Chapter 9

Foundations
of Control

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Learning Outcomes

• Explain the nature and importance of control.

• Describe the three steps in the control process.
• Discuss the types of controls organizations and
managers use.
• Discuss contemporary issues in control.

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9.1
Explain the nature
and importance of
control.

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Management Myth

Myth: Control only takes place after the

fact.
TRUTH: Many managers are using
“feedforward controls,” which is
preventing problems before they occur.

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The Nature of Control
Control:
• The regulatory process that directs the activities
of the organization to achieve its goals.
• The control function is closely linked with planning
function.
• The planning process to prepare courses of action to
achieve organizational goals.
• The control function is the ongoing process to
determine if the organization is meeting its goals.
• Feedback on the performance provide managers
with a method to improve their plan.
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Managers Control
• In controlling, managers monitor and
evaluate:
• Whether their organization’s strategy and
structure are working as intended.
• How they could be improved.
• How they might be changed if they are not
working.

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The Importance of Control
• To determine how efficiently they are using their
resources, managers must be able to accurately
measure how many units of inputs are being used to
produce a unit of output.
• Another important control issue involves the quality of
goods and services.
• Managers can also make their organizations more
responsive to customers if they develop a control
system to evaluate how well customer-contact
employees are performing their jobs.
• Controlling can raise the level of innovation in an
organization.
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Areas of Control

• There are four areas for control:

1. Financial resources. Information
Resources

2. Physical resources. Financial

Resources

3. Human resources. Human Physical

Resources Resources

4. Information resources.
• Financial resources are usually at the
center of controlling process.

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Physical Control

• Managers use operations control to

regulate the process of producing
goods and services.
• help them reduce the amount of time it
takes to produce a product and to
increase the amount of time that critical
machines are operational.

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Human Resource Control
• This is the process of regulating employee
behavior.
• Human resource control includes both:
• Improving the capabilities of employees
through
Strict hiring policies.
Better training opportunities.
• Implementing
Rewards – Bonuses - Incentive

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Information Control
Example:
• Marketing control is the process used to
evaluate how effectively pricing,
promotion, distribution and products
meets the customer’s expectations.
• Many companies use marketing controls to
monitor sales by region, competitors'
prices, and competitive product
introductions.
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Financial Control
• Financial control enables top – level managers
to assess the overall functioning of the
organization.
• Middle managers in all departments use
budgetary control to keep spending on target.
• Most organizations compare actual spending with
the budget, and they require managers to analyze
and explain any significant deviations.

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9.2
Describe the three
steps in the control
process.

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Steps In Control

Compare
Establish Measure Performance Take
Standards Performance against Action
Standards

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1. Measuring Performance
Sources of information:
• Personal observation: Management by walking around
(MBWA)

• Statistical reports: graphs, bar charts, and numerical displays

• Oral reports: conferences, meetings, one-to-one conversations
• Written reports
Benchmarking
• What are the benefits of benchmarking?
• What are the challenges in doing it?
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Criteria for Measurement
• What managers measure is probably more important to the
control process than how they measure.
• Criteria such as:
• Employee satisfaction or turnover and absence rates
• Keeping costs within budget
• Most activities can be broken down into objective segments
that can be measured.

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3. Correcting Performance

• Immediate corrective action

• Basic correction action
• correct the actual performance, or revise
the standards.

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Revising Standards

If performance consistently exceeds the goal,

then the goal may need to be raised.

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9.3
Discuss the types
of controls
organizations and
managers use.

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Approaches To Control
• There are 3 basic approaches:
• Feedward control
Deals with inputs from the environment.
• Concurrent control
Focuses on transformation process.
• Feedback control
Deals with outputs from the environment.

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Feedward Control

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Feedward Control

• Monitors the quality and / or quantity

of various resources before they enter
the system.
• For instance, when McDonald’s opened its first restaurant in
Moscow, it sent company quality control experts to help Russian
farmers learn techniques for growing high-quality potatoes
because McDonald’s demands consistent product quality no
matter the geographical location.

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Concurrent Control

Control that takes place while a work activity

is in progress.
• For instance, Google’s team keep a watchful eye on one online ads. They
watch the number of searches and clicks, the rate at which users click on
ads, and the revenue this generates. Everything is tracked hour by hour,
compared with the data from a week earlier, and charted. If something is
not working well, they fine-tune it.

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Feedback Control

• Control that takes place after a work activity

is done.
• Feedback gives managers meaningful information on how
effective their planning efforts were.
• Feedback enhances motivation because people want to
know how well they’re doing.

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Keeping Track of an Organization’s
Finances: Ratio Analysis

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Keeping Track of an Organization’s
Finances: Budget Analysis

Budgets are used for both planning and

controlling.

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Keeping Track of an Organization's
Information

Management information system (MIS):

A system used to provide management with
needed information on a regular basis.

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Keeping Track of Employee
Performance

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Keeping Track with a Balanced
Scorecard Approach
• Financial
• Customer
• Internal Processes
• People/innovation/growth assets

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 Management Insight: Gillette
Changes its Goals and Objectives
• In 2001 Gillette had a new chairman, James M. Kilts, who announced that the
struggling company would not be expecting a turnaround anytime soon. He
based his assessment on the fact that his predecessor had set overly
ambitious sales and profit goals. Also, Gillette’s employees were not focusing
on the right way to reduce costs because of an unrealistic salary and bonus
structure based on unrealistic sales and earnings targets. To get away from
what was called “the circle of doom,” the company would now set long-term
goals that targeted products customers wanted and would lead to long-term
sales growth.

• Question: Why would changing the nature of the company’s goals help
Gillette be more profitable in the future?
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9.4
Discuss
contemporary
issues in control.

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Contemporary Issues
1. Cross-cultural differences
2. Workplace concerns
• technology usage
• employee theft
• workplace violence

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Cultural Differences
• Organizations in technologically advanced nations use :
• indirect control device (computer-based reports and analyses—standardized rules -
direct supervision).
• Organizations in less technologically advanced countries use:
• direct supervision and highly centralized decision making are the basic means of control.

• Managers in foreign countries may have constraints on what corrective

action taken
• laws in some countries do not allow managers the option of closing facilities, laying off
employees, or bringing in a new management team from outside the country.
• Global companies face comparability when collecting data.
• For instance : labor intensive in Scotland for producing the same products is not the
same in Mexico. If top-level executives were to control costs by calculating labor costs
per unit or output per worker, the figures would not be comparable.

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Controlling Technology Usage
Is my work computer really mine?
• 30 % of companies have fired workers for misusing the Internet and
another 28 % have terminated workers for email misuse.
• 80 % of employees look at non-work-related websites while at work and
more than half engage in personal website surfing every day.

Do I have a right to privacy at work?

• Managers want security to ensure that company secrets aren’t being
leaked via instant messaging, blogs, social media outlets, or phone
cameras.
• Managers should control employee behavior in a no demeaning way and
with the employees’ full knowledge.

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Controlling Employee Theft

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Controlling Workplace Violence

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