Ch11Control

chp20
Controlling
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Organizational Control
• The systematic process of regulating organizational activities

• Control can focus on events before, during, or after a process
• Three types of control
The American Productivity
1 Feed forward & Quality Center devoted
 Sometimes called preliminary or preventive control specifically to improve
organizational effectiveness
2 Concurrent
 Assesses current work activities, relies on performance standards
 Includes rules and regulations for guiding employee tasks and
behaviors
 Intent to ensure that work activities produce the correct results
3 Feedback
 Focuses on the organization’s outputs; also called post-action or
output control
Organizational Control Focus
Concurrent Control Feedback Control
Feed forward Control
Solve Problems as Solves Problems
Anticipates Problems
They Happen After They Occur
Examples Examples Examples
• Pre-employment • Adaptive •
drug testing culture Analyze sales per
• • Total employee
Inspect raw materials quality • Final
• management quality
Hire only college • Employee inspection
graduates self-control • Survey customers
Focus is on
Focus is on
Focus is on
Ongoing
Inputs Outputs
Processes
Feedforward Control
• Attempts to identify and prevent deviations

• Sometimes called preliminary or preventive control
• Focus is on
– Human
– Material
– Financial resources
Concurrent Control
• Monitors employees activities for consistency with

performance standards
• Assesses
– Current work activities
– Relies on performance standards
– Includes rules and regulations
Feedback Control
• Focuses on outputs
• Sometimes called post action or output control
Feedback Control Model
Adjust Standards Adjust Performance
Establish 1. Establish 2. Measure 3. Compare 4. Take

Strategic standards of actual performance If corrective
Goals performance. performance. to standards. Inadequate action.
If Adequate
4. Do nothing
Feedback or provide
reinforcement.
NIST Quality
Program
Budgetary Control
• Common method of managerial control

• Process of setting targets
• Used to monitor results and compare to budget
Budgets Managers Use
 Expense
 Revenue
 Cash
 Capital
Traditional Budgeting Methods
• Top-down budgeting
 Middle and lower-level managers set departmental
budget targets
 Done in accordance with overall company revenues and
expenditures specified by top management
• Bottom-up budgeting
 Lower-level managers budget their departments’
resource needs
 Budget request pass up to top management for approval
Financial Statements
• Provide basic information for financial control

• Two statements
1. Balance sheet- shows assets, liabilities, and
owners’ equity
2. Income statement- shows revenues and expenses
Financial Analysis
Ratios How Determining Tells You
1. Ability to meet its current debt
Liquidity Ratios obligations
Current ratio Current assets/Current liabilities 2. If there are sufficient assets to
convert into cash to pay off debts
Activity Ratios 1. Measures internal performance

Inventory turnover Total sales/Average inventory 2. How many times the inventory is
Conversation ratio Purchase orders/Customer inquiries used up to meet the total sales
figure
3. Company’s effectiveness in
converting inquiries into sales
Profitability Ratios 1. Profits relative to a source, such
Profit margin on sales Net income/Sales as sales or assets
Gross margin Gross income/Sales 2. What a company earned from its
Return on assets (ROA) Net income/Total Assets assets
1. Funding activities with
Leverage Ratios borrowed money
Debt ratio Total debt/Total assets 2. A debt ratio above 1.0 to be a
poor credit risk
Control Philosophies
• Bureaucratic influencing behavior through;

– rules
– policies
– hierarchy of authority
– written documentation
– reward systems
• Decentralized relies on;
– cultural values
– traditions
– shared beliefs
– trust
TQM
• Most companies that have adopted TQM have

incorporated
 Quality circles
 Benchmarking
 Six Sigma principles: a highly ambitions quality
standard that specifies a goal of no more than 3.4
defects per million parts.
 Reduced cycle time
 Continuous improvement
Quality Circle Process
Team Team Team Team

Creates Quality Selects Problems Gathers Data and Recommends
Circle and to Be Solved Analyzes Problems Solutions
Collects
Information
Decision by
Feedback from Mangers to Quality Circles Top Management
New Financial Control Systems
 Economic value added

 Market value added
 Activity-based costing
New Workplace & Control
 Open book management

 Balanced scorecard

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chp20

• The systematic process of regulating organizational activities

• Attempts to identify and prevent deviations

• Monitors employees activities for consistency with

Adjust Standards Adjust Performance

Establish 1. Establish 2. Measure 3. Compare 4. Take

• Common method of managerial control

• Provide basic information for financial control

Activity Ratios 1. Measures internal performance

• Bureaucratic influencing behavior through;

• Most companies that have adopted TQM have

Team Team Team Team

 Economic value added

 Open book management

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