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Chapter 13

Foundations of Control

Chapter 11, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada

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LEARNING OUTLINE
Follow this Learning Outline as you read and study this chapter

• What Is Control?
– Define control

– Discuss the reasons why control is important
– Explain the planning-controlling link – Contrast the three approaches to designing control systems

Chapter 11, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada

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LEARNING OUTLINE (cont’d)
Follow this Learning Outline as you read and study this chapter

• The Control Process
– Describe the three steps in the control process

– Explain the three courses of action managers can take in controlling
– Explain why what is measured is more critical than how it’s measured

Chapter 11, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada

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LEARNING OUTLINE (cont’d)
Follow this Learning Outline as you read and study this chapter

• Controlling for Organizational Performance
– Define organizational performance – Describe the most frequently used measures of organizational performance
• Tools for Organizational Performance
– Contrast feed-forward, concurrent, and feedback controls – Explain the types of financial and information controls managers can use – Describe how balanced scorecards and benchmarking are used in controlling
Chapter 11, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada

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LEARNING OUTLINE (cont’d)
Follow this Learning Outline as you read and study this chapter

• Current Issues in Control
– Describe how managers may have to adjust controls for cross-cultural differences – Discuss the types of workplace concerns managers face and how they can address those concerns – Discuss what corporate governance is and how it’s changing
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Chapter 11, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Fundamentals of Management, Fifth Canadian Edition Copyright © 2008 Pearson Education Canada

Robbins. and Nancy Langton.LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter • The Organization’s Culture – Describe the seven dimensions of organizational culture – Discuss the impact of strong culture on organizations and managers – Explain the source of an organization’s culture and how that culture continues – Describe how culture is transmitted to employees 11-6 Chapter 11. Stephen P. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada . Mary Coulter. Fundamentals of Management.

Fundamentals of Management. Mary Coulter.What Is Control? • Control – The process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations • Importance of Control – To ensure that activities are completed in ways that lead to accomplishment of organizational goals Chapter 11. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-7 . and Nancy Langton. Robbins. Stephen P.

Purpose of Controls Goals and Objectives Organizational Divisional Departmental Individual • Taking Corrective Action • Comparing to Standards • Measuring Performance .

Controlling Planning PlanningControlling Linkage Leading Organizing .

Fundamentals of Management.Exhibit 11. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-10 . Stephen P. and Nancy Langton. Robbins. Mary Coulter.1 The Planning–Controlling Link Planning Goals Objectives Strategies Plans Controlling Standards Measurements Comparison Actions Organizing Structure Human Resource Management Leading Motivation Leadership Communication Individual and Group Behaviour Chapter 11.

Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-11 . Robbins. Stephen P. regulations. traditions. norms.What Is Control? (cont’d) • Types of 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. and Nancy Langton. Fundamentals of Management. procedures. and policies – Clan Control • Regulates behaviour by shared values. and beliefs of the firm’s culture Chapter 11. Mary Coulter. rituals.

2 Approaches to Design Control Systems Chapter 11. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-12 . Robbins.Exhibit 11. Stephen P. Mary Coulter. and Nancy Langton. Fundamentals of Management.

Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-13 . Robbins. and Nancy Langton. Fundamentals of Management. Stephen P.11 Types of Control Input Processes Output Feedforward Control Anticipates problems Concurrent Control Corrects problems as they happen Feedback Control Corrects problems after they occur Chapter 11. Mary Coulter.Exhibit 11.

Tools for Controlling Organizational Performance • Feed-forward 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 Chapter 11. and Nancy Langton. Mary Coulter. Stephen P. Fundamentals of Management. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-14 . Robbins.

Mary Coulter. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-15 . Robbins. Fundamentals of Management.Tools for Controlling Organizational Performance (cont’d) • Feedback Control – Takes place after an activity is done • Corrective action is after-the-fact. Stephen P. 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 Chapter 11. and Nancy Langton.

Measuring actual performance 2. Stephen P. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada . Taking managerial action to correct deviations or inadequate standards 11-16 Chapter 11. Robbins. Mary Coulter. and Nancy Langton. Comparing actual performance against a standard 3. Fundamentals of Management.The Control Process 1.

Fundamentals of Management. Mary Coulter.6 The Control Process Step 1 Measuring Actual Performance GOALS Organizational Divisional Departmental Individual Taking Managerial Action Comparing Actual Performance Against Standard Step 2 Step 3 Chapter 11. Stephen P. Robbins. and Nancy Langton. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-17 .Exhibit 11.

Robbins. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada . and Nancy Langton. Mary Coulter. Stephen P.How and What We Measure • How We Measure – Personal observations (MBWA) – Statistical reports – Oral reports – Written reports • What We Measure – Employees • Satisfaction • Turnover • Absenteeism – Budgets • Costs • Output • Sales 11-18 Chapter 11. Fundamentals of Management.

Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-19 . Robbins.7 Common Sources of Information for Measuring Performance Chapter 11. Fundamentals of Management. and Nancy Langton. Stephen P. Mary Coulter.Exhibit 11.

What Do Managers Measure? • Finances • Operations • People • Information .

Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-21 . Fundamentals of Management. Stephen P.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 Chapter 11. Robbins. Mary Coulter. and Nancy Langton.

Stephen P. Fundamentals of Management.12 Popular Financial Ratios Chapter 11. and Nancy Langton. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-22 . Robbins. Mary Coulter.Exhibit 11.

Exhibit 11. Mary Coulter.12 Popular Financial Ratios (cont’d) Chapter 11. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-23 . Fundamentals of Management. Robbins. Stephen P. and Nancy Langton.

and Nancy Langton. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-24 . Robbins.Financial Controls (cont’d) • Other Measures – Economic value added (EVA) • How much value is created by what a company does with its assets. Fundamentals of Management. less any capital investments in those assets: the rate of return earned over and above the cost of capital Chapter 11. Stephen P. Mary Coulter.

Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-25 . Mary Coulter. and Nancy Langton. then managers have created wealth Chapter 11.Financial Controls (cont’d) • Other Measures (cont’d) – Market value added (MVA) • The value that the stock market places on a firm’s past and expected capital investment projects • If the firm’s market value (its stock and debt) exceeds the value of its invest capital (its equity and retained earnings). Fundamentals of Management. Stephen P. Robbins.

Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-26 . Mary Coulter. Fundamentals of Management. Stephen P. and Nancy Langton.Controlling Organizational Performance • Balanced Scorecard – A measurement tool that uses goals set by managers in four areas to measure a company’s performance: • • • • Financial Customer Internal processes People/innovation/growth assets Chapter 11. Robbins.

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. and Nancy Langton. Mary Coulter. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-27 . Fundamentals of Management.. Robbins. unsorted list of customer names) • Information: data that has been analyzed and organized such that it has value and relevance to managers Chapter 11. Stephen P.

Robbins. Fundamentals of Management. Stephen P. Mary Coulter. and Nancy Langton. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-28 .Benchmarking of Best Practices • Benchmarking – The search for the best practices among competitors or non-competitors that lead to their superior performance – A control tool for identifying and measuring specific performance gaps and areas for improvement Chapter 11.

33-37. Mary Coulter. Fundamentals of Management. and Nancy Langton. Leahy. “Extracting Diamonds in the Rough. August 2000.13 Steps to Nurture best practices Implementing a Best on an ongoing basis best practices Practices Program Create knowledge sharing system Communicate best practices throughout the organization Develop best practices reward and recognition systems Identify best practices throughout the organization Connect best practices to strategies and goals Source: Based on T. Robbins. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-29 .” Business Finance.Exhibit 11. Chapter 11. Stephen P. pp.

Comparing Actual Performance Against Standard • 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 11-30 Chapter 11. Robbins. Mary Coulter. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada . and Nancy Langton. Fundamentals of Management. Stephen P.

and Nancy Langton. Robbins.Exhibit 11. Stephen P.8 Defining the Acceptable Range of Variation Acceptable Upper Limit Acceptable Range of Variation Standard Acceptable Lower Limit t t+1 t+2 t+3 Time Period ( t ) t+4 t+5 11-31 Chapter 11. Mary Coulter. Fundamentals of Management. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada .

Exhibit 11.9 Sales Performance Figures for July. and Nancy Langton. Beer Unlimited Chapter 11. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-32 . Stephen P. Fundamentals of Management. Robbins. Mary Coulter.

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. and Nancy Langton. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-33 . Mary Coulter. and achievable Chapter 11. Stephen P. fair. Robbins. Fundamentals of Management.

Exhibit 11. Stephen P. Robbins.10 Managerial Decisions in the Control Process Compare actual performance with standard No Is variance acceptable? Goals Standard Measure actual performance No Is standard acceptable? No Revise standard Correct performance Y es Identify cause of variation Y es Do nothing Is standard being attained? Y es Do nothing Chapter 11. Mary Coulter. Fundamentals of Management. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-34 . and Nancy Langton.

382-3) Corrective Action Multiple Criteria Emphasis on Exceptions Accuracy Timeliness EFFECTIVE CONTROL SYSTEM Economy Strategic Placement Reasonable Criteria Robbins et al. Fundamentals of Management..17 .Qualities Of An Effective Control System (PP. Flexibility Understandability FOM 7. Inc. 4th Canadian Edition ©2005 Pearson Education Canada.

self-control Formal. external controls Comprehensive controls Loose. easy-to-measure criteria Increased number of controls Reduced number of controls Informal. personal management Many complex criteria Few. personal management Organization Size Large High Low High Low Open Closed High Low Formal.Contingency Factors in Control Systems Contingency Variable Small Control Recommendations Informal. informal controls Position and Level Degree of Decentralization Organizational Culture Importance of an Activity .

