control concept and process

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Control concept andControl concept and

processprocess



ControllingControlling

ControllingControlling isis thethe processprocess thatthat measuresmeasures

currentcurrent performanceperformance andand guidesguides itit towardstowardssomesome predeterminedpredetermined goalsgoals..



Nature and feature of controlNature and feature of control

It is a fundamental management functionIt is a fundamental management function

Essential function of every manager Essential function of every manager

It is a continuous functionIt is a continuous function

It is both the beginning and the end of the managementIt is both the beginning and the end of the managementprocessprocess

It is not necessarily looking back, it is looking forwardIt is not necessarily looking back, it is looking forward

alsoalso

Control is related to resultsControl is related to results Action is the essence of control Action is the essence of control

Control is an efficiency improvement conceptControl is an efficiency improvement concept



Controlling and other functionsControlling and other functions

Planning as the basisPlanning as the basis

Action as the essence Action as the essence

Delegation as the keyDelegation as the key Information as a guideInformation as a guide



Objective or need of controlObjective or need of control

To evaluate the work progressTo evaluate the work progress

Apply to corrective measures Apply to corrective measures

To gain maximum cooperation of humanTo gain maximum cooperation of human

resourcesresources

To maximise the utilisation of material andTo maximise the utilisation of material and

machinesmachines

To motivate employeesTo motivate employees To face the changing environmentTo face the changing environment

To check the various undesirable activitiesTo check the various undesirable activities



Importance or advantages of Importance or advantages of

controlcontrol It ensures the execution of plansIt ensures the execution of plans

It ensures the optimum utilisation of human andIt ensures the optimum utilisation of human and

physical resourcesphysical resources

It simplifies supervisionIt simplifies supervision

It is helpful in coordinationIt is helpful in coordination

It helps in improving efficiencyIt helps in improving efficiency

It facilitates decision makingIt facilitates decision making

It helps in minimizing cost and improving qualityIt helps in minimizing cost and improving quality



Process of controllingProcess of controlling

Establishment of standardsEstablishment of standards

Measurement of actual performanceMeasurement of actual performance

Comparing actual and standardComparing actual and standardperformanceperformance

Correct and deviationsCorrect and deviations



Control areasControl areas

Over policiesOver policies

Over organization structureOver organization structure

Over personnelOver personnel Over wages and salariesOver wages and salaries

Over costOver cost

Over capital expenditureOver capital expenditure



Difficulties in control processDifficulties in control process

Human problemsHuman problems

Expensive processExpensive process

Absence of control over external factors Absence of control over external factors Difficulties in fixing individual responsibilityDifficulties in fixing individual responsibility

Difficulty in determining standardsDifficulty in determining standards



Effective control systemEffective control system

MultiMulti stepstep procedureprocedure appliedapplied toto variousvarious

typestypes of of controlcontrol activitiesactivities

ManagersManagers faceface numbersnumbers of of challengechallenge inindesigningdesigning aa effectiveeffective controlcontrol systemsystem thatthat

provideprovide accurateaccurate feedbackfeedback inin aa timelytimely andand

economicaleconomical fashionfashion



Essentials of effective controlEssentials of effective control

systemsystem Reflecting organizational needsReflecting organizational needs

Forward lookingForward looking

Promptness in reporting deviationsPromptness in reporting deviations

Pointing out exceptions at critical pointsPointing out exceptions at critical points

ObjectivesObjectives

FlexibleFlexible

EconomicalEconomical

SimpleSimple

MotivatingMotivating

Reflecting organizational patternReflecting organizational pattern



Behavioral implications of Behavioral implications of

controlcontrol Nature of controlNature of control

Perception of peoplePerception of people

Response to controlResponse to control



Causes of resistant to controlCauses of resistant to control

Curb on freedomCurb on freedom

Curb on creativity and innovationCurb on creativity and innovation

Rigid control standardsRigid control standards Faulty evaluation systemFaulty evaluation system

