Chapter Eighteen

Control
I. Chapter Objectives
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After reading and studying this chapter, the student should be able to do the following:
1. Define control.
2. Give reasons why control is important.
3. Describe the five-step control process.
4. Distinguish among the three types of control.
5. Explain the important financial controls.
6. Describe the qualities of an effective control system.
7. Outline the contemporary issues in control.

II. Key Teaching Elements/Chapter Outline/Lecture Suggestions

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Object.
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What is Control?
Control provides a way to check actual results against expected 1
results. Action can then be taken to correct the situation if the
results are too far from the expected outcome.

Control is the management function that provides information on 1

the degree to which goals and objectives are being accomplished.
Management engages in controlling by monitoring activities and
taking corrective actions whenever the goals are not being met. An
effective control system ensures that activities that lead to the
attainment of the organization’s goals are completed.

It is also about providing guidelines and mechanisms to keep 1

things on track

Why is Control Important?

Control is important because it’s the final link in the management 2
functions. It’s the only way managers know whether organizational
goals are being met and, if not, why not. Controlling is involved
with planning, organizing, and leading.

An effective control system is important because managers need 2

to delegate duties and empower employees to make decisions

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The Control Process
The control process is a five-step process of determining goals, 3
setting standards, measuring actual performance, comparing actual
performance against those standards, and taking managerial action
to correct deviations or inadequate performances

Setting Standards
Standards are normally set in terms of quantity, quality, finances, 3
or time.

When developing a method of measurement, one must be 3

absolutely sure that the goals are indeed measurable.

Measuring
Personal observation—by monitoring subordinates to make sure 3
things are done right—is the simplest and most common way of
comparing actual performance to standards.

How We Measure
Four common sources of information frequently used by managers 3
to measure actual performance are personal observation, statistical
reports, oral reports, and written reports.

Management by walking around (MBWA) is the best way to 3

make personal observations.

Statistical reports provide information in the form of data that 3

measures results and can be used for comparative purposes. They
also use charts, graphs, and other displays that are easy to visualize.

Control information can be acquired through oral reports, 3

conferences, meetings, one-on-one conversations, or telephone
calls. The advantage of oral control reports is that they can be quick
and allow instant feedback in the form of a two-way conversation

Written reports generally have more information than oral ones and 3
are usually easy to file and retrieve

What We Measure
We measure results to see how they compare with expectations. 3
What we measure is more critical than how we measure.
The results we measure include guest satisfaction, labor costs, food
and beverage costs, employee satisfaction, rooms and room rates,
bed sheets, energy costs, insurance, and labor turnover.

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In simple terms, we measure labor costs because they are the 3
highest of the variable costs

Because all managers, by definition, coordinate the work of others, 3

criteria such as employee satisfaction or turnover and absenteeism
rates can be measured.

Most managers have budgets set in dollar costs for their areas of 3
responsibility. Keeping costs within budget is, therefore, a fairly
common control measure

Results-accountability control system must be able to detect 3

deviations from desired results quickly enough to allow for timely
corrective management action.

Comparing Results
Comparing results with expectations shows the amount of 3
variation between actual performance and the standard or expected
results. Some variation is generally seen between the expected and
the actual results. The range of variation is the acceptable
difference between the actual and expected results.

Managers are concerned with the size and direction of the variance 3

Taking Managerial Action

The final step in the control process is taking managerial action. 3
Correcting actual performance is used by managers if the source
of the performance variation is unsatisfactory. For instance,
corrective action may include changing the way the job tasks are
done, changing strategy (doing different tasks), changing structure
(changing supervisors’/managers’ compensation practices),
changing training programs, redesigning jobs, or firing employees.

Another decision: Do you use immediate corrective action, 3

which corrects problems at once to get performance back on track,
or basic corrective action, which looks at how and why
performance has deviated and then proceeds to correct the source
of deviation?

Effective managers analyze deviations and, when the benefits 3

justify it, take the time to pinpoint and correct the causes of
variance

Good communication is critical to associate control. The most 3

important reason is that good communication helps associates

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understand what is expected of them. Employee performance
reviews take on added significance when viewed from the control
perspective. Rather than a method of reviewing past performance,
they become a control technique.

Types of Control
Managers can use controls in advance of an activity (feedforward 4
control), during the activity (concurrent control), and after the
activity has been completed (feedback control).

Feedforward control focuses on preventing anticipated problems 4

because it takes place in advance of the work activity

Feedforward controls are helpful in that they encourage managers 4

to prevent problems rather than react to them

Concurrent control is a type of control that takes place while a 4

work activity is in progress. When control is enacted while the work
is being performed, management can correct problems before they
become too costly.

Feedback control, the most popular type of control, takes place 4

after the activity is done. For example, financial statements are
examples of feedback control

Feedback control has two advantages over feedforward and 4

concurrent control. First, feedback provides managers with
meaningful information on how effective their planning efforts
were. Second, feedback control can enhance employee motivation.

