IBM Chapter 9

Antonio Evander - Galih Suci - Janice Alesandrina - Richard Harissen - Stefanus Arvin
WHY AND HOW MANAGER
CONTROL
Controlling is the process of measuring performance and taking action to ensure desired
results.

Henry Schacht, linked control to “friendly facts”.

Friendly facts are facts that reinforce what you are doing are nice, because they help in terms
of psychic reward.

Figure 9.1
The role of controlling in the management process

One of the great benefits of effective control is organizational learning.

Example : An after-action review is a systematic assessment of lessons learned and results

accomplished in a completed project.
TYPES OF
CONTROL

Work Inputs Work Throughputs Work Outputs

Feedforward Controls Concurrent Controls Feedback Controls
(preliminary controls) (steering controls) (post-action controls)

 Ensure that objectives are clear, proper directions are
established, and the right resources are available to
accomplish the objectives.
 Key question : “What needs to be done before we
begin?”
 Example :
The Body Shop ensures that every ingredient has
the exact same quality from every supplier to make
the products.
 Focus on what happens during the work process.
 Steering controls → make sure objective-focused
actions are executed according to plan.
 Key question : “What can we do to improve things right
now?”
 Example:
The Body Shop monitored its product from
suppliers until it reaches customers. They ensure
there are no mistakes or problems during the
process.
 Focus on the quality of end results rather than on inputs
and activities.
 Largely reactive; to solve problems after they occur and
to prevent future problems from occurring.
 Key question : “Now that we are finished, how well did
we do?”
 Example :
The Body Shop gives a feedback form to its
customer; the store’s supervisor evaluate how
much sales they had in the end of the day.
TYPES OF cONTROL
Managers have 2 broad options
• Trust and expect people to control their own behavior (internal/self-control)
• Structuring situations to increase the likelihood that things will happen as planned (external control)

The most effective control : a mix of both

2. Bureaucratic Control
1. Self Control
• Influences behavior through authority, policies,
• Internal control that occurs through self-management and self-
procedures, job desc, budgets, and day-to-day
discipline
supervision to make sure that people act in harmony
• Relied on jobs that emphasizes participation, empowerment,
with organizational interests
involvement which requires trust
• Flows through organization’s hierarchy/authority
• Managers have to give the worker confidence and freedom to
• Example:
exercise their self-control
Policy regarding sexual harassment in an
• Occur in daily life
organization, therefore they have to make sure that
• Example:
members behave respectfully with no sexual pressure
Self-control in managing money, in relationships, eating and
or impropriety toward one another.
drinking, health behaviors, study habits
TYPES OF CONTROL
3. Clan Control / Normative Control
• Influencer behavior through norms and expectations set by the
organizational culture
• Occur in people who share values and identify strongly with one
another who behave in consistent ways
• Example:
Clan control in a university reflected in how people dress, use
language, act in class during leisure time, often is because
peers’ expectation
4. Market Control
• Essentially the influence of market competition on the behavior of
organizations and their members
• How a company keeps up with the competition
• Occur in business firms as product adjustments, pricing, promotions,
such as green products and sustainability practices
• Example:
A company released its stores powered by renewable energy, people
respond positively, later the effect is felt by its competitors and
pressures them to do better
Four Steps in the Control
Process
Step 1 : Establish performance objectives and standards
• Set-up performance objectives and standards
• The objectives and standards define what one wants to accomplish in terms of
“critical” or “essential” results that will make a real performance difference.
Example : Indomie want their new flavour of instant noodles to increase sales by
20% by the end of the months.
• 2 types of standards:
• Output standards - measures performance results
Ex. sales growth, quantity and quality of production
• Input standards - measures work efforts that go into a performance task
Ex. efficient use of resources and work attendance

Step 2 : Measure actual performance

• Uses both standards to carefully document results
• Performance measurement must be accurate to identify significant difference
between what has been planned and what is really taking place.
Example : Indomie’s manager check how is the sales of the new flavour
Indomie has grown
Four Steps in the Control
Process
Step 3 : Compare Results with Objectives and Standards
• Control equation :
Need for Action = Desired Performance - Actual Performance
Example : Organizations use historical comparisons, where past experience
becomes the baseline for evaluating current performance.

Step 4 : Take Corrective Action

• Take actions needed to correct problems or make improvements
• Management by exception - the practice of giving attention to situations that show
the greatest need for action
• The first is where actual performance is less than desired. This must be understood
so that corrective action can restore performance to the desired level.
• The second is where actual performance turns out higher than what was desired.
This opportunity situation must be understood with the goal of continuing or
increasing the high level of accomplishment in the future.
 Control Tools and Techniques B. Inventory Control
• Ensure that inventory is only big enough to meet immediate
A. Project Management and Control needs.
• Takes responsibility for overall planning, supervision, and
control of projects. • There are 2 styles for inventory control:
• A project manager’s job is to ensure that a project well planned 1. The economic order quantity:
and completed according to plan on time. A method places new orders when inventory level falls
to predetermined points.
Two useful techniques : 2. Just in time scheduling (JIT)
Routes materials to workstations just in time for use.

Example : Starbucks manager is going to do check and make

planning for coffee stocks to make sure Starbucks has enough
coffee for selling.

Gantt Chart CPM/PERT

Graphically displays the scheduling of tasks Combination of the critical path method and the program
required to complete a project evaluation and review technique. The longest pathway from
start to conclusion in a CPM/PERT network is called the
critical path.

Example: Gojek manager is going to make task and scheduling the task to the employees.
Control Tools and Techniques
C. Break even Analysis
• Performs what if calculations under different revenue and cost
conditions
• Break even point is occurs where revenues just equal costs.
• Manager using break even analysis perform what if calculations
under different projected cost and revenue conditions.
• Break even Point = Fixed Costs & Price = Variable Costs

Example: Nike manager is going to calculate the fixed and variable costs and going
to analysis the breakeven point to keep the profit stable.
Control Tools and Techniques
D. Financial Controls E. Balanced Scorecards
a. Balance sheet shows assets and liabilities at one point in time. • Balanced Scorecards tallies organizational performance in
i. Assets = Liabilities financial, customer service, internal process, and innovation
b. Income statement shows profits or losses at one point at time. learning areas.
i. Sales - Expenses = Net Income • How to develop specific scorecard goals :
c. Financial ratios that included in financial performance i. Financial Performance
measurement ii. Customer Satisfaction
i. Profitability (earn revenue) iii. Internal Process Improvement
1. Net Margin = Net Income/Sales iv. Innovation and Learning
2. Return on Asset = Net Income/Total Assets • Advantage : Make better decisions
3. Return on Equity = Net Income/Owner’s Equity
ii. Liquidity (meet short-term obligation) Example : RS PI wants to get higher performance, so they always keep
1. Current Ratio = Current Assets/Liabilities their financial performance, customer satisfaction, internal process
iii. Leverage (use of debt) improvement, and innovation and learning in balanced with score, so it
1. Debt Ratio = Total Debt/Assets can be measured to make the right decision.
iv. Asset Management (inventory efficiency)
1. Asset Turnover = Sales/Total Assets

Example : Danone distributes a monthly financial report to their

employees, shows their record to helps employees in to a better
improvement.