Foundati

ons of
control

What is controlling ?
Controlling
The process of measuring performance and

taking action to ensure desired results.

Is the management function that involve

monitoring activities to ensure that they are

being accomplished as planned and correcting
any significant deviations .

why is control important ?

1. Has a positive and necessary role in the

management process.
2. Ensures that the right things happen, in the

right way, at the right time.

3. Organizational learning and after-action

review

Control Process
Actual
Measure
Performance Performance

Implement
Desired
Program
Performance
for
Corrections

Compare
with
Standard

Identify
Deviations

Develop
Program
Analyze
for
Deviations
Corrections

Note that :Goals , objectives and

standards are stated in
the planning process

Control Process
Compare
Compare
Performance
Performance
to
to Standard
Standard
Objectives
Objectives

Standard
Standard

Standard
Standard
Attained?
Attained?

Do
Do Nothing
Nothing

No

Variance
Variance
Acceptable?
Acceptable?
Measure
Measure
Performance
Performance

Yes

Yes

Do
Do Nothing
Nothing

No

Standard
Standard
Acceptable?
Acceptable?

Yes

Identify
Identify
Causes
Causes

No

Revise
Revise
Standard
Standard
Prentice
Hall, 2001

Chapter 13

Correct
Correct
Performance
Performance

What is the control process?

1.

Establish clear standards

2. Measure actual performance

3. Compare results with standards
4. Take corrective actions

What is the control process?

Step 1 establishing objectives and

standards

Output standards
Measure performance results in terms of
quantity, quality, cost, or time.
Input standards
Measure effort in terms of amount of
work expended in task performance.

 Step 2 measuring actual performance

Goal is accurate measurement of actual

performance results and/or performance
efforts.
Must identify significant differences
between actual results and original plan.
Effective control requires measurement.

 Step 2 measuring actual performance

Sources of information
Personal observations
Statistical reports
Oral reports
Written reports

Note that :What mangers measures is probably more

important to the control process than how they
measure .

 Step 3 comparing results with

objectives and standards

Need for action reflects the difference between

desired performance and actual performance.

Comparison methods:
Historical comparison
Relative comparison
Engineering comparison

 Step 4 taking corrective action

Taking action when a discrepancy exists

between desired and actual performance.

Management by exception
Giving attention to situations showing the
greatest need for action.
Types of exceptions
Problem situation
Opportunity situation

Range of variation
Acceptable
Upper Limit

Standard

Acceptable
Lower Limit

Acceptable
Range of
Variation

A good

control system should:

Be flexible so managers can respond as

needed.
Provide accurate information about
the organization.
Provide information in a timely
manner.

Three Types of Control

Input
Input

Processes
Processes

Output
Output

Feed
Feed forward
forward
Control
Control

Concurrent
Concurrent
Control
Control

Feedback
Feedback
Control
Control

Anticipates
Anticipates
Problems
Problems

Corrects
CorrectsProblems
Problems Corrects
CorrectsProblems
Problems
as
after
asThey
TheyHappen
Happen
after They
TheyOccur
Occur

1. Feed forward control

Sometimes called preliminary or preventive control

Examples :. Pre-employment drug testing

. Inspect raw materials
. Hire only college graduates

2. Concurrent control
.Action taken as input are transformed into output to

ensure that standards are met

.Includes rules and regulations for guiding employee

tasks and behaviors

.Intent to ensure that work activities produce the

correct results
Examples :. Adaptive culture
. Total quality management
. Employee self-control

3.

Feedback control

Focuses on the organizations

outputs
also called post-action or output
control
Examples :. Analyze sales per employee
. Final quality inspection

Internal and external control

Internal control
Allows motivated individuals and groups to exercise
self-discipline in fulfilling job expectations.

External control
Occurs through personal supervision and the use of
formal administrative systems.

Clan

Control

control through the development of an internal system of

values and norms.
Both

culture and clan control accept the norms and values as

their own and then work within them.

Examples include dress styles, normal work hours, pride taken

in work.

These

methods provide control where output and behavioral

control does not work.

Strong

culture and clan control help worker to focus on the

organization and enhance its performance.

 Discipline
Corrective action to get employees to meet
standards and standing plans.
To change ineffective employee behavior.
To let employees know that action will be taken
when standing plans or performance
requirements are not met.
To maintain authority when challenged.
Progressive discipline steps
Oral warning, written warning, suspension, and
dismissal.
Documentation must be maintained.

Problem Employees

Control Methods
Bureaucratic
Objective
Normative
Concertive
Self-Control

 Bureaucratic
Top-down control
Bureaucratic influencing behavior
through : Rules
Policies
Hierarchy of authority
Witten documentation
Rewards systems

 Objective
The use of observable measures
Behavioral control
regulate employee behaviors and
actions
managers monitor and shape employee
behaviors

Output control
measure employee outputs
focus is on outcomes not behaviors

 Normative
Relies on : Culture values
Traditions
Shared beliefs
Trust
Company values and beliefs guide
employee behavior and decisions
Cultural norms not rules, guide
employees

Concertive
Employees are guided by the beliefs
of work groups
Autonomous work groups
operate without managers
group members control processes, output,
and behaviors

 Self-Control
Employees control their own behavior
Employees make decisions within wellestablished boundaries
Management and employees set goals and
monitor their own progress

Tools of control
Example of a Balanced
Scorecard
Financial

Customer

EVA
Ratios and Budgets

Defections
Partnerships

Internal
Business
Quality
Productivity

Innovation/Learning
Waste minimization
Time to market

Basic Accounting Tools

Income statement
Present revenues and expenses , profit and loss for
the stated period of time

balance sheet
Presents the assets and liabilities , owners equity
for a stated period of time

Cash flow statement

Present the cash flow receipt and payments for the
stated period of time.

Common financial ratios

Liquidity ratio
Current ratio
Quick ratio

Efficiency ratio
Inventory turnover
Average collections

Leverage ratio
Debt to equity
Debt coverage

Profitability ratio
Gross profit margin
Return on equity