©2008 by Nelson, a division of Thomson Canada Limited 1 Management Second Canadian Edition Chuck Williams Alex Z. Kondra Conor Vibert Slides Prepared by: Kerry Rempel, Okanagan College

©2008 by Nelson, a division of Thomson Canada Limited 2 Chapter 7 Control

©2008 by Nelson, a division of Thomson Canada Limited 3 What Would You Do? Advancements in technology have enabled cable companies to compete with traditional phone service providers. Analysts and stockholders play increasingly significant roles in how a company’s actions are interpreted by the market With these factors in mind, how you would you maintain control of Bell Canada.

©2008 by Nelson, a division of Thomson Canada Limited 4 Learning Objectives: Basics of Control After reading the next section, you should be able to: 1. describe the basic control process

©2008 by Nelson, a division of Thomson Canada Limited 5 The Control Process Establish clear standards Compare actual to standard performance Take corrective action, if needed Control is a continuous, dynamic process Three basic methods of control

©2008 by Nelson, a division of Thomson Canada Limited 6 Standards Good Standards should: Enable goal achievement Be determined by listening to customers or watching competitors. Determine what should be benchmarked

©2008 by Nelson, a division of Thomson Canada Limited 7 Comparison to Standards Compare actual performance to performance standards The better the systems that measure and analyze performance, the easier it is for companies to track their progress and identify problems that need to be fixed Adapted from Exhibit 7.1

©2008 by Nelson, a division of Thomson Canada Limited 8 Corrective Action Identify performance deviations Analyze the deviations Develop and implement programs to correct deviations

©2008 by Nelson, a division of Thomson Canada Limited 9 Dynamic Process The process of performance, measurement, analysis and corrective action are repeated over and over in an endless feedback loop

©2008 by Nelson, a division of Thomson Canada Limited 10 Basic Control Methods Feedback control Gather information about performance deficiencies after they occur Concurrent control Gather information about deficiencies as they occur Feedforward control Gather information about performance deficiencies before they occur

©2008 by Nelson, a division of Thomson Canada Limited 11 Is More Control Possible? Cost of control direct costs of control unintended costs Cybernetic feasibility the extent to which it is possible to implement each step in the control process if a step cannot be implemented, then control may not be possible

©2008 by Nelson, a division of Thomson Canada Limited 12 Learning Objectives: How and What to Control After reading the next two sections, you should be able to: 2. Discuss the various methods that managers can use to maintain control 3. Describe the behaviours, processes, and outcomes that managers are choosing to control in today’s organizations

©2008 by Nelson, a division of Thomson Canada Limited 13 Control Methods Bureaucratic Objective Normative Concertive Self-Control

©2008 by Nelson, a division of Thomson Canada Limited 14 Bureaucratic Control Top-down control Use rewards and punishments to influence employee behaviour Use policies and rules to control behaviour Bureaucratically controlled companies are resistant to change and slow to respond to customers

©2008 by Nelson, a division of Thomson Canada Limited 15 Objective Control Use of observable measures to assess performance and influence behaviour Behaviour control regulate actions and behaviours of employees Output control measure employee outputs coupled with use of rewards and incentives

©2008 by Nelson, a division of Thomson Canada Limited 16 Normative Control Company values and beliefs guide employee behaviour and decisions. Created by: Careful selection of employees Role-modeling and retelling of stories

©2008 by Nelson, a division of Thomson Canada Limited 17 Concertive Control Employees are guided by beliefs that are shaped and negotiated by work groups. Autonomous work groups operate without managers Members responsible for controlling work group process, outputs, and behaviour

©2008 by Nelson, a division of Thomson Canada Limited 18 Self-Control Employees control their own behaviour Employees make decisions within clear boundaries Managers and employees set goals and monitor their own progress

©2008 by Nelson, a division of Thomson Canada Limited 19 When to Use Different Methods of Control Use bureaucratic control when standard operating procedures needed necessary to establish limits Use behaviour control when easier to measure activities than outputs “cause-effect” relationships are clear good measures of behaviour are available Adapted from Exhibit 7.3

©2008 by Nelson, a division of Thomson Canada Limited 20 When to Use Different Methods of Control Use output control when easier to measure outputs than behaviours good measures of output are available clear goals and standards are available “cause-effect” relationships are unclear Use normative control when culture is strong difficult to create behaviour measures difficult to create output measures Adapted from Exhibit 7.3

©2008 by Nelson, a division of Thomson Canada Limited 21 When to Use Different Methods of Control Use concertive control when group responsible for task accomplishment workers take “ownership” of behaviour and outputs strong worker-based control needed Use self-control when workers are intrinsically motivated difficult to create behaviour measures difficult to create output measures workers have self-control and self-leadership Adapted from Exhibit 7.3

©2008 by Nelson, a division of Thomson Canada Limited 22 What to Control The Balanced Scorecard Customer perspective Internal perspective Innovation and learning perspective Financial perspective

©2008 by Nelson, a division of Thomson Canada Limited 23 Example of a Balanced Scorecard — Financial Perspective Financial perspective GoalsMeasures SurviveCash flow SucceedSales growth by division ProsperIncreased market share

©2008 by Nelson, a division of Thomson Canada Limited 24 Advantages of Balanced Scorecard Managers look beyond traditional financial measures Managers set specific goals and measure performance in four areas Helps minimize suboptimization

©2008 by Nelson, a division of Thomson Canada Limited 25 The Financial Perspective: Controlling Economic Value Added The amount by which company profits exceed the cost of capital in a given year. Important because: It shows if a business or profit centre is paying for itself Focuses attention on specific departments Encourage creative ways to improve organizational performance

©2008 by Nelson, a division of Thomson Canada Limited 26 The Customer Perspective: Controlling Customer Defections Measure Customer Defection - which customers are leaving and at what rate Don’t rely completely on customer satisfaction surveys Cost of replacing old customers with new ones is great

©2008 by Nelson, a division of Thomson Canada Limited 27 The Internal Perspective: Controlling Quality Managers focus on quality. Quality is measured as: excellence value conformance to expectations

©2008 by Nelson, a division of Thomson Canada Limited 28 Quality as Excellence Advantages  promotes organizational vision  motivates and inspires  appeals to customers Disadvantages  provides little practical guidance  what does excellence mean?  difficult to measure and control Adapted from Exhibit 7.8

©2008 by Nelson, a division of Thomson Canada Limited 29 Quality as Value Advantages customers recognize differences in value easy to measure and compare value of different products/services Disadvantages difficult to determine which factors account for value difficult to control balance between excellence and cost Adapted from Exhibit 7.8

©2008 by Nelson, a division of Thomson Canada Limited 30 Quality as Conformance to Specifications Advantages  specifications, if written, are measurable  increased efficiency  consistent quality Disadvantages  difficult to evaluate some products/services  increased standardization may make change difficult  less appropriate for services Adapted from Exhibit 7.8

©2008 by Nelson, a division of Thomson Canada Limited 31 The Innovation and Learning Perspective: Controlling Waste and Pollution Four levels of waste minimization Waste prevention and reduction Recycle and reuse Waste treatment Waste disposal

©2008 by Nelson, a division of Thomson Canada Limited 32 What Really Happened? Bell Canada utilized it’s board through their participation in strategic directions They changed their compensation to align management views with those of the shareholders.