Chapter 18

1. Chapter 18 FOUNDATIONS OF CONTROL © Prentice Hall, 2002 18-1

2. What Is Control? Control: the process of monitoring activities to ensure that they are being accomplished as planned and of correcting significant deviations. control systems are judged in terms of how well they facilitate goal achievement. There are three different approaches to designing organizational control systems. (See Exhibit 18.1 on p. 496.): © Prentice Hall, 2002 18-2

3. What Is Control? There are three different approaches to designing organizational control systems. (See Exhibit 18.1 on p. 496.): 1. market control - emphasizes the use of external market mechanisms to establish standards of performance. E.g., use of price competition, relevant market share to establish standards. When this approach is used? useful where products and services are distinct useful where marketplace competition is considerable divisions turned into profit centers and judged by the percentage of total corporate profits each contributes © Prentice Hall, 2002 18-3

4. What Is Control? (cont.) Control 2. bureaucratic control - emphasizes organizational authority. relies on administrative rules, procedures, and policies. depends on standardization of activities, well-defined job descriptions, and other administrative mechanisms such as budgets. © Prentice Hall, 2002 18-4

5. What Is Control? (cont.) Control 3. clan control - behavior regulated by shared values, traditions, and other aspects of organizational culture. dependent on individual and group to identify expected behaviors and performance measures. found where teams are common and technology changes often. For example in IUG individuals are well aware of expectations regarding appropriate work behavior and performance standards. © Prentice Hall, 2002 18-5

6. Control system • Most organizations don’t rely totally on just one of these approaches to designing an effective control system.

7. Why Is Control Important? Control is the Final Link in the Management Process provides the critical link back to planning only way managers know whether organizational goals are being met Permits Delegation of Authority fear that employees will do something wrong for which the manager will be held responsible provides information and feedback on employee performance © Prentice Hall, 2002 18-7

8. The Planning-Controlling Link Planning Organizing Goals Objectives Strategies Plans Structure Human Resource Management Controlling Standards Measurements Comparisons Actions Leading Motivation Leadership Communication Individual and Group Behavior © Prentice Hall, 2002 18-8

9. The Control Process © Prentice Hall, 2002 18-9

10. The Control Process Background controlling is a three-step process assumes that performance standards already exist specific goals are created in the planning process Measuring: How we measure is done through four common sources of information that managers use. Each of these sources has its own advantages and drawbacks. personal observation - permits intensive coverage. Management By Walking Around (MBWA) drawbacks - subject to personal biases consumes a great deal of time suffers from obtrusiveness: mistrust © Prentice Hall, 2002 18-10

11. The Control Process (cont.) Measuring (cont.) How We Measure (cont.) 2. statistical reports - numerical data are easy to visualize and effective for showing relationships. Use of graphs, bar charts.. drawbacks - not all operations can be measured. important subjective factors may be ignored. 3. oral reports - includes meetings, telephone calls may be best way to control work in a virtual environment technology permits creation of written record from oral report drawbacks - filtering of information © Prentice Hall, 2002 18-11

12. The Control Process (cont.) How We Measure (cont.) 4. written reports - often more comprehensive and concise than oral reports usually easy to file and retrieve comprehensive control efforts should use all four approaches. © Prentice Hall, 2002 18-12

13. What We Measure. what we measure more critical than how we measure. control criteria applicable to any management situation: employee satisfaction, absenteeism, and turnover. keeping costs within budgets. control system needs to recognize the diversity of activities some activities difficult to measure in quantifiable terms. most activities can be grouped into some objective segments that can be measured. when objective measures are not available, should rely on subjective\qualitative measures The Control Process (cont.) © Prentice Hall, 2002 18-13

14. The Control Process (cont.) Comparing Comparing is the next step in the control process. It determines the degree of variation between actual performance and the standard. It’s critical to determine the range of variation, which are the acceptable parameters of variance between actual performance and the standard. (See Exhibit 18.4 on p. 501.) An example of comparing actual performance to standards is shown in Exhibit 18.5 on p. 502. © Prentice Hall, 2002 18-14

15. Defining The Acceptable Range Of Variation Acceptable Upper Limit Acceptable Range of Variation Measurement of Performance Standard Acceptable Lower Limit t t+1 t+2 t+3 t+4 t+5 Time Period (t) © Prentice Hall, 2002 18-15

16. Sales Performance Figures For July, Eastern States Distributors Standard* 1,075 630 800 620 540 160 225 80 170 4,300 Actual* 913 634 912 622 672 140 220 65 286 4,464 Over (under)* (162) 4 112 2 132 (20) (5) (15) 116 164 Brand Heineken Molson Irish Amber Victoria Bitter Labatt’s Corona Amstel Light Dos Equis Tecate Total cases * hundreds of cases © Prentice Hall, 2002 18-16

17. The Control Process (cont.) Taking Managerial Action. Correct Actual Performance - action taken when the performance variation is unsatisfactory. Example of corrective actions: changing strategy, structure, training, redesigning jobs. immediate corrective action - corrects problems at once to get performance back on track. basic corrective action - identifies reason for performance variation. corrects the source of variation. Revise the Standard - variance results from an unrealistic standard. standard, not performance, needs correction troublesome to revise the standard downward © Prentice Hall, 2002 18-17

