Controlling

Activities &
Operations

18
Copyright © 2012 Pearson Education, 17-1
Inc. Publishing as Prentice Hall
 What Is Control?
• Controlling
– The process of monitoring, comparing and correcting
work performance.
– 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.
– Value of Controlling results in three areas - Planning,
empowering employees, and protecting the
workplace.

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 Why Is Control Important?
• As 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.
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Exhibit 18–2 The Planning–Controlling Link
 The Control Process

• The Process of Control

1. Measuring actual
performance.
2. Comparing actual
performance against a
standard.
3. Taking action to correct
deviations or
inadequate standards.

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Exhibit 18–3 The Control Process
 Measuring: How and What We Measure

• Control
SourcesCriteria
of Information
(What) (How)
– Employees
Personal observation
• Satisfaction
– Statistical reports
• Turnover
– Oral reports
• Absenteeism
– Written reports
– Budgets
• Costs
• Output
• Sales
Exhibit 18–4 Common Sources of Information
for Measuring Performance
 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 (forecast
or budget).

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Exhibit 18–5 Defining the Acceptable Range of Variation
Exhibit 18–6 Green Earth Gardening Supply—June Sales
 Taking Managerial Action

• Courses of Action
– “Doing nothing”
• Only if deviation is judged to be insignificant.
– Correcting actual (current) performance
• Immediate corrective action to correct the problem
at once.
• Basic corrective action to locate and to correct the
source of the deviation.
• Corrective Actions
– Change strategy, structure, compensation scheme, or
training programs; redesign jobs; or fire employees

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 Taking Managerial Action (cont’d)

• Courses of Action (cont’d)

– Revising the standard
• Examining the standard to ascertain whether or not
the standard is realistic, fair, and achievable.
– Upholding the validity of the standard.
– Resetting goals that were initially set too low or too high.

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Exhibit 18–7 Managerial Decisions in the Control Process
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
organization’s work processes and activities
• Designing strategies, work processes, and work
activities.
• Coordinating the work of employees.

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 Organizational Performance Measures
• Organizational Productivity
– Productivity: the overall output of goods
and/or services divided by the inputs needed
to generate that output.
• Output: sales revenues
• Inputs: costs of resources (materials, labor
expense, and facilities)
– Ultimately, productivity is a measure of how
efficiently employees do their work.

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 Organizational Performance Measures
• Organizational Effectiveness
– Measuring how appropriate organizational
goals are and how well the organization is
achieving its goals.
– That’s the bottom line for managers, and it’s
what guides managerial decisions in
designing strategies and work activities and in
coordinating the work of employees.

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 Tools for Controlling Organizational
Performance
• All managers need appropriate tools for
monitoring and measuring organizational
performance.
• Managers can implement controls before an
activity begins, during the time the activity is going
on, and after the activity has been completed. The
first type is called feed-forward control; the
second, concurrent control; and the last, feedback
control (see Exhibit 18-9).

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Exhibit 18–9 Types of Control
 Tools for Controlling Organizational
Performance
• Feedforward Control
– A control that prevents anticipated problems before
actual occurrences of the problem.
– That way, problems can be prevented rather than
having to correct them after any damage (poor-quality
products, lost customers, lost revenue, etc.) has
already been done.
– However, these controls require timely and accurate
information that isn’t always easy to get.
• Building in quality through design.
• Requiring suppliers conform to ISO 9002.

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 Tools for Controlling Organizational
Performance
• Concurrent Control
– A control that takes place while the
monitored activity is in progress.
• Direct supervision: management by walking
around.
– All managers can benefit from using
concurrent control, but especially first-line
managers, because they can correct
problems before they become too costly.

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 Tools for Controlling Organizational
Performance (cont’d)
• Feedback Control
– The most popular type of control relies on feedback.
– Control that takes place after an activity is done.
• Corrective action is after-the-fact, when the problem has already
occurred.
– Advantages of feedback controls:
• Provide managers with information on the effectiveness of their
planning efforts.
• If there is little variance between standard and actual performance
indicates that the planning was generally on target. If the deviation is
significant, a manager can use that information to formulate new plans.
• Enhance employee motivation by providing them with information on
how well they are doing.

