• ORGANIZATIONAL

CONTROL
• MGT 400

15–1
LEARNING OUTCOMES:

15–2
 LO1:Organizational Control Defined

Organizational Control This definition implies that leaders must:

The systematic process  Establish performance

through which managers standards.
regulate organizational  Develop mechanisms for
gathering performance
activities to make them information
consistent with the  assess the degree to which
expectations established standards are being met.
in plans, and to help  Ensuring organizations meet
them achieve all their objectives
predetermined standards
of performance. This shows that controlling and planning
processes are linked;
Planning sets goals and actions whereas
controlling make sure that the plans are
achieved and if not correct them 15–3
LO1- the role or importance of control

15–4
 LO2:Control Process for Diverse and Multinational
Organizations – SEE FIGURE 15.1
1. Setting Standards for 3. Comparing Actual
Performance Performance With Standards
Whenever possible, the This step involves determining
standards should be set in a if actual performance
manner that allows them to be compared to standards falls
compared with actual within acceptable limits.
performance.
4. Responding to Deviations
2. Measuring Actual If the deviation from
Performance performance is unacceptable,
An organization must decide: then corrective action is
 What to measure. warranted.
 When to measure. If the deviation is acceptable,
 How frequently to measure. no correction action is
necessary.

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 Figure 15.1 Steps in the Control Process

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LO3: Factors to consider when Designing Quality and
Effectiveness into the Control System

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Control System–Design Issues – detail explanations in the following
slides

© 2007 Thomson/South-Western. All

15–8
rights reserved.
1.Design Factors Affecting Control System Quality
 The Amount of Variety in the Control
System
 Variety: the number of activities,
processes, or items that are measured
and controlled.
 More variety leads to less predictability.
 Law of Requisite Variety in Control
Systems
 Variety in control systems to match the
variety in the systems to be controlled
can be achieved by:
 Increasing variety in the control
system.
 Reducing variety in the system being
controlled.
© 2007 Thomson/South-Western. All
rights reserved.
 Ability to Anticipate Problems
 If a deviation can be anticipated before it
occurs:
 Corrective action can be instituted more
quickly.
 Negative consequences of the deviation
(e.g., unacceptable performance time
lags) are reduced.
 Sensitivity of the Measuring Device
 Sensitivity: the precision with which the
measurement can be made.
 Use a device sensitive enough to
adequately measure the system being
controlled is required.
 Composition of Feedback Reports
 Variance Reporting
 Highlights only those things that fail to
meet the established standards.
 Management by Exception
 Focuses on the elements that are not
meeting the standards.
15–9
 2.Criteria for Effective Control-
Effectiveness criteria
 Related to Organizational  Incorporates Timeliness in
Strategy Feedback Reporting
 A control system should measure  Timeliness is the degree to which
what is important now and what the control system provides
will be important in the future… not information when it is needed.
what was important in the past.  Acceptable to a Diverse Work
 Uses All Steps in the Control Force
Process  To be effective, organizational
 To be effective, a control system controls must be accepted by
must employ all of the steps in the employees.
control process.  The control system should motivate
 Composed of Objective and workers to recognize standards and
Subjective Measures act to achieve them.
 Effective control systems typically
require managers to blend
quantitative (objective) and
qualitative (subjective) performance
measures.

© 2007 Thomson/South-Western. All

15–10
rights reserved.
 3.Selecting the Proper Amount of Control
 Costs in Control Systems
 Two basic categories of costs need to  Importance of the Process Being
be considered relative to control Controlled
systems:  The more important the object or
 The costs associated with the process being controlled, the
information needed to perform greater the amount of control that
the control process. should be exercised.
 The costs associated with
undesirable deviations from
standards.

 Reliability of the System

 Reliability refers to the probability
that the object or process being
controlled will consistently behave in
an acceptable manner.
 The basic premise is that the more
reliable the process, the less control
that is needed.

