Unit 12Organizational

Control

Discussion Topics

• describe the basic control process

• discuss some of the methods that managers can use

to maintain control

• describe the behaviors, processes, and outcomes that

today’s managers are choosing to control in their

organizations

The Control Process:

• Establishment of clear standards of

performance

• Comparing performance to those standards,

• Corrective action to repair performance

deficiencies

• Three basic methods: feedback control,

concurrent control, and feed-forward control.

• Control isn’t always worthwhile or possible.

Standards:

• Must enable goal achievement

• How to set the standards

o A standard must enable goal achievement

o Determined by benchmarking (anything from cycle time to

quality and price) other companies’ standards.

o Listen to customer’s comments, complaints, and suggestions

Comparison to Standards

• The quality of the comparison depends largely on the

measurement and information systems a company uses

to keep track of performance.

• The better the system, the easier it is for a company to

track performance and identify problems that need to be

fixed.

Corrective Action:

• Identify performance deviations

• Analyze deviations

• Development and implement corrective programs

Control Isn’t Always Worthwhile or Possible

• Control loss

• Regulation costs

• Cybernetic feasibility

Methods of Process Control

• Feedback control

• Concurrent control

• Feed-forward control

Bureaucratic Control

• Managers try to influence employee behavior by rewarding or

punishing employees for compliance or non-compliance with . .

.

• Managers emphasize following rules above all else.

• Rules and regulations typically set the standards at a minimum

acceptable level.

• Companies are highly resistant to change and slow to respond

to customers and competitors.

Objective Control• The use of observable measures of employee behavior or output to assess

performance and influence behavior.

• Behavior control – management-based control

• Output control - employee-based control

o measures must be reliable, fair, and accurate

o employees and managers must believe that they can produce the desired

results

o rewards must be dependent on achieving established standards of performance

Normative Controls

• A company’s widely shared values and beliefs guide workers’ behavior

and decisions.

• Created in two ways:

oNormatively controlled companies are careful about who they hire

attitude and value, not just ability. Employees are then empowered

to run the business as they see fit.

oManagers and employees learn by observing experienced employees

Self-control (Self-management)• A control system in which managers and workers control their

own behavior

• Workers need be empowered for self-control

The Balanced Scorecard

• Encourages managers to look at four different perspectives on

company performance.

• Customer perspective

• Internal perspective

• Innovation and learning perspective

• Financial perspective

Balanced Scorecard of Southwest Airlines

16-3© 2015 Cengage Learning

Controlling Financial Performance

Traditional approaches

• Cash flow analysis

• Balance sheets

• Income statements

• Financial ratios

• Budgets

Economic Value Added (EVA)

• Not the same thing as profits…

• The amount by which profits exceed the cost of capital in a

given year.

• EVA is positive when company profits exceed the cost of

capital in a given year.

• Includes the cost of capital

• Can be easily determine for subsets of a company

Calculating Economic Value Added (EVA)

Controlling Customer Defections

• Companies can do a better job of answering “How do customers see

us?” by identifying which customers are leaving the company and

measuring the rate at which they are leaving.

• Customers who have left are much more likely than current

customers to tell you what you were doing wrong.

Controlling Quality

Quality is measured in three ways:

• Excellence

• Value

• Conformance to specifications

Conformance to Specifications Checklist for Buying Fresh Fish

Advantages and Disadvantages of Different Measures of Quality

Controlling Waste and Pollution

• Waste prevention and reduction

ogood housekeeping

omaterial/product substitution

oprocess modification

• Recycle and reuse

• Waste treatment

• Waste disposal