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Chapter ObjectivesIdentify three types of control and the

components common to all control systems.Learn the two approaches to control systemDiscuss organizational control from a strategic

perspective.Learn the components of organizational

control system.Understand why Planning and Controlling are

called he Siamese twin of ManagementUnderstand and discuss the Planning/Control

Cycle© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

2

Fundamentals of Organizational Control

Control Comparing desired results with actual results and

taking corrective action as needed to keep things on track. Checking, testing, regulating, verifying, or adjusting Objectives are yardsticks for measuring actual

performance. Purpose of the control function:

To get the job done despite environmental, organizational, and behavioral obstacles and uncertainties

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Types of ControlsFeedforward Control

The active anticipation and prevention of problems, rather than passive reaction

Concurrent Control Monitoring and adjusting ongoing activities

and processesFeedback Control

Checking a completed activity and learning from mistakes

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Figure 16.1: Three Types of Control

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1. Bureaucratic Control - extensive rules and regulations, top-down authority, tightly written job descriptions and other formal methods for preventing and correcting deviations from desired behaviors and results.

2. Clan or Organic Control - flexible authority, loose job descriptions, individual self-controls and other informal methods of preventing and correcting deviations from desired behaviors and results.

Approaches to Control System

BUREAUCRATIC CONTROL CLAN CONTROL

Use of detailed rules and procedures whenever possible.

Use of detailed rules and regulations only when necessary.

Top-down authority with emphasis on positional power.

Flexible authority with emphasis on expert power and networks of control.

Activity-based job descriptions that prescribe day-to-day behavior

Results-based job description that emphasize goals to be achieved.

Emphasis on extrinsic rewards (wages, pensions, status symbols) for controlling performance.

Emphasis on both extrinsic and intrinsic rewards (meaningful work) for controlling performance.

Org. culture not recognized as source of control

Org culture seen as a way of integrating org, group and individual goals for greater overall control.

Organizational Control SubsystemsStrategic plansLong-range plansAnnual operating budgetsStatistical reportsPerformance appraisalsPolicies and proceduresThe organization’s culture

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Components of Organizational Control Systems

Objectives Measurable reference points (targets) for

corrective actionStandards

Guideposts on the way to achieving objectives Benchmarking: Identifying, studying, and

building upon the best practices of organizational role models

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Evaluation-Reward Systems

Goals of System To measure and reward individual and team

contributions to attaining organizational objectives

To shape effort-reward expectancies in order to motivate better performance

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Identifying Control Problems

Executive Reality Checks Top managers periodically work at lower-level

jobs to become more aware of operations.Internal Audits

Independent appraisals of organizational operations and systems are conducted to assess effectiveness and efficiency.

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Identifying Control Problems (cont’d)

Symptoms of Inadequate Control An unexplained decline in revenues or profits A degradation of service (customer complaints) Employee dissatisfaction Cash shortages caused by bloated inventories or

delinquent accounts receivable Idle facilities or personnel Disorganized operations Excess costs Evidence of waste and inefficiency (scrap,

rework)

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.12

© 2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.13

PLANNING AND CONTROLLING: . . . “ THE SIAMESE TWIN OF

MANAGEMENT”

•Planning is the formal process of developing goals, strategies, standards and allocating resources while controls are the measures that help ensure that decisions, actions and results are consistent with those plans. Thus, planning and controlling go hand in hand.•Planning prescribes desired behavior and results while controls help maintain or redirect actual behavior and results.•Managers cannot effectively plan without accurate and timely information, controls provide some of this essential information.•Managers need plans to indicate the purposes to be solved by controls. Thus, planning and controls complement and support each other.•To conclude, without planning, there would be no way to control.

Define Vision

Identify Mission

Set Goals & Objectives

Develop & Implement Strategic Plans

Develop & Implement Intermediate Plans

Develop & Implement Operational Plans

Determine Areas to Control

Establish Standards

Measure Performance

Compare Performance

Against Standards

Standards met?

Recognize Performance

Take Corrective Action as necessary

Adjust Standards & Measures as necessary

YES

NO

The Planning/Control Cycle