Part 5 Control Challenges in the 21st Century

Chapter
15
Organizational
Control in a
Complex Business
Environment

PowerPoint Presentation by Charlie Cook

The University of West Alabama
© 2007 Thomson/South-Western. All rights reserved.
 8

Controlling

By : JUAN RIZAL SA’ARI

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 LEARNING OBJECTIVES
When you have finished studying this chapter, you
should be able to:
1. Define and discuss the importance of organizational
control.
2. Identify the sequence of steps to be undertaken in a
thorough control system.
3. Describe the various criteria of effective control.
4. Define feedforward control, concurrent control, and
feedback control.
5. Describe the difference between the philosophies of
bureaucratic control and organic control.

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The Planning–Controlling Link

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17–4
What Is Control?
• Controlling
 The process of monitoring activities to ensure that
they are being accomplished as planned and of
correcting any significant deviations.

• The Purpose of Control

 To ensure that activities are completed in ways that
lead to accomplishment of organizational goals.

Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall

17–5
 Organizational Control Defined
• Organizational Control
 The systematic process through which managers
regulate organizational activities to make them
consistent with the expectations established in plans,
and to help them achieve all predetermined standards
of performance.
• This definition implies that leaders must:
 Establish performance standards.
 Develop mechanisms for gathering performance
information in order to assess the degree to which
standards are being met.

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Why Is Control Important?
• As the final link in management functions:
 Planning
 Controls
let managers know whether their goals
and plans are on target and what future actions to
take.
 Empowering employees
 Control systems provide managers with information
and feedback on employee performance.
 Protecting the workplace
 Controls enhance physical security and help
minimize workplace disruptions.

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17–7
 Figure 15.1 Steps in the Control Process

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 Control Process for Diverse and
Multinational Organizations
• Setting Standards for Performance
 Whenever possible, the standards should be set in a
manner that allows them to be compared with actual
performance.
• Measuring Actual Performance
 An organization must decide:
 What
to measure.
 When to measure.
 How frequently to measure.
**Standard should be set as clearly as possible in order
to be able to compare with performance.
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Measuring: How and What We Measure

• Sources of • Control Criteria

Information (How) (What)
 Personal observation  Employees
 Statistical reports  Satisfaction
 Turnover
 Oral reports
 Absenteeism
 Written reports
 Budgets
 Costs
 Output
 Sales
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17–10
 Control Process for Diverse and
Multinational Organizations (cont’d)
• Comparing Actual Performance With Standards
 This step involves determining if actual performance
compared to standards falls within acceptable limits.
• Responding to Deviations
 If the deviation from performance is unacceptable,
then corrective action is warranted.
 If the deviation is acceptable, no correction action is
necessary.

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Defining the Acceptable Range of Variation

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17–12
Comparing
• Determining the degree of variation between
actual performance and the standard.
 Significance of variation is determined by:

 The acceptable range of variation from the

standard (forecast or budget).
 “Out of Control” - The size (large or small) and
direction (over or under) of the variation from the
standard (forecast or budget).

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17–13
Taking Managerial Action
• Courses of Action
 “Doing nothing”
 Only if deviation is judged to be insignificant.
 Correcting actual (current) performance
 Immediate corrective action to correct the problem
at once.
 Basic corrective action to locate and to correct the
source of the deviation.
 Corrective Actions
– Change strategy, structure, compensation scheme, or training
programs; redesign jobs; or fire employees

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17–14
Taking Managerial Action

• Courses of Action (cont’d)

 Revising the standard
 Examining the standard to ascertain whether or not
the standard is realistic, fair, and achievable.
– Upholding the validity of the standard.
– Resetting goals that were initially set too low or too high.

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17–15
 Organizational Effectiveness

Measuring how appropriate organizational

goals are and how well the organization is
achieving its goals.

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 Criteria for Effective Control
• Related to Organizational Strategy
 A control system should measure what is important
now and what will be important in the future… not
what was important in the past.