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LO4/4.Selecting the Focal Point
/types for Control*

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 Examples of Organizational Control Focus

Feedforward Concurrent Control Feedback Control

Control Anticipates Solve Problems as Solves Problems
Problems They Happen After They Occur

Examples Examples Examples

• Pre-employment • Adaptive culture •
drug testing • Analyze sales per
• Inspect raw Total quality employee
materials • management • Final quality
Hire only college • Employee inspection
graduates self-control • Survey customers
Focus is on

Focus is on

Focus is on
Ongoing
Inputs Outputs
Processes

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LO5: Control Philosophies for Leaders
– bureaucratic and organic control

• Bureaucratic Control
– Use of formal
mechanisms to influence
behavior, assess
performance, and correct
unacceptable deviations
from standards.
• Organic Control (“Clan
Control”)
– Reliance upon social
values, traditions, shared
beliefs, flexible authority,
and trust to assess
performance and correct
unacceptable deviations.

15–14
 LO6:Selecting A Control Style In
Today’s Diverse And Multinational
Organizations

• Top-level leaders are faced with a dilemma in

choosing a control style for their organization.
• Managers should evaluate:
• Individual management style
• Organizational culture
• Employee professionalism
• Performance measures.
• The choice of a control style is
contingent(bergantung/bersandarkan) on all of
these situational factors.
© 2007 Thomson/South-Western. All
15–15
rights reserved.
 LO7: Barriers to
control
• Problems with unfocused controls
– Failure to achieve desired or
intended results occur when
control measures lack specificity
• Problems with incomplete control
measures
– Individuals or organizational
units attempt to look good
exclusively on control measures.
• Problems with inflexible or
unreasonable control standards
– Controls and organizational goals
will be ignored or manipulated.
• Lack of resources can inhibit a
company's ability to manage
control. Resources that can
improve managing control
include trained staff, statistical
software, and accurate
measurement systems.
• Inaccurate measurement while
managing control can occur for a
number of different reasons. It
can be avoided by having
accurate measurement systems
and appropriately trained staff.
• The time lag(masalah untuk
mendapat maklumat untuk
disebarkan) in information flow
can misdirect management to
problems at the wrong time in
the sequence
13–16
LO8: Characteristics of effective Control
System

Accepted by
members
Accuracy

Prescriptive and Timeliness

operational

flexible Effective
Control Objective and
System comprehensible

Coordinated with
organizational work flow Focus on strategic
control points

Organizational Economic realistic

realistic

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 LO8: Characteristics of
effective Control System
• Accurate. Information on performance must
be accurate. Evaluating the accuracy of the
information they receive is one of the most
important control tasks that managers face.
• Timely. Information must be collected,
routed, and evaluated quickly if action is to
be taken in time to produce improvements.
• Objective and Comprehensible. The
information in a control system should be
understandable and be seen as objective by
the individuals who use it. A difficult-to
understand control system will cause
unnecessary mistakes and confusion or
frustration among employees.
• Focused on Strategic Control Points. The
control system should be focused on those
areas where deviations from the standards
are most likely to take place or where
deviations would lead to the greatest harm.
• Economically Realistic. The cost of
implementing a control system should be
less than, or at most equal to, the benefits
derived from the control system.
• Organizational Realistic. The control system
has to be compatible with organizational
realities and all standards for performance
must be realistic.
• Coordinated with the Organization's Work
Flow. Control information needs to be
coordinated with the flow of work through
the organization for two reasons: (1) each
step in the work process may affect the
success or failure of the entire operation, (2)
the control information must get to all the
people who need to receive it.
• Flexible. Controls must have flexibility built
into them so that the organizations can react
quickly to overcome adverse changes or to
take advantage of new opportunities.
• Prescriptive and Operational. Control
systems ought to indicate, upon the
detection of the deviation from standards,
what corrective action should be taken.
• Accepted by Organization Members. For a
control system to be accepted by
organization members, the controls must be
related to meaningful and accepted goals.
• These characteristics can be applied to
controls at all levels of the organization.
 LO9: Implications for
Leaders •The degree to which it incorporates
objective and subjective performance
measures.
• Leaders can gauge (ukur) the control system’s effectiveness by:
– Develop a control system for each important product, service, process, or activity within the organization.

•Its timeliness.
– Incorporate sufficient variety, sensitivity, anticipation capability, and feedback into the control system.

– Determine the appropriate points within the organization where control systems should be focused

– Considering the control relationship to corporate strategy.

•Its acceptability to individuals within
the organization
– Its completeness.

•Understand the intricacies of the

financial data contained in the
organization’s financial statements, and
use various financial control techniques
to assess the firm’s financial health.
•Adopt a philosophy of control that is
consistent with the management style,
corporate culture, employee
professionalism, and performance
measures present within the
organization.

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