Fear of discriminationFear of discrimination



Control techniquesControl techniques

Traditional techniquesTraditional techniques

Budgetary controlBudgetary control

Break even analysisBreak even analysis

Statistical dataStatistical data

Special reportsSpecial reports

Operational auditOperational audit

Personal observationPersonal observation

Modern techniquesModern techniques

Zero base budgetingZero base budgeting

Responsibility accountingResponsibility accounting

Management auditManagement audit

Performance budgetingPerformance budgeting

Program network analysisProgram network analysis



EthicsEthics

TheThe codecode of of moralmoral principlesprinciples andand valuesvalues

thatthat governgovern thethe behaviorsbehaviors of of aa personperson or or

groupgroup withwith respectrespect toto whatwhat isis rightright or or

wrongwrong



Three Domains of HumanThree Domains of Human

Action Action

Amount of

Explicit ControlHigh Low

Domain of Certified Law

(Legal Standard)

Domain of Ethics

(Social Standard)

Domain of Free Choice

(Personal Standard)



EthicsEthics

TheThe codecode of of moralmoral principlesprinciples andand valuesvalues thatthat

governgovern thethe behaviorsbehaviors of of aa personperson or or groupgroup withwith

respectrespect toto whatwhat isis rightright or or wrongwrong..

Codified LawCodified Law

ValuesValues andand standardsstandards thatthat areare writtenwritten intointo thethelegallegal systemsystem..



Free ChoiceFree Choice

Behavior Behavior aboutabout whichwhich lawlaw hashas nono saysay andand

for for whichwhich anan individualindividual or or organizationorganization

enjoysenjoys completecomplete freedomfreedom

ExampleExample:: An An individual'sindividual's choicechoice of of aa

marriagemarriage partner partner or or religionreligion..



Ethical DilemmaEthical Dilemma

A A situationsituation thatthat arisesarises whenwhen allall

alternativealternative choiceschoices or or behaviorsbehaviors havehave

beenbeen deemeddeemed undesirableundesirable..

PotentiallyPotentially negativenegative ethicalethical

consequences,consequences, makingmaking itit difficultdifficult toto

distinguishdistinguish rightright fromfrom wrongwrong..



Common Ethical DilemmasCommon Ethical Dilemmas

HonestyHonesty inin advertisingadvertising andand inin communicationscommunications

withwith superiors,superiors, clients,clients, andand governmentgovernment..

ProblemsProblems relatingrelating toto specialspecial gifts,gifts, entertainment,entertainment,

andand kickbackskickbacks..

OverlookingOverlooking wrongwrong doingsdoings of of othersothers



Criteria for Criteria for

Ethical Decision MakingEthical Decision Making MostMost ethicalethical dilemmasdilemmas involveinvolve

A A conflictconflict betweenbetween needsneeds of of thethe partpart &&

wholewhole..

TheThe individualindividual versusversus thethe organizationorganization..

TheThe organizationorganization versusversus societysociety asas aa

wholewhole..



Four Considerations inFour Considerations in

Ethical Decision MakingEthical Decision Making Utilitarian ApproachUtilitarian Approach

Individualism ApproachIndividualism Approach

MoralMoral--Rights ApproachRights Approach

Justice ApproachJustice Approach



Utilitarian ApproachUtilitarian Approach

MoralMoral behavior behavior producesproduces thethe greatestgreatest

goodgood for for thethe greatestgreatest number number..

ComputationsComputations cancan bebe veryvery complex,complex,

simplifyingsimplifying themthem isis consideredconsidered

appropriateappropriate..

CriticsCritics fear fear aa ³Big³Big Brother´Brother´ approachapproach

andand askask if if thethe commoncommon goodgood isis

squeezingsqueezing thethe lifelife outout of of thethe individualindividual..



Individualism ApproachIndividualism Approach

Acts Acts areare moralmoral whenwhen theythey promotepromote thethe

individual'sindividual's bestbest longlong--termterm interestsinterests..

IndividualIndividual self self--directiondirection paramountparamount..

IndividualismIndividualism isis believedbelieved toto leadlead toto honestyhonesty

&& integrityintegrity sincesince thatthat worksworks bestbest inin thethe longlong

runrun..



MoralMoral--Rights ApproachRights Approach

Asserts Asserts humanhuman beingsbeings havehave fundamentalfundamental

rightsrights andand libertiesliberties.. MoralMoral decisionsdecisions areare thosethose thatthat bestbest

maintainmaintain thethe rightsrights of of thosethose peoplepeople

affectedaffected byby themthem.. An An ethicalethical decisiondecision isis oneone thatthat avoidsavoids

interferinginterfering withwith thethe fundamentalfundamental rightsrights of of

othersothers..