• Uses All Steps in the Control Process

 To be effective, a control system must employ all of
the steps in the control process.

• Composed of Objective and Subjective Measures

 Effective control systems typically require managers
to blend quantitative (objective) and qualitative
(subjective) performance measures.

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 Criteria for Effective Control (cont’d)

• Incorporates Timeliness in Feedback Reporting

 Timeliness is the degree to which the control system
provides information when it is needed.
 It is not about how fast the feedback information is
provided but more about how quickly enough to
response to unacceptable behavior.

• Acceptable to a Diverse Work Force

 To be effective, organizational controls must be
accepted by employees.
 The control system should motivate workers to
recognize standards and act to achieve them.
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 Criteria for Effective Control (cont’d)
• In summary, gauge the control system’s
effectiveness by:
 Considering its relationship to corporate strategy.
 Its completeness.
 The degree to which it incorporates objective and
subjective performance measures.
 Its timeliness.
 Its acceptability to individuals within the organization.

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 Selecting the Focal Point for Control
• Feedforward (Preventive) Control
 Focuses on detecting undesirable material, financial, or human
resources that serve as inputs to the transformation process.
 A control that prevents anticipated problems before actual
occurrences of the problem.

• Concurrent Control
 Focuses on the transformation process to ensure that it is
functioning properly.
 A control that takes place while the monitored activity is in
progress.
 Direct supervision: management by walking

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 Selecting the Focal Point for Control
• Feedback Control
 Focuses on discovering undesirable output and implementing
corrective action.
 A control that takes place after an activity is done.
 Corrective action is after-the-fact, when the problem has
already occurred.
 Advantages of feedback controls:
 Provide managers with information on the effectiveness of
their planning efforts.
 Enhance employee motivation by providing them with
information on how well they are doing.
 Disadvantages of feedback controls ?

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 Selecting the Focal Point for Control
• Multiple Focal Points
 Most organizations use several control systems focused on
various phases of the transformation process.

 Able to control resource inputs, ongoing transformation activities,

and final outputs simultaneously.

 Give the manager the capability to determine whether:

 Current output is in accordance with standards
 Any impending problems on the horizon

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Types of Control

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17–23
 Figure 15.5 Control Focal Points

Pre-process In-process Post-process

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 Control Philosophies for Leaders
• Bureaucratic Control
 Use of formal mechanisms to influence behavior,
assess performance, and correct unacceptable
deviations from standards.
• Organic Control (“Clan Control”)
 Reliance upon social values, traditions, shared
beliefs, flexible authority, and trust to assess
performance and correct unacceptable deviations.

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 Bureaucratic versus Organic Controls

Bureaucratic Control Organic Control

Task-oriented Relationship-oriented
management style management style

Culture favors decision Culture encourages

making at the top employee participation

Employees that lack Highly educated, highly

education and experience trained employees

Performance that can be Performance that is

quantified and measured difficult to measure

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 Table 15.2 Bureaucratic and Organic Methods of Control

Bureaucratic Organic
Purpose Employee compliance Employee commitment

Technique Rigid rules and policies, Corporate culture, individual self-

strict hierarchy, formalized discipline, cohesive peer groups,
selection and training selection and socialization

Performance Clearly defined standards Emphasizes group or system

expectation of individual performance performance

Organizational Tall structure, top-down controls Flat structure, mutual influence

structure Rules and procedures for Shared values, goals, and traditions
coordination and control for coordination and control
Authority resides in position Authority resides with knowledge
and expertise

Rewards Based upon individual employee Based upon group achievements

achievements and equity across employees

Participation Formalized and narrow Informal and broad

Source: Adapted and reprinted by permission of Harvard Business Review. An exhibit from “From Control to Commitment in the
Workplace” by R. E. Walton, March/April 1985, 76–85. Copyright © by the President and Fellows of Harvard College. All rights reserved.
© 2007 Thomson/South-Western. All rights reserved. 15–27