Dysfunctional Controls Inflexible Controls Unreasonable Standards .

Robbins. Fundamentals of Management. Stephen P.Current 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 Chapter 11. and Nancy Langton. Mary Coulter. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-38 .

Stephen P. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-39 . Robbins. Fundamentals of Management. Mary Coulter. telephone. rage. computer. and Internet usage can all be monitored – Employee theft • The unauthorized taking of company property by employees for their personal use – Violence • Anger. and Nancy Langton.Current Issues in Control (cont’d) • Workplace Concerns – Privacy versus monitoring: • E-mail. and violence in the workplace is affecting employee productivity Chapter 11.

Robbins. p. and Nancy Langton. Fundamentals of Management. McElvoy.7% 44. Stephen P.8% 14.14 Types of Workplace Monitoring by Employers Internet use Telephone use E-mail messages Computer files Job performance using video cameras Phone conversations 54.0% 38.1% 30. Mary Coulter.5% Voice-mail messages Source: Based on S.6% 11.8% 11-40 . Chapter 11. June 2002. “E-Mail and Internet Monitoring and the Workplace: Do Employees Have a Right to Privacy?” Communications and the Law.Exhibit 11. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 6. 69.

Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-41 . and Nancy Langton.15 Control Measures for Employee Theft or Fraud Chapter 11. Robbins. Stephen P. Fundamentals of Management. Mary Coulter.Exhibit 11.

16 Control Measures for Deterring or Reducing Workplace Violence Chapter 11. Mary Coulter. Stephen P. Fundamentals of Management. Robbins. and Nancy Langton.Exhibit 11. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-42 .

Fundamentals of Management.Current Issues in Control (cont’d) • 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 Chapter 11. Mary Coulter. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-43 . Robbins. Stephen P. and Nancy Langton.

Entrepreneurs Managing Downturns • Recognizing crisis situations • Things can turn worse • Exit the venture • Business evaluation .

Entrepreneurs Controlling for Growth • Plan for growth • Organize for growth • Control for growth .

symbols. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-46 . Mary Coulter. rituals. Stephen P. Fundamentals of Management. and Nancy Langton.Understanding Organizational Culture • What Is Organizational Culture? – A system of shared meanings and common beliefs held by organizational members that determine. Robbins. myths. how they act toward each other – “The way we do things around here” • Values. to a large degree. and practices – Implications: • Culture is a perception • Culture is shared • Culture is a descriptive term Chapter 11.

3 Dimensions of Organizational Culture Degree to which employees are expected to exhibit precision. analysis. Robbins. Stephen P. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada Degree to which work is organized around teams rather than individuals 11-47 . Fundamentals of Management. and Nancy Langton. Mary Coulter. and attention to detail Degree to which employees are encouraged to be innovative and to take risks Degree to which managers focus on results or outcomes rather than on how these outcomes are achieved Attention to Detail Innovation and Risk-taking Outcome Orientation Stability Organizational Culture People Orientation Degree to which organizational decisions and actions emphasize maintaining the status quo Aggressiveness Team Orientation Degree to which management decisions take into account the effects on people in the organization Degree to which employees are aggressive and competitive rather than cooperative Chapter 11.Exhibit 11.

Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-48 .Strong Vs. and Nancy Langton. Stephen P. Robbins. Mary Coulter. Weak Cultures • Strong Cultures – Key values are deeply held and widely held – Have strong influence on organizational members • Factors Influencing the Strength of Culture – Size of the organization – Age of the organization – Rate of employee turnover – Strength of the original culture – Clarity of cultural values and beliefs Chapter 11. Fundamentals of Management.

Stephen P. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-49 . Mary Coulter.Developing an Organization’s Culture • The founder’s philosophy • Recruitment of employees who “fit” • Behaviour of top management • Socialization of new employees to help them adapt to the culture Chapter 11. Robbins. Fundamentals of Management. and Nancy Langton.

Fundamentals of Management. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-50 .Exhibit 11. and Nancy Langton.4 How an Organization’s Culture Is Established Top Management Philosophy of Organization's Founders Selection Criteria Organization's Culture Socialization Chapter 11. Mary Coulter. Stephen P. Robbins.

Fundamentals of Management. and Nancy Langton. Mary Coulter. Robbins. phrases. Stephen P. Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-51 .How Employees Learn Culture • Stories – Narratives of significant events or actions of people that convey the spirit of the organization • Rituals – Repetitive sequences of activities that express and reinforce the values of the organization • Material Symbols – Physical assets distinguishing the organization • Language – Acronyms and jargon of terms. and word meanings specific to an organization Chapter 11.

Fifth Canadian Edition Copyright © 2008 Pearson Education Canada 11-52 . Mary Coulter. and Nancy Langton.5 Managerial Decisions Affected by Culture Chapter 11. Fundamentals of Management.Exhibit 11. Robbins. Stephen P.