Other Types of Control

Corporate Control
Planning and scheduling work more effectively may save thousands 4
of dollars for departments such as Food and Beverage and
Banquets.

Food and Beverage Controls

Most operations take inventory and calculate the food and 4
beverage costs expressed as a percentage of sales at least once,
sometimes twice, a month

When you become a manager and assume responsibility for 4

controlling food and beverage items, the first thing to do is to get
the locks changed because you have no idea who has access to
what. The second thing is to review all control procedures. If you
really want to exercise tight control, insist that all orders have your
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signature or approval—that way, you know what should be
received. Next, the stores need to be under the authority and
responsibility of one person who is held accountable for all items
under his or her control.

Operational Financial Controls

At the operational level in the hospitality industry, the financial 5
controls mainly consist of budgets and income statements.
Budgets “guesstimate” the sales figure for the month/year and
allow for up to a specific dollar amount to be spent on any cost of
goods sold or controllable-costs item

Instead of just allowing departments to budget the same amount 5

year in and year out, zero-based budgeting has managers begin
with a budget of zero dollars and justify all the cost of goods sold,
controllable costs, and capital expenditures

Income statements show the actual sales and expenditures for a 5

month or year. They are used extensively in the hospitality industry
as a means of control because they are results driven.

Good managers first control the “big ticket” items that will be most 5
costly if not controlled

Labor costs in a hospitality operation are the largest of the 5

controllable costs. Labor costs, like any other, need to be controlled
in line with sales

In managerial accounting, food and beverage costs are the next 5

largest to be controlled after labor costs. All food
and beverage items need to be costed and priced in advance to
yield a certain percentage

Qualities of an Effective Control System

Effective control systems tend to have certain characteristics in 6
common.

All effective control systems exhibit the following ten characteristics: 6

Accuracy, timeliness, economy, flexibility, understandability,
reasonable criteria, strategic placement, emphasis on exceptions,
multiple criteria, and corrective action.

Contingency Plans and Controls

The most important contingency plan factor that affects the design 7
of an organization’s control system is size of the organization. The
control system should vary according to the organization’s size.

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As organizations increase in size, direct supervision is likely to be 7
supplemented by an expanding formal control system of reports,
regulations, and rules.

Very large organizations typically have highly formalized and 7

impersonal feedforward and feedback controls.

As you move up in the organization’s hierarchy, there is a greater 7

need for several different types of control; this reflects increased
operational complexities.

Adjusting Controls for Cultural Differences

In a global hospitality corporation, managers of foreign operations 7
tend to be controlled less directly by the home office

Because distance creates a tendency to formalize controls, the 7

home office of a global company often relies on extensive formal
reports for control. Global companies rely on the power of
information technology to provide speedy control reports of results.

In less technologically advanced countries, managers tend to rely 7

more on direct supervision and highly centralized decision making
for control

Contemporary Issues in Control

Workplace Privacy
Employees are hired to work, not to surf the Web checking stock 7
prices, placing bets at online casinos, or shopping for presents for
family or friends.

Personal on-the-job Web surfing costs millions of dollars a year in 7

wasted computer resources and billions of dollars in lost work
productivity. Another reason why managers monitor employee e-
mail and computer usage is that they don’t want to risk being sued
for creating a hostile workplace environment because of offensive
messages or an inappropriate image displayed on a coworker’s
computer screen

Concern about sexual harassment is one of the reasons why 7

companies may want to monitor or keep backup copies of all
e-mail.

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 Employee Theft
A high percentage of all organizational theft and fraud is 7
committed by employees, not outsiders

Industrial loss-prevention professionals suggest that people steal 7

because the opportunity presents itself through lax controls and
favorable circumstances

People steal because they can rationalize whatever they’re doing 7

as being correct and appropriate behavior. Hospitality associates
also steal because they often feel underpaid

Workplace Violence
Factors contributing to workplace violence include employee stress 7
caused by long working hours, information overload, daily
interruptions, unrealistic deadlines, and uncaring managers.

Controlling Sustainability
Hotels and restaurants as well as other businesses and 7
organizations must constantly monitor and manage the different
aspects of sustainable practices, such as energy, waste, lighting,
water, heating and cooling, temperature and other sources that
consume energy

Energy Management
There are a variety of solutions to lighting controls, including 7
occupancy sensors, time switches, energy efficient bulbs

Waste Reduction
The tourism industry serves many millions of visitors annually. 7
The waste generated by tourists constitutes a large portion of a
destination’s commercial waste stream.

