Chapter 18 FOUNDATIONS OF CONTROL © Prentice Hall, 200218-1

Chapter 18

FOUNDATIONSOF

CONTROL

© Prentice Hall, 2002 18-1

What Is Control?Control:

the process of monitoring activities to ensure that they are being accomplished as planned and of correcting significant deviations.

• control systems are judged in terms of how well they facilitate goal achievement.

• There are three different approaches to designing organizational control systems. (See Exhibit 18.1 on p. 496.):


What Is Control?• There are three different approaches to designing

organizational control systems. (See Exhibit 18.1 on p. 496.):

1. market control - emphasizes the use of external market mechanisms to establish standards of performance. E.g., use of price competition, relevant market share to establish standards.

When this approach is used?• useful where products and services are distinct• useful where marketplace competition is considerable• divisions turned into profit centers and judged by the

percentage of total corporate profits each contributes


What Is Control? (cont.)Control

2. bureaucratic control - emphasizes organizational authority.

• relies on administrative rules, procedures, and policies.

• depends on standardization of activities, well-defined job descriptions, and other administrative mechanisms such as budgets.


What Is Control? (cont.)Control

3. clan control - behavior regulated by shared values, traditions, and other aspects of organizational culture.

• dependent on individual and group to identify expected behaviors and performance measures.

• found where teams are common and technology changes often.

• For example in IUG individuals are well aware of expectations regarding appropriate work behavior and performance standards.



Control system

Most organizations don’t rely totally on just one of these approaches to designing an effective control system.

Why Is Control Important? Control is the Final Link in the Management Process

– provides the critical link back to planning– only way managers know whether organizational goals

are being met

Permits Delegation of Authority– fear that employees will do something wrong for which

the manager will be held responsible– provides information and feedback on employee

performance


StructureHuman Resource Management

Organizing

The Planning-Controlling Link

StandardsMeasurementsComparisonsActions

Controlling

GoalsObjectivesStrategiesPlans

Planning

MotivationLeadershipCommunicationIndividual and Group Behavior

Leading


The Control Process


The Control ProcessBackground

– controlling is a three-step process– assumes that performance standards already exist

• specific goals are created in the planning process

Measuring:

How we measure is done through four common sources of information that managers use. Each of these sources has its own advantages and drawbacks.

1. personal observation - permits intensive coverage.– Management By Walking Around (MBWA)– drawbacks - subject to personal biases

» consumes a great deal of time» suffers from obtrusiveness: mistrust


The Control Process (cont.)Measuring (cont.)

How We Measure (cont.)

2. statistical reports - numerical data are easy to visualize and effective for showing relationships. Use of graphs, bar charts..

• drawbacks - not all operations can be measured.

• important subjective factors may be ignored.

3. oral reports - includes meetings, telephone calls– may be best way to control work in a virtual

environment

– technology permits creation of written record from oral report

– drawbacks - filtering of information© Prentice Hall, 2002 18-11

The Control Process (cont.)How We Measure (cont.)

4. written reports - often more comprehensive and concise than oral reports

• usually easy to file and retrieve

– comprehensive control efforts should use all four approaches.


What We Measure.

what we measure more critical than how we measure. • control criteria applicable to any management situation:

1. employee satisfaction, absenteeism, and turnover.

2. keeping costs within budgets. • control system needs to recognize the diversity of

activities• some activities difficult to measure in quantifiable terms.• most activities can be grouped into some objective

segments that can be measured.• when objective measures are not available, should rely on

subjective\qualitative measures

The Control Process (cont.)


The Control Process (cont.)Comparing Comparing is the next step in the control process. 1. It determines the degree of variation between

actual performance and the standard.2. It’s critical to determine the range of variation,

which are the acceptable parameters of variance between actual performance and the standard. (See Exhibit 18.4 on p. 501.)

3. An example of comparing actual performance to standards is shown in Exhibit 18.5 on p. 502.


Defining The Acceptable Range Of Variation

AcceptableUpper Limit

Standard

AcceptableLower Limit

Mea

sure

men

t of

Per

form

ance

AcceptableRange ofVariation

t t+1 t+2 t+3 t+4 t+5

Time Period (t)


Sales Performance Figures For July, Eastern States Distributors

BrandHeinekenMolsonIrish AmberVictoria BitterLabatt’sCoronaAmstel LightDos EquisTecateTotal cases

Standard* 1,075 630 800 620 540 160 225 80 170 4,300

Actual* 913 634 912 622 672 140 220 65 286 4,464

Over (under)* (162) 4 112 2 132 (20) (5) (15) 116 164

* hundreds of cases


The Control Process (cont.)Taking Managerial Action.

• Correct Actual Performance - action taken when the performance variation is unsatisfactory. Example of corrective actions: changing strategy, structure, training, redesigning jobs.

• immediate corrective action - corrects problems at once to get performance back on track.

• basic corrective action - identifies reason for performance variation. corrects the source of variation.

• Revise the Standard - variance results from an unrealistic standard.

