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Foundations of Control

This document discusses control and organizational performance. It defines control as monitoring activities to ensure goals are met and deviations are corrected. There are three main control system designs: market, bureaucratic, and clan. Control is important for planning, empowering employees, and protecting the workplace. The control process involves measuring performance, comparing to standards, and taking managerial action. Organizational performance can be measured through productivity, effectiveness, and other financial and non-financial metrics. Tools for control include feedforward, concurrent, and feedback controls. Issues discussed include cross-cultural differences, privacy concerns, and corporate governance challenges.

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33 views23 pages

Foundations of Control

This document discusses control and organizational performance. It defines control as monitoring activities to ensure goals are met and deviations are corrected. There are three main control system designs: market, bureaucratic, and clan. Control is important for planning, empowering employees, and protecting the workplace. The control process involves measuring performance, comparing to standards, and taking managerial action. Organizational performance can be measured through productivity, effectiveness, and other financial and non-financial metrics. Tools for control include feedforward, concurrent, and feedback controls. Issues discussed include cross-cultural differences, privacy concerns, and corporate governance challenges.

Uploaded by

aditi001
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Foundations of Control

What Is Control?
Control
The process of monitoring activities to ensure that they are being
accomplished as planned and of correcting any significant deviations

The Purpose of Control


To ensure that activities are completed in ways that lead to
accomplishment of organizational goals

Designing Control Systems


Market Control
Emphasizes the use of external market mechanisms to establish the standards
used in the control system
Bureaucratic Control
Emphasizes organizational authority and relies on rules, regulations,
procedures, and policies
Clan Control
Regulates behaviour by shared values, norms, traditions, rituals, and beliefs of
the firms culture
3

Contingency Factors in the Design of


Control Systems

Why Is Control Important?


The final link in management functions:
Planning
Controls let managers know whether their goals and plans are on target and what
future actions to take

Empowering employees
Control systems provide managers with information and feedback on employee
performance

Protecting the workplace


Controls enhance physical security and help minimize workplace disruptions

The Control Process


Step 1

Measuring
Actual Performance

GOALS
Organizational
Divisional
Departmental
Individual

Step 3

Comparing Actual
Performance
Against Standard

Step 2

Taking
Managerial Action

How and What We Measure


How: Sources of Information

Personal observations
Statistical reports
Oral reports
Written reports

What: Control Criteria


Employees
Satisfaction
Turnover
Absenteeism

Budgets
Costs
Output
Sales

Comparing
Determining the degree of variation between actual performance and
the standard
Significance of variation is determined by:
The acceptable range of variation from the standard (forecast or budget)
The size (large or small) and direction (over or under) of the variation from the
standard

Taking Managerial Action


Courses of Action
Doing nothing
Only if deviation is insignificant

Correcting actual (current) performance


Immediate or basic corrective action

Revising the standard


Determine whether the standard is realistic, fair, and achievable

Controlling for Organizational


Performance
What Is Performance?
The end result of an activity

What Is Organizational
Performance?
The accumulated end results of all of the organizations work processes and
activities
Designing strategies, work processes, and work activities
Coordinating the work of employees

10

Organizational Performance
Measures
Organizational Productivity
The overall output of goods and/or services divided by the inputs needed
to generate that output
Ultimately, a measure of how efficiently employees do their work

11

Organizational Performance
Measures
Organizational Effectiveness (contd)
Measuring how appropriate organizational goals are and how well the
organization is achieving its goals
Systems resource model: Is organization efficient in acquiring scarce and valued
resources?
The process model: Is organization efficient in converting inputs to outputs?
The multiple constituencies model: Is organization effective in meeting each
constituencies needs?

12

Tools for Controlling


Organizational Performance
Feedforward Control
Prevents anticipated problems before they occur
Building in quality through design
Requiring suppliers conform to ISO 9002

Concurrent Control
Monitoring while activity is in progress
Direct supervision: management by walking around

13

Tools for Controlling Organizational


Performance (contd)
Feedback Control
Takes place after an activity is done
Corrective action is after-the-fact, when the problem has already occurred

Advantages
Feedback provides managers with information on the effectiveness of their planning
efforts
Feedback enhances employee motivation by providing them with information on
how well they are doing

14

Types of Control
Input

Feedforward
Control
Anticipates
problems

Processes

Output

Concurrent
Control

Feedback
Control

Corrects
problems as
they happen

Corrects
problems after
they occur

15

Tools for Controlling Organizational


Performance: Financial Controls
Traditional Controls
Ratio analysis

Liquidity
Leverage
Activity
Profitability

Other Measures
Economic value added (EVA)
Market value added (MVA)

Budget analysis
Quantitative standards
Deviations

16

Controlling Organizational
Performance
Balanced Scorecard
A measurement tool that uses goals set by managers in four areas to
measure a companys performance:

Financial
Customer
Internal processes
People/innovation/growth assets

17

Information Controls
Management Information Systems (MIS)
A system used to provide management with needed information on a
regular basis
Data: an unorganized collection of raw, unanalyzed facts (e.g., unsorted list of
customer names)
Information: data that has been analyzed and organized such that it has value and
relevance to managers

18

Benchmarking of Best Practices


Benchmarking
The search for the best practices among competitors or noncompetitors
that lead to their superior performance
A control tool for identifying and measuring specific performance gaps
and areas for improvement

19

Contemporary Issues in Control


Cross-cultural Issues
The use of technology to increase direct corporate control of local
operations
Legal constraints on corrective actions in foreign countries
Difficulty with the comparability of data collected from operations in
different countries

20

Contemporary Issues in Control


(contd)
Workplace Concerns
Privacy versus monitoring:
E-mail, telephone, computer, and Internet usage can all be monitored

Employee theft
The unauthorized taking of company property by employees for their personal use

Violence
Anger, rage, and violence in the workplace is affecting employee productivity

21

Contemporary Issues in Control


(contd)
Corporate Governance
The system used to govern a corporation so that the interests of the
corporate owners are protected
Changes in the role of boards of directors
Increased scrutiny of financial reporting

22

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