11-1

Organizational Control
Managers monitor and regulate how
efficiently and effectively an
organization and its members are
performing the activities necessary to
achieve organizational goals
Keeping an organization on track,
anticipating events, changing the
organization to respond to opportunities
and threats
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Control Systems
Formal, target-setting, monitoring, evaluation
and feedback systems that provide managers
with information about how well the
organizations strategy and structure are
working.
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.
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Three Types of Control
Figure 11.1
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Types of Control
Feedforward Controls
Used in the input stage of the process
Managers can anticipate problems before they arise.
Managers can give rigorous specifications to suppliers to
avoid quality problems with inputs.
Concurrent Controls
Give immediate feedback on how inputs are
converted into outputs
Allows managers to correct problems as they arise
Managers can see that a machine is becoming out of
alignment and fix it.
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Types of Control
Feedback Controls
Provide after-the-fact information managers
can use in the future
Customers reactions to products are used to
take corrective action
in the future.
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Control Process Steps
Figure 11.2
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Three Organizational Control Systems
Figure 11.3
11-8
Financial Measures of Performance
Financial Controls
Profit ratios
Measures of how efficiently
managers convert resources
into profits
return on investment (ROI).
Liquidity ratios
Measures of how well managers protect resources to
meet short term debtcurrent and quick ratios.
Leverage ratios
Measures of how much debt is used to finance
operationsdebt-to-asset and times-covered ratios.
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Financial Measures of Performance
Financial Controls
Leverage ratios
Measures of how much debt is used to finance
operationsdebt-to-asset and times-covered
ratios.
Activity ratios
Measures of how efficiently managers are
creating value from assetsinventory turnover,
days sales outstanding ratios.
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Output Control
Organizational Goals
Each division within the firm is given
specific goals that must be met in order to
attain overall organizational goals.
Goals should be specific and difficult, but not
impossible, to achieve (stretch goals).
Goal setting and establishing output controls are
management skills that are developed over time.
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Organization-Wide Goal Setting
Figure 11.4
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Output Control
Operating Budgets
Blueprints state how managers
intend to allocate and use the
resources they control to attain organizational
goals effectively and efficiently.
Each division is evaluated on its own budgets for cost,
revenue or profit.
Managers are evaluated by how well they meet goals for
controlling costs, generating revenues, or maximizing
profits while staying within their budgets.
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Problems with Output Control
Managers must create output standards
that motivate at all levels.
They must be careful not to create short-
term goals that motivate managers to
ignore the future.
If standards are set too high, workers may
engage unethical behaviors to attain them.
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Behavior Control
Direct Supervision
Managers who directly manage can teach, reward,
lead by example, and take corrective action as
needed.
Can be very expensive since only a few workers can be
personally managed by one manager and many
managers are needed.
Close supervision demotivates workers who desire less
scrutiny and more autonomy, causing them to avoid
responsibility.
Direct supervision is difficult to do effectively in complex
job settings.
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Management by Objectives
Management by Objectives (MBO)
A goal-setting process in which managers and
subordinates negotiate specific goals and
objectives for the subordinate to achieve and then
periodically evaluate their attainment of those
goals.
Specific goals are set at each level of the firm.
Goal setting is participatory with manager and worker
Periodic reviews of subordinates progress toward goals
are held (pay raises and promotions are tied to goal
attainment).
Teams are also measured in this way with goals and
performance measured for the team.
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Bureaucratic Control
Bureaucratic Control
Control through a system of rules and standard
operating procedures (SOPs) that shapes the
behavior of divisions, functions, and individuals.
Rules and SOPs tell the worker what to do (standardized
actions) so outcomes are predictable.
There is still a need for output control to correct mistakes.
Bureaucratic control is best used for routine problems in
stable environments.
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Organizational Culture
Organizational Culture
The set of internalized values, norms,
standards of behavior, and common
expectations that control the ways in which
individuals and groups in an organization
interact with each other and work to
achieve organizational goals.
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Clan Control
Clan Control
The 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: Work dress styles, normal working 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.
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Adaptive Culture
Strong and cohesive
culture that controls
employee attitudes
and behaviors
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Inert Culture
Culture that leads to
values and norms
that fail to motivate
or inspire
employees
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Steps in the Organizational Change
Process
Figure 11.6
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Organization Change
Movement of an organization away from
its present state and toward some
desired future state to increase its
efficiency and effectiveness
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Organizational Learning
Process through which managers try to
increase organizational members
abilities to understand and appropriately
respond to changing conditions
Impetus for change
Can help members make decisions about
changes