chapter 16

PowerPoint slides by

R. Dennis Middlemist

Colorado State University

Chapter 16Chapter 16

Control Control

2 ©2005 Prentice Hall

Control Function in Control Function in ManagementManagement

Control Regulation of activities and behaviors within

organizations Adjustment or conformity to specifications or

objectives Effective control depends heavily on other

functions that precede it and feeds back to them Planning Organizing Leading


Ensures adjustment orconformity to specifications

Regulates activities

Regulates behavior

Control Function in Control Function in ManagementManagement

Adapted from Exhibit 16.1: The Control Function in Management

Ensures adjustment orconformity to objectives

Control


Control’s Feedback LoopControl’s Feedback Loop

Adapted from Exhibit 16.2: Control’s Feedback Loop

Organizing

Planning

Control Feedback Changes in


Basic Elements in Basic Elements in Control ProcessControl Process

Adapted from Exhibit 16.3: The Basic Elements in the Control Process

Establish standards

Establish standards• Specification starts at the top of the

organization and involves every level of employee

• Standards are the targets of performance

• Involving employees in setting standards• Commits the employees to

achieving the standards

• Results in more appropriate standards


Specificity of Standards and Specificity of Standards and Performance MeasurementPerformance Measurement

Adapted from Exhibit 16.4: The Effect of Specificity of Standards on Performance Measurement

High

LowConcrete Abstract

Specificity of standards

Le

vel o

f c

on

fus

ion

in

pe

rfo

rma

nce

me

as

ure

men

t


Establishing StandardsEstablishing Standards

Adapted from Exhibit 16.5: Issues in Establishing Standards

Standards

How

spe

cific

sho

uld

they

be? W

ho should set them?

How difficult should they be to reach?




Establish standards

Measure performance

Measure performance• Obtain consensus about how to

assess performance• If performance involves multiple

activities, measure must be comprehensive

• Measurement is costly and hence usefulness of the information must justify the costs


Measurement of Measurement of PerformancePerformance

Adapted from Exhibit 16.6: Issues in the Measurement of Performance

Performance Measurement

Can expensive, but noncritical,

controls be eliminated?Are all necessary aspects of

actions contributing to

perform

ance being measured?

Is there consensus among

those involved as to how

performance will be

measured?

Can measurement criteria be

quantified?




Establish standards

Measure performance

Compare performance against standards


• Comparisons are affected b the kinds of measurements available

• Managers must interpret the patterns of comparisons (some negative/some positive)

• Comparisons often involve subjective and objective measures




Establish standards

Measure performance


Evaluate results and take any necessary

corrective action

Evaluate results/take necessary corrective action

• Not all results require action• Evaluate importance and magnitude of

the deviation

• Determine what action to take if necessary• Diagnosis skills of managers

• Level of expertise

• Evaluate the standards and the measures

• Employees performing better than “standard” should be recognized and rewarded


Outcomes of Performance Outcomes of Performance MeasurementMeasurement

Adapted from Exhibit 16.7: Outcomes of Performance Measurement

Actual performance measured against

standard for performance

GapDetected

Reinforcing Action Taken(e.g., increase rewards and

recognition, consider increasing production targets,

add new product lines)

Corrective Action Taken(e.g., increase training, modify supervision, invest in newer

equipment)

Actual performance better than expected

performance+

-Actual performance

worse than expected performance


Types and Scope of ControlTypes and Scope of Control

Adapted from Exhibit 16.8: Types and Scope of Control

Scope(Narrow) (Broad)

Operational Controls

Tactical Controls

Strategic Controls


Scope of ControlScope of Control

Assess and regulate how the organization fits its external environment and meets its long-range objectives and goals

Control becomes less efficient in uncertain or changing environments

Strategic Control


Centralization of Control and Centralization of Control and Environmental StabilityEnvironmental Stability

Adapted from Exhibit 16.9: Degree of Centralization of Control in Relation to Environmental Stability