Restaurants, lodging establishments, and other businesses are 7

finding that promoting a “green” image provides innumerous
benefits, resulting in more long-term cost-savings

Trends in Control
Current trends include:
 A focus on variable and fixed cost controls; reducing costs
without shrinking quality standards or profitability.
 Staffing guides and flexible scheduling; use of staffing
guides and detailed, yet flexible, staffing schedules to
control labor use and expenses
 Labor costs; more care in planning, attentive scheduling,

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 and improving productivity.
 Invest in logistics and equipment; to control costs and drive
productivity
 Hire and train to reduce turnover; screening, hiring, and
training for the future.

III. Teaching Techniques/Classroom Exercises

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Note: The content of these exercises is such that they may also be used as essay
questions.

Exercise One:
Divide students into groups and have each group use the five-step control process
to develop a strategy to control their food and beverage department costs in one area;
either food or beverage.

Exercise Two:
Your banquet department just reported a food cost of 26.4% on a budget of
25.5%. Have your students decide whether to use immediate corrective action or basic
corrective action to correct the problem.

Exercise Three:
Ask students if they are concerned about workplace violence. How does it affect
them in their workplace or at school.

Check Your Knowledge, p. 720

1) Question: Define Control.
Answer: Control provides a way to check actual results against expected results.
Action can then be taken to correct the situation if the results are too far from the
expected outcome.

2) Question: Why is control important?

Answer: Control is important because it’s the final link in the management
functions.

Check Your Knowledge, p. 725

1) Question: Describe the five-step control process?
Answer: The control process is a five-step process of determining goals, setting
standards, measuring actual performance, comparing actual performance against
those standards, and taking managerial action to correct deviations or inadequate
performances

2) Question: What are the four common sources of information managers’ use to
measure employee performance.

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 Answer: Four common sources of information frequently used by managers to
measure actual performance are personal observation, statistical reports, oral
reports, and written reports.

3) Question: Explain the difference between immediate corrective action and basic
corrective action.
Answer: Immediate corrective action corrects problems at once to get
performance back on track and basic corrective action, which looks at how and
why performance has deviated and then proceeds to correct the source of
deviation.

Check Your Knowledge, p. 728

1) Question: Distinguish among the three types of control.
Answer: Managers can use controls in advance of an activity (feedforward
control), during the activity (concurrent control), and after the activity has been
completed (feedback control).

2) Question: When is feedforward control used?

Answer: Feedforward controls are helpful in that they encourage managers to
prevent problems rather than react to them

3) Question: What is the difference between concurrent control and feedback

control?
Answer: Concurrent control is a type of control that takes place while a work
activity is in progress. Feedforward is used in advance to prevent problems.

Check Your Knowledge, p. 733

1) Question: Explain the important financial controls.
Answer: At the operational level in the hospitality industry, the financial controls
mainly consist of budgets and income statements.
Budgets “guesstimate” the sales figure for the month/year and allow for up to a
specific dollar amount to be spent on any cost of goods sold or controllable-costs
item
Income statements show the actual sales and expenditures for a month or year.
They are used extensively in the hospitality industry as a means of control
because they are results driven.

2) Question: Describe the qualities of an effective control system.

Answer: All effective control systems exhibit the following ten characteristics:
Accuracy, timeliness, economy, flexibility, understandability, reasonable criteria,
strategic placement, emphasis on exceptions, multiple criteria, and corrective
action.

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Check Your Knowledge, p. 736
1) Question: Briefly explain zero-based budgeting.
Answer: Zero-based budgeting has managers begin with a budget of zero dollars
and justify all the cost of goods sold, controllable costs, and capital expenditures

2) Question: Outline the contemporary issues in control.

Answer: Workplace privacy, workplace theft, and workplace violence are three
of the primary issues facing management in their role of control.

3) Question: What are some contributors to workplace violence?

Answer: Factors contributing to workplace violence include employee stress
caused by long working hours, information overload, daily interruptions,
unrealistic deadlines, and uncaring managers.

IV. Answers to Chapter 18 Review Questions

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1) Student answers will vary in the description. Control is necessary because it’s the
final link in the management functions. It’s the only way managers know whether
organizational goals are being met and, if not, why not.

2) Four common sources of information frequently used by managers to measure actual

performance are personal observation, statistical reports, oral reports, and written
reports. Student answers should use these four sources as the basis of their answers.

3) Managers can use controls in advance of an activity (feedforward control), during

the activity (concurrent control), and after the activity has been completed (feedback
control). Student answers will vary.

4) Student answers will vary.

V. Mini-Case Discussion Question Answers

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1) The company uses a participatory leadership style through information gathering,

coordinated planning and execution, and a highly trained workforce. They maintain
“Gold Standards” that are beyond industry standards. They’ certify’ employees and
reinforce the training with frequent recognition for achievement.

2) Besides recognition for achievement, they perform regular performance appraisals,

daily lineups, and annual surveys are taken to measure satisfaction. Workers are
further empowered to do whatever it takes to solve guest problems and solve them
immediately.

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