Unit 12Organizational
Control
Discussion Topics
• describe the basic control process
• discuss some of the methods that managers can use
to maintain control
• describe the behaviors, processes, and outcomes that
today’s managers are choosing to control in their
organizations
The Control Process:
• Establishment of clear standards of
performance
• Comparing performance to those standards,
• Corrective action to repair performance
deficiencies
• Three basic methods: feedback control,
concurrent control, and feed-forward control.
• Control isn’t always worthwhile or possible.
Standards:
• Must enable goal achievement
• How to set the standards
o A standard must enable goal achievement
o Determined by benchmarking (anything from cycle time to
quality and price) other companies’ standards.
o Listen to customer’s comments, complaints, and suggestions
Comparison to Standards
• The quality of the comparison depends largely on the
measurement and information systems a company uses
to keep track of performance.
• The better the system, the easier it is for a company to
track performance and identify problems that need to be
fixed.
Corrective Action:
• Identify performance deviations
• Analyze deviations
• Development and implement corrective programs
Control Isn’t Always Worthwhile or Possible
• Control loss
• Regulation costs
• Cybernetic feasibility
Methods of Process Control
• Feedback control
• Concurrent control
• Feed-forward control
Bureaucratic Control
• Managers try to influence employee behavior by rewarding or
punishing employees for compliance or non-compliance with . .
.
• Managers emphasize following rules above all else.
• Rules and regulations typically set the standards at a minimum
acceptable level.
• Companies are highly resistant to change and slow to respond
to customers and competitors.
Objective Control• The use of observable measures of employee behavior or output to assess
performance and influence behavior.
• Behavior control – management-based control
• Output control - employee-based control
o measures must be reliable, fair, and accurate
o employees and managers must believe that they can produce the desired
results
o rewards must be dependent on achieving established standards of performance
Normative Controls
• A company’s widely shared values and beliefs guide workers’ behavior
and decisions.
• Created in two ways:
oNormatively controlled companies are careful about who they hire
attitude and value, not just ability. Employees are then empowered
to run the business as they see fit.
oManagers and employees learn by observing experienced employees
Self-control (Self-management)• A control system in which managers and workers control their
own behavior
• Workers need be empowered for self-control
The Balanced Scorecard
• Encourages managers to look at four different perspectives on
company performance.
• Customer perspective
• Internal perspective
• Innovation and learning perspective
• Financial perspective
Balanced Scorecard of Southwest Airlines
16-3© 2015 Cengage Learning
Controlling Financial Performance
Traditional approaches
• Cash flow analysis
• Balance sheets
• Income statements
• Financial ratios
• Budgets
Economic Value Added (EVA)
• Not the same thing as profits…
• The amount by which profits exceed the cost of capital in a
given year.
• EVA is positive when company profits exceed the cost of
capital in a given year.
• Includes the cost of capital
• Can be easily determine for subsets of a company
Calculating Economic Value Added (EVA)
Controlling Customer Defections
• Companies can do a better job of answering “How do customers see
us?” by identifying which customers are leaving the company and
measuring the rate at which they are leaving.
• Customers who have left are much more likely than current
customers to tell you what you were doing wrong.
Controlling Quality
Quality is measured in three ways:
• Excellence
• Value
• Conformance to specifications
Conformance to Specifications Checklist for Buying Fresh Fish
Advantages and Disadvantages of Different Measures of Quality
Controlling Waste and Pollution
• Waste prevention and reduction
ogood housekeeping
omaterial/product substitution
oprocess modification
• Recycle and reuse
• Waste treatment
• Waste disposal
