CHAPTER 7

Characteristics of Three Approaches to Control Systems

• Market

 Uses external market mechanisms, such as price competition and relative market
share, to establish standards used in system to gain competitive advantage.

• Bureaucratic

 Emphasizes organizational authority of administrative and hierarchical mechanisms to

ensure appropriate employee behaviors and to meet performance standards.

• Clan

 Regulates employee behavior by the shared values, norms, traditions, rituals, beliefs,
and other aspects of the organization’s culture.

CONTROLLING

 The process of monitoring activities to ensure that they are being accomplished as planned and
of correcting any significant deviations

 An effective control system ensures that activities are completed in ways that lead to
the attainment of the organization’s goals.

The Control Process

The Controlling process assures the management that the performance rate
does not deviate from its standards. 
Controlling Process consists of five steps: 
1. Setting the standards.
2. Measuring the performance.
3. Comparing the performance to the set standards 
4. Determining the reasons for any such deviations which is required to be
paid heed into. 
5. Take corrective action as required. Correction can be made in regards to
changing the standards by setting them higher or lower or identifying new
or additional standards in the department.

Range of variation
The acceptable parameters of variance between actual performance and the standard

Taking managerial action to correct deviations or inadequate standards

 Immediate corrective action

 Correcting a problem at once to get performance back on track

 Basic corrective action

 Determining how and why performance has deviated and then correcting
the source of deviation

Performance could be defined simply in terms of the achievement of quantified objectives.

But performance is not only a matter of what people achieves but also how they are achieving it.
A high performance result comes from appropriate behavior and the effective use of required
knowledge, skills and competencies.

Organizational performance management is the process of making sure that your

company resources are being properly used in pursuit of company goals."

Productivity is a measure of economic or business performance that indicates

how efficiently people, companies, industries and whole economies convert
inputs, such as labor and capital, into outputs, such as goods or services.

Organizational effectiveness is defined as a concept to measure

the efficiency of an organization in meeting its objectives with the help of given
resources without putting undue strain on its employees. It is about how the
company can produce the target quota of products, how efficient its process
is, and how much waste is produced.
• Measuring actual performance

 Personal observation, statistical reports, oral reports, and written reports

 Management by walking around (MBWA)

 A phrase used to describe when a manager is out in the work area

interacting with employees

Types Of Control

• Feedforward control

 Control that prevents anticipated problems

• Concurrent control

 Control that takes place while an activity is in progress

• Feedback control

 Control that takes place after an action

 Provides evidence of planning effectiveness

 Provides motivational information to employees

The most common metrics used to determine a company's value include

economic value added and market value added.

Economic value added (EVA) is a performance measure developed by Stern

Stewart & Co. (now known as Stern Value Management) that attempts to
measure the true economic profit produced by a company. 1 It is frequently
also referred to as "economic profit," and provides a measurement of a
company's economic success (or failure) over a period of time. Such a metric
is useful for investors who wish to determine how well a company has
produced value for its investors, and it can be compared against the
company's peers for a quick analysis of how well the company is operating in
its industry.
Market value added (MVA), on the other hand, is simply the difference
between the current total market value of a company and the capital
contributed by investors (including both shareholders and bondholders). It is
typically used for companies that are larger and publicly-traded. MVA is not a
performance metric like EVA but instead is a wealth metric, measuring the
level of value a company has accumulated over time.
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Vedantu. (2021, February 4). Control Process. https://www.vedantu.com/commerce/control-

process

Overview of Organizational Performance Management: Guidelines and Resources. (n.d.). Free

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Holliday, M. (2021, April 13). What Is Productivity? Why It Matters & How to Measure It.

Oracle NetSuite. https://www.netsuite.com/portal/resource/articles/business-

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Bhasin, H. (2020, October 26). Organizational Effectiveness – Definition, Meaning and Six

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Economic Value Added vs. Market Value Added: What’s the Difference? (2021, October 28).

Investopedia.

https://www.investopedia.com/ask/answers/06/economicvsmarketvalueadded.asp

A, N. (n.d.). Ch 17 introduction to controlling. Slideshare.

https://www.slideshare.net/NardiinObada/ch-17-introduction-to-controlling-16923743