Foundations of Controlling Chapter Seventeen Foundations of Controlling

Learning Objectives Define control Describe the three approaches to control Explain why control is important Describe the control process Distinguish between the three types of control Describe the qualities of an effective control system Explain how controls can become dysfunctional Identify three current ethical issues in control

Characteristics of Three Approaches to Control Systems Type of Control Characteristics Market Uses external market mechanisms, such as price com- petition and relative market share, to establish stan- dards used in system. Typically used by organizations whose products of services are clearly specified and distinct and how face considerable marketplace competition. Bureaucratic Emphasizes organizational authority. Relies on admin- istrative and hierarchical mechanisms, such as rules, regulations, procedures, policies, standardization of activities, well-defined job descriptions, and budgets, to ensure that employees exhibit appropriate behaviors and meet performance standards. Clan Regulates employee behavior by the shared values, norms, traditions, rituals, beliefs, and other aspects of the organization’s culture. Often used by organizations where teams are common and where technology is changing rapidly. Figure 18-1

The Planning-Controlling Link Goals Objectives Strategies Plans Controlling Organizing Standards Measurements Comparisons Action Structure Human resources management Leading Motivation Leadership Communication Individual and group behavior Figure 18-2

Defining the Acceptable Range of Variation upper limit Acceptable range of variation Standard Measurement of Performance Acceptable lower limit t t+1 t+2 t+3 t+4 t+5 Figure 18-3

Sales Performance Figures for July, Eastern States Distributors (HUNDREDS OF CASES) BRAND STANDARD ACTUAL OVER (UNDER) Heineken Molson Beck’s Moosehead Labatt’s Corona Amset Light Dos Equis Tecate Total Cases 1,075 630 800 620 540 160 225 80 170 4,300 913 634 912 622 672 140 220 65 286 4,464 (162) 4 112 2 132 (20) (5) (15) 116 164 Table 18-1

The Control Process Is standard being attained? Yes Compare actual performance with standard Do nothing No Is variance acceptable? Yes Do nothing Objectives Measure actual performance No Is standard acceptable? Standard Yes Identify cause of variation No Revise standard Correct performance Figure 18-4

Types of Control Input Processes Output Feedforward control Concurrent Feedback control Corrects problems as they happen Corrects problems after they occur Anticipates problems Figure 18-5

Qualities of an Effective Control System Corrective action Accuracy Multiple criteria Timeliness Effective Control System Emphasis on exceptions Economy Flexibility Strategic placement Understandability Reasonable criteria Figure 18-6