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 Controlling Organizational Performance
• Now, let’s look at some specific control tools that
managers can use.
– Financial Control
• Every business wants to earn a profit. To achieve this goal,
managers need financial controls.
• For instance, they might analyze quarterly income statements for
excessive expenses.
• They might also calculate financial ratios to ensure that sufficient
cash is available to pay ongoing expenses, that debt levels haven’t
become too high, or that assets are used productively.
• Managers might use traditional financial measures such as ratio
analysis and budget analysis.

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Controlling Organizational Performance
• Information Control
– Data breach by cybercriminals, cyber attacks in
order to steal customer information, theft of
proprietary computer programs by employees remind
us about the need for information controls.
– Managers deal with information controls in two ways:
• (1) as a tool to help them control other organizational activities
and
• (2) as an organizational area they need to control.
– Information controls should be monitored regularly to
ensure that all possible precautions are in place to
protect important information.

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 Controlling Organizational Performance
• Balanced Scorecard
– The balanced scorecard approach is a way to evaluate
organizational performance from more than just the
financial perspective.
– It typically looks at four areas that contribute to a
company’s performance:
• Financial
• Customer
• Internal processes
• People/innovation/growth assets
– Is intended to emphasize that all of these areas are
important to an organization’s success and that there
should be a balance among them.
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 Benchmarking of Best Practices
• Benchmark
– The standard of excellence against which to measure
and compare.
• Benchmarking
– Is the search for the best practices among competitors
or non-competitors that lead to their superior
performance. (to learn from others)
– Is a control tool for identifying and measuring specific
performance gaps and areas for improvement.
• Sometimes those best practices can be found inside the organization
and just need to be shared.
• In today’s environment, organizations seeking high performance levels
can’t afford to ignore such potentially valuable information.

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 Exhibit 18–11 Steps to Successfully Implement an Internal
Benchmarking Best Practices Program

1. Connect best practices to strategies and goals.

2. Identify best practices throughout the organization.
3. Develop best practices reward and recognition
systems.
4. Communicate best practices throughout the
organization.
5. Create a best practices knowledge-sharing system.
6. Nurture best practices on an ongoing basis.
Contemporary Issues in Control (cont’d)
• Workplace Concerns
– Workplace privacy versus workplace monitoring:
• E-mail, telephone, computer, and Internet usage
• Productivity, harassment, security, confidentiality, intellectual
property protection
– Employee theft
• The unauthorized taking of company property by employees
for their personal use.
– Workplace violence
• Anger, rage, and violence in the workplace is affecting
employee productivity.

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Exhibit 18–13 Control Measures for Employee Theft or Fraud

Sources: Based on A.H. Bell and D.M. Smith. “Protecting the

Company Against Theft and Fraud,” Workforce Online
(www.workforce.com) December 3, 2000; J.D. Hansen. “To Catch
a Thief,” Journal of Accountancy, March 2000, pp. 43–46; and J.
Greenberg, “The Cognitive Geometry of Employee Theft,” in
Dysfunctional Behavior in Organizations: Nonviolent and Deviant
Behavior, eds. S.B. Bacharach, A. O’Leary-Kelly, J.M. Collins, and
R.W. Griffin (Stamford, CT: JAI Press, 1998), pp. 147–93.
Exhibit 18–15 Control Measures for Deterring or Reducing
Workplace Violence

Sources: Based on M. Gorkin, “Five Strategies and Structures for Reducing

Workplace Violence,” Workforce Online (www.workforce.com). December
3, 2000; “Investigating Workplace Violence: Where Do You Start?”
Workforce Online (www.forceforce.com), December 3, 2000; “Ten Tips on
Recognizing and Minimizing Violence,” Workforce Online
(www.workforce.com), December 3, 2000; and “Points to Cover in a
Workplace Violence Policy,” Workforce Online (www.workforce.com),
December 3, 2000.
Contemporary Issues in Control (cont’d)

• Corporate Governance
– The system used to govern a corporation so that the
interests of the corporate owners are protected.
• Corporate governance has been reformed.
• Two areas where reform has taken place –
– Changes in the role of boards of directors
» The Sarbanes-Oxley Act puts greater demands on board members
of publicly traded companies in the United States to do what they
were empowered and expected to do.
– More disclosure and transparency of corporate financial information
» The Sarbanes-Oxley Act also called for more disclosure and
transparency of corporate financial information. Certification of
financial results by senior management.

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