Study Guide Week5

Study Guide
MGT/521 Version 9
Week Five Study Guide: Controlling

Readings and Key Terms
Ch. 18 of Management
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Controlling
Control process
Range of variation
Corrective action
Organizational performance
Productivity
Organizational effectiveness
Feedforward control
Concurrent control
Feedback control
Balanced scorecard
Benchmarking
Corporate governance
Content Overview
Controlling
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Controlling is the process of observing actual performance in a process, comparing that

performance to already established standards, and from there, making decisions on what may
need to be adjusted to bring the performance in line with standards.
Effective controls ensure that activities are completed in ways that lead to goal attainment.
Controlling is important because it is the only way for managers to determine whether
organizational goals are being met. If goals are not being met, controlling can help managers to
figure out why.
Controlling provides the critical link back to planning, as controlling tells a manager how well the
planning function has gone.
The control process:

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The control process does not create performance standards. Instead, these standards are
created during the planning process and may be known as organizational goals.
Measuring actual performancefour approaches are generally used:

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Personal observations
Statistical reports
Oral reports
Written reports
Managers must ensure they select the appropriate criteria to measure; while most criteria can
be measured quantitatively, others are qualitative and must be measured using subjective
terms instead.
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Study Guide
MGT/521 Version 9
Comparing actual performance against a standard while some deviation can always be
expected, a manager must determine an acceptable range of variation, that is, the acceptable
parameters of variance between actual performance and the standard. Both overvariance
and undervariance may need special attention in the action-taking step of this process.
Taking action to correct deviations three possible courses of action are available to
managers:
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Controlling for organizational performance

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Organizational performance is the accumulated results of all the organizations work activities.
Measures of organizational performance

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Do nothing.
Correct the actual performanceif the actual performance must be adjusted, managers
can take corrective action, either immediatewhich immediately corrects problemsor
basichow and why performance deviated before correcting the source of the deviation
(Robbins & Coulter, 2012, p. 490).
Revise the standards if the standard must be revised, then the manager may need to
take the process back to the planning stage.
Organizational productivity outputs (the amount of goods or services created by an

organization) divided by the inputs (such as the costs of making those outputs). To
increase productivity, managers can alter inputs and outputs, including raising prices or
increasing efficiency.
Organizational effectiveness a measure of how well organizational goals meet the
needs of the organization and how effectively the established goals are being
accomplished
Industry and company rankings such as measurements like the Fortune 500
Tools for measuring organizational performance

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Controls related to when an activity occurs:
Financial controls
Feedforward control occurs prior to the activity. This is the preferred type of control, as it
allows managers to correct problems proactively.
Concurrent control occurs during the work and allows problems to be handled before any
further errors occur. The most common form of concurrent control is direct managerial
supervision of employees.
Feedback control occurs post-activity. Information received from the process can give
feedback to managers to assess the effectiveness of the planning process, and possibly
enhance employee motivation.
May include analyzing financial statements and calculating financial ratios

Traditional measures include ratio and budget analysis
Balanced scorecard
A balanced scorecard gives a firm a more holistic view of performance, by viewing actual
performance in areas other than those that are financially focused
Study Guide
MGT/521 Version 9
Typically looks at four areas that contribute to a companys performance:

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Includes the use of management information systems, which provide managers with data on
a regular basis
Can be subject to security threats
Benchmarking
Managers should develop goals in each area and assess the firms actual performance
against these goals.
Information controls
Financial
Customer
Internal processes
People/innovation/growth assets
Benchmarking occurs when organizations survey firmsboth within their industry and without
to find information on practices and processes they can use to improve their own
performance.
Benchmarking can also be performed within an organizations departments, to see what
different internal groups are doing.
Contemporary issues in control

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Cross-cultural differences must be considered when managers assess what corrective actions
they wish to take. Additionally, company departments located in different countries may need to
be measured on a different scale, depending on the situation.
Corporate governance is the system used to govern a corporation so that the interests of
corporate owners are protected. Recent reforms to corporate governance have been made in the
role of a companys board of directors and financial reporting and audit committees.

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Study Guide

Week Five Study Guide: Controlling

Controlling is the process of observing actual performance in a process, comparing that

The control process:

Measuring actual performancefour approaches are generally used:

Controlling for organizational performance

Measures of organizational performance

Organizational productivity outputs (the amount of goods or services created by an

Tools for measuring organizational performance

Controls related to when an activity occurs:

May include analyzing financial statements and calculating financial ratios

Typically looks at four areas that contribute to a companys performance:

Contemporary issues in control

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