• standard, not performance, needs correction

• troublesome to revise the standard downward© Prentice Hall, 2002 18-17

Managerial Decisions in the Control Process


Types Of ControlFeedforward\preventive Control

– prevents anticipated problems

– most desirable type of control

– requires timely and accurate information that often is difficult to get

Concurrent\parallel Control

– takes place while activity is in progress

– corrects problem before it becomes too costly

– best-known form is direct supervision


Feedback Control– takes place after the activity is done– problems may already have caused damage or

waste– the most popular type of control

• feedback may be only viable form of control available

– feedback has two advantages• provides meaningful information on the

effectiveness of planning• can enhance employee motivation

Types of Control (cont.)


Types Of Control

Input OutputProcesses

Anticipatesproblems

FeedforwardControl

Correctsproblems after

they occur

FeedbackControl

Correctsproblems asthey happen

ConcurrentControl


Flexibility

Qualities Of An Effective Control System

StrategicPlacement

UnderstandabilityReasonable

Criteria

EFFECTIVECONTROLSYSTEM

TimelinessMultipleCriteria

CorrectiveAction

Accuracy

EconomyEmphasis onExceptions


Contingency Factors in the Design of Control Systems


• methods of controlling people and work can be quite different in other countries. E.g., global companies.

• differences are most marked in the measurement and corrective action steps

• in technologically advanced nations, controls are indirect• in less technologically advanced nations, controls are more

direct• laws in different countries provide different constraints on

corrective action: eg, laying off employees, taking momey out of the country.

• data used for controlling may not be comparable in different countries though for the same company but different branches.

Adjusting Controls for Cultural Differences


Workplace Privacy

employers have the right to monitor employee communications, examine employee computers and files, and use surveillance cameras

• reasons for monitoring include prevention of:

1. Recreational\fun on-the-job Web surfing

2. creation of hostile work environments with e-mail

3. security leaks of critical information• Electronic Communications Privacy Act - 1986

• prohibits unauthorized interception\catching of electronic communication

• workplace electronic monitoring is still legal

Contemporary Issues In Control


Contemporary Issues In Control (cont.)Workplace Privacy (cont.)

companies are developing and enforcing workplace monitoring policies.

• develop unambiguous computer usage policy.

• inform employees that computers may be monitored.

• provide clear guidelines on acceptable use of company e-mail system and the Web.


Workplace Monitoring by employers in US

Track telephone calls (numbers and time spent) 39%Store and review employee e-mail messages 27%Store and review computer files 21%Log computer time and keystrokes entered 15%Record and review telephone conversations 11%Store and review voice-mail messages 6%


Contemporary Issues In Control (cont.)Employee Theft

unauthorized taking of company property by employees for their personal use. Up to 85 percent of all organizational theft and fraud is committed by employees.

• is an escalating problem in all types of organizations

• different proposals to explain employee theft. They will depend on who you ask:

1. industrial security - opportunity presents itself due to lack of controls and favorable circumstances

2. criminology - people have financial-based pressures or vice-based pressures (such as gambling debts).

3. clinical psychology - people are able to rationalize any type of behavior. E.g., every one does it.


Control Measure for Deterring or Reducing Employee Theft or Fraud


Contemporary Issues In Control (cont.)Workplace Violence

many factors contribute to workplace violence including:

1. employee work driven by time, numbers, and crises.

2. rapid and unpredictable change

3. destructive communication style of manager

4. authoritarian leadership

5. defensive attitude

6. double standards

7. unresolved grievances\complains

8. emotionally troubled employees

9. repetitive, boring work© Prentice Hall, 2002 18-30

Contemporary Issues In Control (cont.)Workplace Violence (cont.)

– contributing factors (cont.)• faulty or unsafe equipment• hazardous work environment• culture of violence


Workplace Violence

Witnessed yelling\scream and other verbal abuse 42%Yelled at coworkers themselves 29%Cried over work-related issues 23%Seen someone purposely damage machinesor furniture 14%Seen physical violence in the workplace 10%Struck a coworker 2%



Discussions Contrast market, bureaucratic, and clan control.

Market control emphasizes the use of external market mechanisms such as price, competition, and relative market share to establish the standards used in the control system. Bureaucratic control emphasizes organizational authority and relies on administrative rules, regulations, procedures, and policies. Clan control regulates employee behavior by means of the shared norms, values, traditions, rituals, beliefs, and other aspects of the organization’s culture.


Discussions Why is feedforward control the most desirable type of

control?Feedforward controls are desirable because they allow managers to prevent problems rather than cure them.

What qualities will an effective control system have?An effective control system has the following qualities: accuracy, timeliness, economy, flexibility, understandability, reasonable criteria, strategic placement, emphasis on the exception, multiple criteria, and corrective action.


Discussions

What is the role of control in management?

Control is the process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations.


Discussions What would an organization have to do to change its

dominant control approach from bureaucratic to clan? From clan to bureaucratic?

Changing from a bureaucratic approach to a clan approach would entail a radical change in corporate culture because you would be going from a control system that emphasized rules and administrative mechanisms to a control system that emphasized the cultural values, rituals, and beliefs. Changing from a clan approach to a bureaucratic approach would mean having in place the rules, standardized activities, procedures, and other administrative mechanisms that would be used to control employee behavior.

Documents

Chapter 18 FOUNDATIONS OF CONTROL © Prentice Hall, 200218-1