Justice ApproachJustice Approach

MoralMoral DecisionsDecisions mustmust bebe basedbased onon

standardsstandards of of equity,equity, fairness,fairness, andand

impartialityimpartiality..

TreatmentTreatment of of individualsindividuals shouldshould notnot bebe

basedbased onon arbitraryarbitrary characteristicscharacteristics..

ClosetCloset thinkingthinking toto codifiedcodified lawlaw..



Guidelines for Dealing withGuidelines for Dealing with

Ethical DilemmasEthical DilemmasIs it legal?Is it legal?

Is it right?Is it right?

Is it beneficial? To whom? How much?Is it beneficial? To whom? How much?Is it harmful? To whom? How much?Is it harmful? To whom? How much?



Guidelines for Dealing withGuidelines for Dealing with

Ethical Dilemmas (cont.)Ethical Dilemmas (cont.)

WouldWould youyou bebe willingwilling toto allowallow everyoneeveryone toto dodo whatwhat youyou

areare considering?considering?

WouldWould youyou likelike your your familyfamily toto know?know?

WouldWould youyou likelike your your decisiondecision printedprinted inin thethe

newspaper?newspaper?

HaveHave youyou consultedconsulted othersothers whowho areare objectiveobjective andand

knowledgeable?knowledgeable?



Organizational Str uctures toOrganizational Str uctures to

Promote EthicsPromote EthicsEthicsEthics committeecommittee == groupgroup appointedappointed toto monitor monitor

companycompany ethicsethics

HotHot lineslines-- employeesemployees cancan reportreport questionablequestionable

behavior,behavior, possiblepossible fraud,fraud, waste,waste, or or abuse(abuse(

ii..ee..,, BlowBlow thethe Whistle´)Whistle´)

EthicsEthics trainingtraining programsprograms



WhistleWhistle--BlowingBlowing

Definition:Definition:

The disclosure by anThe disclosure by an

employee of illegal,employee of illegal,

immoral, or immoral, or

illegitimate practicesillegitimate practices

by the organization.by the organization.

Guidelines:Guidelines:Be sure you are right (keepBe sure you are right (keep

accurate records)accurate records)Try to resolve the situationTry to resolve the situation

inin--house firsthouse first

Consult an attorney beforeConsult an attorney beforecontacting the media, etc.contacting the media, etc.

Realize you could be firedRealize you could be firedDon¶t expect to profitDon¶t expect to profit

financiallyfinancially



Social ResponsibilitySocial Responsibility

A business A business¶¶s collectives collective

code of ethics towards itscode of ethics towards its stakeholdersstakeholders

the environmentthe environment

its customersits customers

its employeesits employees

its investorsits investors

its suppliersits suppliers

its communityits community



3-33

R esponsibility

Towards

Customers

Social

R esponsibility

R esponsibility

Towards

Investors

R esponsibility

Towards

Environment

R esponsibil

ity Towards

Employees

Areas of Social Responsibility



Environmental ResponsibilityEnvironmental Responsibility

IssuesIssues Air Pollution Air Pollution

Water PollutionWater Pollution

Land PollutionLand Pollution

Toxic Waste DisposalToxic Waste Disposal

RecyclingRecycling

BiomassBiomass



Water PollutionWater Pollution

Water contamination due to years of releasing toxicWater contamination due to years of releasing toxic

chemicals into lakes, rivers, and streamschemicals into lakes, rivers, and streams

Chief offenders are businesses such as pulp and paper Chief offenders are businesses such as pulp and paper

plants, and municipalities who dump raw sewageplants, and municipalities who dump raw sewage

Practices are being curbed by legislation, education, andPractices are being curbed by legislation, education, and

affordable new technologyaffordable new technology



Land PollutionLand Pollution Contamination of grounds and soil due to dumping of Contamination of grounds and soil due to dumping of

toxic waste and mishandling of landfillstoxic waste and mishandling of landfills

Key issues today include curbing polluting practices andKey issues today include curbing polluting practices and

restoring contaminated landsrestoring contaminated lands New developments includeNew developments include

emphasis on recyclingemphasis on recycling

biomassbiomass ± ± turning waste into energyturning waste into energy

new forms of solid waste disposalnew forms of solid waste disposal

changes in forestry practiceschanges in forestry practices



Customer Responsibility IssuesCustomer Responsibility Issues

Rights of ConsumersRights of Consumers

Unfair PricingUnfair Pricing

Ethics in AdvertisingEthics in Advertising



Consumer Rights IssuesConsumer Rights Issues

ConsumerismConsumerism

social movement that seeks to protect and expand the rights of social movement that seeks to protect and expand the rights of

consumers in their dealings with businessesconsumers in their dealings with businesses

