©Prentice Hall, 2001 Chapter 13 1
Foundations Foundations of Controlof Control
©Prentice Hall, 2001 Chapter 13 2
Learning OutcomesLearning Outcomes
• Define control
• Describe three approaches to control
• Explain why control is important
• Define the control process
• Analyze the three types of control
©Prentice Hall, 2001 Chapter 13 3
Learning OutcomesLearning Outcomes
• Describe an effective control system
• Identify contingency factors in the control
process
• Learn the dysfunctional side of controls
• Describe how national differences affect the
control process
• Study ethical issues in employee monitoring
©Prentice Hall, 2001 Chapter 13 4
Three ApproachesThree Approachesto Control Systemsto Control Systems
MarketMarketControlControlMarketMarketControlControl
ClanClanControlControl
ClanClanControlControl
BureaucraticBureaucraticControlControl
BureaucraticBureaucraticControlControl
©Prentice Hall, 2001 Chapter 13 5
Managerial Decisions in the Control ProcessManagerial Decisions in the Control Process
IdentifyCauses IdentifyCauses
CorrectPerformance
CorrectPerformance
VarianceAcceptable?
VarianceAcceptable?
ReviseStandardRevise
Standard
StandardAttained?StandardAttained?
StandardAcceptable?
StandardAcceptable?
YesYes
YesYes
YesYes
NoNo
NoNo
NoNo
ComparePerformanceto Standard
ComparePerformanceto Standard
MeasurePerformance
MeasurePerformance
ObjectivesObjectives
StandardStandard
Do NothingDo Nothing
Do NothingDo Nothing
©Prentice Hall, 2001 Chapter 13 6
InformationInformation
PeoplePeopleFinancesFinances
OperationsOperations
What ManagersWhat ManagersMeasureMeasure
©Prentice Hall, 2001 Chapter 13 7
Defining an Acceptable Range of Defining an Acceptable Range of VariationVariation
AcceptableAcceptableUpper LimitUpper Limit
StandardStandard
AcceptableAcceptableLower LimitLower Limit
AcceptableAcceptableRange ofRange ofVariationVariation
t t+1 t+2 t+3 t+4 t+5t t+1 t+2 t+3 t+4 t+5
©Prentice Hall, 2001 Chapter 13 8
Mid-Western Distributors’ Sales for JulyMid-Western Distributors’ Sales for July(in hundreds of cases)(in hundreds of cases)
Heineken
Molson
Beck’s
Moosehead
Labatt’s
Corona
Amstel Light
Dos Equis
Tecate
Total Cases
1,075
630
800
620
540
160
225
80
170
4,300
913
634
912
622
672
140
220
65
286
4,464
(162)
4
112
2
132
(20)
(5)
(15)
116
164
Brand Standard Actual Over (Under)
©Prentice Hall, 2001 Chapter 13 9
Do NothingDo NothingDo NothingDo Nothing
TakingTakingManagerialManagerial
ActionAction
TakingTakingManagerialManagerial
ActionAction
CorrectCorrectPerformancePerformance
CorrectCorrectPerformancePerformance
ReviseRevisethe Standardthe Standard
ReviseRevisethe Standardthe Standard
©Prentice Hall, 2001 Chapter 13 10
InputInputInputInput ProcessesProcessesProcessesProcesses OutputOutputOutputOutput
FeedforwardFeedforwardControlControl
AnticipatesAnticipatesProblemsProblems
FeedforwardFeedforwardControlControl
AnticipatesAnticipatesProblemsProblems
ConcurrentConcurrentControlControl
Corrects ProblemsCorrects Problemsas They Happenas They Happen
ConcurrentConcurrentControlControl
Corrects ProblemsCorrects Problemsas They Happenas They Happen
FeedbackFeedbackControlControl
Corrects ProblemsCorrects Problemsafter They Occurafter They Occur
FeedbackFeedbackControlControl
Corrects ProblemsCorrects Problemsafter They Occurafter They Occur
Three Types of ControlThree Types of ControlThree Types of ControlThree Types of Control
©Prentice Hall, 2001 Chapter 13 11
Qualities of an Effective Qualities of an Effective Control SystemControl System
• Accuracy
• Timeliness
• Economy
• Flexibility
• Understandability
©Prentice Hall, 2001 Chapter 13 12
Qualities of an Effective Qualities of an Effective Control SystemControl System
• Reasonable criteria
• Emphasis on exceptions
• Strategic placement
• Multiple criteria
• Corrective action
©Prentice Hall, 2001 Chapter 13 13
Contingency Factors in Control SystemsContingency Factors in Control Systems
Organization Size
Position and Level
Degree of Decentralization
Organizational Culture
Importance of an Activity
Small
Large
Informal, personal management
Formal, personal management
High
Low
High
Low
Open
Closed
High
Low
Contingency Variable Control Recommendations
Many complex criteria
Few, easy-to-measure criteria
Increased number of controls
Reduced number of controls
Informal, self-control
Formal, external controls
Elaborate, comprehensive controls
Loose, informal controls
©Prentice Hall, 2001 Chapter 13 14
Adjusting ControlsAdjusting Controlsfor National for National DifferencesDifferences
TechnologyTechnologyand theand the
ComparabilityComparabilityof Dataof Data
DistanceDistanceand theand the
Formality Formality of Controlsof Controls
©Prentice Hall, 2001 Chapter 13 15
Dysfunctional Dysfunctional ControlsControls
InflexibleControls
InflexibleControls
Unreasonable
Standards
Unreasonable
Standards
©Prentice Hall, 2001 Chapter 13 16
InformInformEmployeesEmployees
Have aHave aWritten PolicyWritten Policy
Monitor forMonitor forBusiness ReasonsBusiness Reasons
Ethical IssuesEthical Issuesand Controland Control
Questions of PrivacyQuestions of Privacy