Environmental stability

De

gre

e o

f ce

ntr

aliz

ati

on

Decentralized

CentralizedStable Turbulent


Approaches to Strategic ControlApproaches to Strategic Control

Adapted from Exhibit 16.10: Approaches to Strategic Control

Easy Difficult

Ability to specify and measure precise strategic objectives

En

viro

nmen

tal t

urb

ule

nce

Hig

hL

ow



Assess and regulate day-to-day functions of the organization and its major units in implementing its strategy Financial controls Budgetary controls Supervisory structure controls Human resource controls Contrasting approaches to using tactical controls

Bureaucratic control Commitment, or clan, control

Tactical Control


Strategic and Tactical ControlsStrategic and Tactical Controls

Adapted from Exhibit 16.11: Characteristics of Strategic and Tactical Controls

TacticalControls

StrategicControls

Time Frame

Objective

Types of Comparisons

Focus

Limited Long, unspecific

Controls relate to specific, functional areas

Controls relate to organization as a whole

Comparisons made within organization

Comparisons made to other organization

Implementation of strategy

Determination of overall organizational strategy


Training

Control in the Human Resource Control in the Human Resource FunctionFunction

Adapted from Exhibit 16.14: Opportunities for Control in the Human Resource Function

Compensation

Selection

Human Resource Function Controls

Appraisal

and evaluation


Type of Social Control Informational Control Requirementsa Approach Requirements

Control in Bureaucracy and Control in Bureaucracy and Clan StructuresClan Structures

Adapted from exhibit 16.15: Control in Bureaucracy and Clan Structures

Bureaucracy Norm of reciprocityLegitimate authority

Adherence to rules and regulationsFormal and impersonalEmphasis on detecting devianceImposed on the individual

Rules

Clan Norm of reciprocityLegitimate authorityShared values, beliefs

Stresses group consensus on goals and their measurementMutual assistance in meeting performance standardsUses deviations as guidelines in diagnosing problemsControl comes from the individuals or groups

Traditions

Source: Adapted from William G. Ouchi, “A Conceptual Framework for the Design or Organizational Control Mechanisms,” Management Science 25, no. 9 (1980), pp. 833–847 (p. 838).

aSocial requirements are the basic agreements between people that, at a minimum, are necessary for a form of control to be employed.



Assess and regulate specific activities and methods used to produce goods and services

Precontrol of operations Concurrent control of

operations Postcontrol of operations

Operational Control


Process

Pre-ControlConcurrent

ControlFeedback

Control

Preventive Corrective

Input Output

Control Model


Operational ControlsOperational Controls

Adapted from Exhibit 16.16: Operational Controls

ConcurrentControl

• Evaluates the conversion process as it occurs

• Provides immediate feedback, which impacts worker motivation

Precontrol

• Controls the quality, quantity, and other characteristics of the inputs to the process

Postcontrol

• Traditionally, quality control

• Many of these controls are being changed to pre- and concurrent controls


Control EffectivenessControl Effectiveness

Focus of control Balanced scorecard

Financial perspective Customer perspective Internal business

perspective Innovation and learning

perspective

Amount of control


Control EffectivenessControl Effectiveness

Quality of information Usefulness Accuracy Timeliness Objectivity

Flexibility Favorable cost-benefit ratio Source of control


Key Factor Concerns

Effectiveness of ControlsEffectiveness of Controls

Adapted from exhibit 16.17: Key Factors in Determining the Effectiveness of Controls

Focus of control What will be controlled?Where should controls be located in the organizational structure?Who is responsible for which controls?

Amount of control Is there a balance between over- and undercontrol?

Quality of information collected by the controls

Is the information useful?Is the information accurate?Is the information timely?Is the information objective?

Flexibility of controls Are the controls able to respond to varying conditions?

Favorable cost-benefit ratio

Is the information being gathered worth the cost of gathering it?

Source of control Is control imposed by others?Is control decided by those who are affected?

chapter 16

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