolution is recommended (continuous development)     Convergent controlling concept can be considered as an suitable framework WHY?     • Basic points: • practical experiences from enterprises in different areas • it respects recommendations of leading persons in controlling theory: prof. Horváth, prof. Eschenbach • it respects recent approaches to enterprise control: process control, ABM, resp. TO-ABM (emphasis to Activities and Time characteristics) prof. Kaplan • it respects recommendations from broad discussions.

  8. Convergent controlling concept1/2 • Concept based on seven viewpoints: • (1) Objectives are primarily Acceptance of basic controlling line (spiral): (vision)  objectives  targets  processes (+ activities)  projects (initiatives) indicators  plan x records  evaluation  decision (D) (correction)  D- execution  D-evaluation • (2) Integration • horizontal and vertical • content and formal • TOOLS: methods, approaches, methodologies, software, … • (3) Planning(budgeting) has exceptional role • (4) EvaluationRegular and consistent, in short time-periods • (5) ToolsApplication of controlling and other managerial tools and their combination, emphasis to integrative ability of tools

  9. Convergent controlling concept2/2 • (6) Standardization and formalization of procedures(for control, etc.) • (7) Broad acceptance of learning processes(ability to take lessons) in all areas  Regular update, resp. improving of procedures, regulations, rules … (versus:„we did it in this way last year, we will continue in this way this year again“) Important confirmation of this approach + another inspirations: • BM- project fy. Point Consulting (9/2003) and its results: namely:  • Dominant support of saying„Missing integration in enterprise control",related to the evaluation of all managerial tools!! • Solutions:Integrative System ConceptE.g.:„Business Navigation“

  10. Time - the key factor in contemporary mgmt. control WHY? • Time related costs rate in total costs is growing • E.g.: Equipment & Machine C., Space C., IT-C., Staff C., Admin. C., Maint. & Repair C., etc. • In some branches: 80 - 90 % costs •  „Time“ is more and more expensive • Time can be controlled „Time“ as: (1) Time expression of disposable capacity of resources: staff, machine, activity, process,.. (  capacity utilization) (2) Time consumption for product, service  typical application in Target Costing processes ( cutting time consumption) • + It is measurable indicator!     Importance of HCT-Method application in different areas

  11. Utilization of ResourcesCapacity • Link to the previous slide “Time as key factor“  (time costs) • Human and Equipment Capacity is continually getting: (1) More expensive (2) More productive (mainly equipment capacity) •  It has to be managed in more economic way, or the performance efficiency is decreasing    •  Consistency in capacity planning and recording is required  Activity time sheet is applied for equipment and staff too (also in areas of product design, product development, at administrative staff, … )  (1) Motivational effect (2) To get an overview of the capacity planned versus consumed     Essential significance of HCT-Method application

  12. Measurement - Indicators • Quotation: „Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it . If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.“ H. J. Harrington

  13. Summary - Final Conclusions • Essential Factors of Contemporary Enterprise Control: • Controlling management concept  Convergent Approach (7V) • Process (Activity) Oriented Approach (Process control, ABM) • Time Control(Capacity, Time consumption/unit) • Maximization of Resource Capacity Utilization • Selection of Suitable Indicators  permanent searching, making them more accurate • Look after specific solutions according to your managerial needs • Prefer simple, understandable, effective tools • Do regular, critical evaluation of application functioning  make it better (improve it continuously) • Personality of Manager is and will be most important

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