1. Control Systems Unit 4: Planning and Controlling

2. Forms of Managerial Control  Managerial control can take many different forms  Most organizations use a combination of the following control systems or techniques: 1. Management by Objectives (MBO) 2. Internal Control Measures 3. External Control Measures 4. Progressive Discipline

3. Forms of Managerial Control – Management by Objectives  Management by Objectives integrates the planning and controlling functions by aligning employees' actions, with the goals of the organization  The intent is to make sure that everyone is clear about what they should be doing and how it is beneficial to the whole organization  When employees focus on their objectives, it helps them to recognize which tasks must be completed and which tasks are simply a waste of valuable time  It is critically important that the manager and the employee agree on the employee’s goals and objectives

4. Forms of Managerial Control – Management by Objectives

5. Forms of Managerial Control – Internal Control Measures  When employees exercise internal control over their own behaviour, they demonstrate self-discipline and self-control  Highly motivated individuals and groups will often meet or exceed their job expectations without the need for external control from managers  Self-control is more likely in an organization where the individuals understand and believe in the organization’s mission, know their own objectives, and have the resources to do their job well  In this type of work environment, there is a high level of trust and respect  Encouraging employees to participate in goal setting, (i.e., Step 3 in the Management by Objectives model), will hopefully result in self-discipline

6. Forms of Managerial Control – External Control Measures  Compensation systems that may be used to motivate employees including:  bonus pay;  Employee Stock Ownership (ESOP);  gain-sharing;  profit-sharing,  pay for performance (or merit pay); and  skills-based pay (or pay for knowledge).  If these compensation systems are effective in encouraging employees to meet standards and performance objectives, then they can be a very useful control mechanism

7. Forms of Managerial Control – Progressive Discipline System  When an employee’s behaviour at work is unacceptable, (e.g., absenteeism, lateness, lying, or sexual harassment), managers must address the behaviour  The idea of Progressive Discipline recognizes that some types of misbehaviour are more severe than others  The disciplinary action administered to an employee should vary according to how significant and how often the behaviour occurs  The “ultimate” penalty of being fired, should only be used in the case of the most severe infractions or for repeated occurrences of minor infractions