10/27/17

Foundations of Control

BA 101 – Introduction to Management

Louie Lee

What Is Control?

Controlling

The process of
monitoring activities
to ensure that they
are being
accomplished as
planned and of
correcting any
significant
deviations

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Designing Control Systems

MARKET BUREAUCRATIC CLAN

Emphasizes Emphasizes Regulates
external organizational behavior to
mechanisms to authority maintain the
establish firm’s culture
standards

Why Is Control Important?

As the final link in management functions:

• Restarts the cycle
• Empowers employees
• Protects the workplace

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The Control Process

1. Measuring Actual Performance

Sources of Control Criteria

Information (How) (What)
– Personal – Employees
observation • Satisfaction
• Turnover
– Statistical reports
• Absenteeism
– Oral reports
– Budgets
– Written reports • Costs
• Output
• Sales

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2. Comparing Against Actual Standard

Determining the degree of variation

between actual performance and the
standard.

3. Taking Managerial Action

“Doing nothing”
– Only if deviation is judged to be insignificant.

Correcting actual (current) performance

– Immediate corrective action to correct the problem at
once.
– Basic corrective action to locate and to correct the
source of the deviation.
– Corrective Actions
• Change strategy, structure, compensation scheme, or
training programs; redesign jobs; or fire employees

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3. Taking Managerial Action

Revising the standard

– Examining the standard to ascertain whether or not
the standard is realistic, fair, and achievable.
• Upholding the validity of the standard.
• Resetting goals that were initially set too low or
too high.

3. Taking Managerial Action

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Controlling for Organizational Performance

Performance
– The end result of an activity
Organizational Performance
– The accumulated end results of all of the
organizationʼs work processes and
activities
• Designing strategies, work processes, and
work activities.
• Coordinating the work of employees.

Organizational Performance Measures

Productivity
The overall output of goods and/or services
divided by the inputs needed to generate that
output

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Organizational Performance Measures

Organizational Effectiveness
Measuring how appropriate organizational goals
are and how well the organization is achieving its
goals

Tools for Controlling Organizational Performance

Feedforward Control
– A control that prevents anticipated problems
before actual occurrences of the problem.

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Tools for Controlling Organizational Performance

Concurrent Control
– A control that takes place while the
monitored activity is in progress.

Tools for Controlling Organizational Performance

Feedback Control
– A control that takes place after an activity is
done.

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Tools for Controlling Organizational Performance

Tools for Controlling Organizational Performance

• Traditional Controls • Other Measures

– Ratio analysis – Economic Value
• Liquidity Added (EVA)

• Leverage – Market Value Added

(MVA)
• Activity
• Profitability
– Budget Analysis
• Quantitative
standards
• Deviations

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Controlling Organizational Performance

Balanced Scorecard
– Is a measurement tool that uses goals set by
managers in four areas to measure a
companyʼs performance:
• Financial
• Customer
• Internal processes
• People/innovation/growth assets
– Is intended to emphasize that all of these
areas are important to an organizationʼs
success and that there should be a balance
among them.

Purposes of Information Controls

• As a tool to help managers control other

organizational activities.
• As an organizational area that managers need to
control.
Management
Information Systems
(MIS)
A system used to provide
management with needed
information on a regular
basis

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Benchmarking of Best Practices

Benchmark
The standard of excellence against which to
measure and compare.

Benchmarking of Best Practices

1. Connect best practices to strategies and goals.

2. Identify best practices throughout the
organization.
3. Develop best practices reward and recognition
systems.
4. Communicate best practices throughout the
organization.
5. Create a best practices knowledge-sharing
system.
6. Nurture best practices on an ongoing basis.

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Benchmarking of Best Practices

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