Consumers rightsConsumers rights right to safe productsright to safe products

right to be informedright to be informed

right to be heardright to be heard

right to choose what they buyright to choose what they buy

The right to be educated about purchasesThe right to be educated about purchases

The right to courteous serviceThe right to courteous service



Ethics in AdvertisingEthics in Advertising

Truth in Advertising ClaimsTruth in Advertising Claims

Morally Objectionable AdvertisingMorally Objectionable Advertising



Employee Responsibility IssuesEmployee Responsibility Issues

Human resource management issuesHuman resource management issues

Provide equal opportunity for rewards and advancement withoutProvide equal opportunity for rewards and advancement without

discriminationdiscrimination

Social responsibility issuesSocial responsibility issues

Safe workplace, no abuseSafe workplace, no abuse

Privacy issuesPrivacy issues

Drug testing and computer monitoringDrug testing and computer monitoring

WhistleWhistle--blowersblowers

Employees who call attention to unethical behaviour Employees who call attention to unethical behaviour



Responsibility TowardsResponsibility Towards

InvestorsInvestors Improper Financial ManagementImproper Financial Management

Misrepresentation of FinancesMisrepresentation of Finances



Approaches to Approaches to CorporateCorporate

Social ResponsibilitySocial Responsibility

3-43

Obstructionist ± Defensive ± Accommodative - Proactive

Lowest Level of

Social Responsibility

Highest Level of

Social Responsibility



Step 4: The Social AuditStep 4: The Social Audit

A systematic analysis of how the firm is A systematic analysis of how the firm isusing funds designated specifically to fundusing funds designated specifically to fundits social initiativesits social initiatives

Also addresses the effectiveness of the Also addresses the effectiveness of themonies that have been spentmonies that have been spent

Triple bottom line reporting =Triple bottom line reporting =

financial reports, social audits andfinancial reports, social audits andsustainability reportssustainability reports



Social Responsibility andSocial Responsibility and

the SmallB

usinessthe SmallB

usiness small businesses face many of the same ethical andsmall businesses face many of the same ethical and

social responsibility issues as large firmssocial responsibility issues as large firms

some wonder if they can afford a social agendasome wonder if they can afford a social agenda

need to decide in advance how to respondneed to decide in advance how to respond



Ethical behavior can be rationalized by convincingEthical behavior can be rationalized by convincing

yourself that:yourself that:

the behavior is not really illegalthe behavior is not really illegal

the behavior is really in everyone¶s bestthe behavior is really in everyone¶s bestinterestsinterests

nobody will ever find outnobody will ever find out

the organization will µprotect¶ youthe organization will µprotect¶ you



Factors influencing ethical behavior include:Factors influencing ethical behavior include:

the personthe person

the organizationthe organization

the environment.the environment.



F igure 6.3

F actors influencing ethical managerial

behaviour ² the person, organisation and

environment



What is organisationalWhat is organisational

social responsibility?social responsibility? Arguments against social responsibilityArguments against social responsibility::

Reduced business profitsReduced business profits

Higher business costsHigher business costs

Dilution of business purposeDilution of business purpose Too much social power for businessToo much social power for business

Lack of public accountability.Lack of public accountability.



Arguments in favor of social responsibility:Arguments in favor of social responsibility:

Adds long Adds long--run profitsrun profits

Better public imageBetter public image

Avoids more government regulation Avoids more government regulation Businesses have resources and ethical obligationBusinesses have resources and ethical obligation

Better environmentBetter environment

Public wants it.Public wants it.



What is organizationalWhat is organizational

social responsibilitysocial responsibility Criteria for evaluating corporate social performanceCriteria for evaluating corporate social performance

Is the organization's:Is the organization's:

economic responsibility met?economic responsibility met?

legal responsibility met?legal responsibility met?

ethical responsibility met?ethical responsibility met?

discretionary responsibility met?discretionary responsibility met?



Figure 6.4Figure 6.4Four strategies of corporate social responsibility, fromFour strategies of corporate social responsibility, from

µobstructionist¶ to µproactive¶ behavior µobstructionist¶ to µproactive¶ behavior

control concept and process

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