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Organizational ControlOrganizational Control

Managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals Keeping an organization on track,

anticipating events, changing the organization to respond to opportunities and threats

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Control SystemsControl Systems

Formal, target-setting, monitoring, evaluation and feedback systems that provide managers with information about how well the organization’s strategy and structure are working.

A good control system should: be flexible so managers can respond as needed. provide accurate information about the

organization. provide information in a timely manner.

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Three Types of ControlThree Types of Control

Figure 11.1

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Types of ControlTypes of Control

Feedforward Controls Used in the input stage of the process

Managers can anticipate problems before they arise. Managers can give rigorous specifications to suppliers to

avoid quality problems with inputs.

Concurrent Controls Give immediate feedback on how inputs are

converted into outputs Allows managers to correct problems as they arise Managers can see that a machine is becoming out of

alignment and fix it.

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Types of Control Types of Control

Feedback Controls Provide after-the-fact information managers

can use in the futureCustomers’ reactions to products are used to

take corrective action in the future.

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Control Process StepsControl Process Steps

Figure 11.2

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Three Organizational Control SystemsThree Organizational Control Systems

Figure 11.3

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Financial Measures of PerformanceFinancial Measures of Performance

Financial Controls Profit ratios

Measures of how efficiently managers convert resources into profits—return on investment (ROI).

Liquidity ratios Measures of how well managers protect resources to

meet short term debt—current and quick ratios. Leverage ratios

Measures of how much debt is used to finance operations—debt-to-asset and times-covered ratios.

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Financial Measures of Performance Financial Measures of Performance

Financial Controls Leverage ratios

Measures of how much debt is used to finance operations—debt-to-asset and times-covered ratios.

Activity ratiosMeasures of how efficiently managers are

creating value from assets—inventory turnover, days sales outstanding ratios.

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Output ControlOutput Control

Organizational Goals Each division within the firm is given

specific goals that must be met in order to attain overall organizational goals.Goals should be specific and difficult, but not

impossible, to achieve (stretch goals).Goal setting and establishing output controls are

management skills that are developed over time.

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Organization-Wide Goal SettingOrganization-Wide Goal Setting

Figure 11.4

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Output ControlOutput Control

Operating Budgets Blueprints state how managers

intend to allocate and use the resources they control to attain organizational goals effectively and efficiently. Each division is evaluated on its own budgets for cost,

revenue or profit. Managers are evaluated by how well they meet goals for

controlling costs, generating revenues, or maximizing profits while staying within their budgets.

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Problems with Output ControlProblems with Output Control

Managers must create output standards that motivate at all levels. They must be careful not to create short-

term goals that motivate managers to ignore the future.

If standards are set too high, workers may engage unethical behaviors to attain them.

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Behavior ControlBehavior Control

Direct Supervision Managers who directly manage can teach, reward,

lead by example, and take corrective action as needed. Can be very expensive since only a few workers can be

personally managed by one manager and many managers are needed.

Close supervision demotivates workers who desire less scrutiny and more autonomy, causing them to avoid responsibility.

Direct supervision is difficult to do effectively in complex job settings.

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Management by Objectives Management by Objectives

Management by Objectives (MBO) A goal-setting process in which managers and

subordinates negotiate specific goals and objectives for the subordinate to achieve and then periodically evaluate their attainment of those goals. Specific goals are set at each level of the firm. Goal setting is participatory with manager and worker Periodic reviews of subordinates’ progress toward goals are

held (pay raises and promotions are tied to goal attainment). Teams are also measured in this way with goals and

performance measured for the team.

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Bureaucratic Control Bureaucratic Control

Bureaucratic Control Control through a system of rules and standard

operating procedures (SOPs) that shapes the behavior of divisions, functions, and individuals. Rules and SOPs tell the worker what to do (standardized

actions) so outcomes are predictable. There is still a need for output control to correct mistakes. Bureaucratic control is best used for routine problems in

stable environments.

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Organizational CultureOrganizational Culture

Organizational Culture The set of internalized values, norms,

standards of behavior, and common expectations that control the ways in which individuals and groups in an organization interact with each other and work to achieve organizational goals.

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Clan ControlClan Control

Clan Control The control through the development of an internal

system of values and norms. Both culture and clan control accept the norms and

values as their own and then work within them. Examples: Work dress styles, normal working hours, pride

taken in work. These methods provide control where output and

behavioral control does not work. Strong culture and clan control help worker to focus

on the organization and enhance its performance.

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Adaptive CultureAdaptive Culture

Strong and cohesive culture that controls employee attitudes and behaviors

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Inert CultureInert Culture

Culture that leads to values and norms that fail to motivate or inspire employees

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Steps in the Organizational Change Process

Steps in the Organizational Change Process

Figure 11.6

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Organization ChangeOrganization Change

Movement of an organization away from its present state and toward some desired future state to increase its efficiency and effectiveness

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Organizational LearningOrganizational Learning

Process through which managers try to increase organizational members’ abilities to understand and appropriately respond to changing conditions Impetus for change Can help members make decisions about

changes