18. Managerial Decisions in the Control Process © Prentice Hall, 2002 18-18

19. Types Of Control Feedforward\preventive Control prevents anticipated problems most desirable type of control requires timely and accurate information that often is difficult to get Concurrent\parallel Control takes place while activity is in progress corrects problem before it becomes too costly best-known form is direct supervision © Prentice Hall, 2002 18-19

20. Feedback Control takes place after the activity is done problems may already have caused damage or waste the most popular type of control feedback may be only viable form of control available feedback has two advantages provides meaningful information on the effectiveness of planning can enhance employee motivation Types of Control (cont.) © Prentice Hall, 2002 18-20

21. Types Of Control Input Processes Output Feedforward Control Concurrent Control Feedback Control Anticipates problems Corrects problems as they happen Corrects problems after they occur © Prentice Hall, 2002 18-21

22. Qualities Of An Effective Control System Corrective Action Accuracy Timeliness Multiple Criteria Emphasis on Exceptions Economy Strategic Placement Flexibility Reasonable Criteria Understandability EFFECTIVE CONTROL SYSTEM © Prentice Hall, 2002 18-22

23. Contingency Factors in the Design of Control Systems © Prentice Hall, 2002 18-23

24. methods of controlling people and work can be quite different in other countries. E.g., global companies. differences are most marked in the measurement and corrective action steps in technologically advanced nations, controls are indirect in less technologically advanced nations, controls are more direct laws in different countries provide different constraints on corrective action: eg, laying off employees, taking momey out of the country. data used for controlling may not be comparable in different countries though for the same company but different branches. Adjusting Controls for Cultural Differences © Prentice Hall, 2002 18-24

25. Workplace Privacy employers have the right to monitor employee communications, examine employee computers and files, and use surveillance cameras reasons for monitoring include prevention of: Recreational\fun on-the-job Web surfing creation of hostile work environments with e-mail security leaks of critical information Electronic Communications Privacy Act - 1986 prohibits unauthorized interception\catching of electronic communication workplace electronic monitoring is still legal Contemporary Issues In Control © Prentice Hall, 2002 18-25

26. Contemporary Issues In Control (cont.) Workplace Privacy (cont.) companies are developing and enforcing workplace monitoring policies. develop unambiguous computer usage policy. inform employees that computers may be monitored. provide clear guidelines on acceptable use of company e-mail system and the Web. © Prentice Hall, 2002 18-26

27. Workplace Monitoring by employers in US Track telephone calls (numbers and time spent) 39% Store and review employee e-mail messages 27% Store and review computer files 21% Log computer time and keystrokes entered 15% Record and review telephone conversations 11% Store and review voice-mail messages 6% © Prentice Hall, 2002 18-27

28. Contemporary Issues In Control (cont.) Employee Theft unauthorized taking of company property by employees for their personal use. Up to 85 percent of all organizational theft and fraud is committed by employees. is an escalating problem in all types of organizations different proposals to explain employee theft. They will depend on who you ask: industrial security - opportunity presents itself due to lack of controls and favorable circumstances criminology - people have financial-based pressures or vice-based pressures (such as gambling debts). clinical psychology - people are able to rationalize any type of behavior. E.g., every one does it. © Prentice Hall, 2002 18-28

29. Control Measure for Deterring or Reducing Employee Theft or Fraud © Prentice Hall, 2002 18-29

30. Contemporary Issues In Control (cont.) Workplace Violence many factors contribute to workplace violence including: employee work driven by time, numbers, and crises. rapid and unpredictable change destructive communication style of manager authoritarian leadership defensive attitude double standards unresolved grievances\complains emotionally troubled employees repetitive, boring work © Prentice Hall, 2002 18-30

31. Contemporary Issues In Control (cont.) Workplace Violence (cont.) contributing factors (cont.) faulty or unsafe equipment hazardous work environment culture of violence © Prentice Hall, 2002 18-31

32. Workplace Violence Witnessed yelling\scream and other verbal abuse 42% Yelled at coworkers themselves 29% Cried over work-related issues 23% Seen someone purposely damage machines or furniture 14% Seen physical violence in the workplace 10% Struck a coworker 2% © Prentice Hall, 2002 18-32

33. Discussions • Contrast market, bureaucratic, and clan control. • Market control emphasizes the use of external market mechanisms such as price, competition, and relative market share to establish the standards used in the control system. Bureaucratic control emphasizes organizational authority and relies on administrative rules, regulations, procedures, and policies. Clan control regulates employee behavior by means of the shared norms, values, traditions, rituals, beliefs, and other aspects of the organization’s culture.

34. Discussions • Why is feedforward control the most desirable type of control? • Feedforward controls are desirable because they allow managers to prevent problems rather than cure them. • What qualities will an effective control system have? • An effective control system has the following qualities: accuracy, timeliness, economy, flexibility, understandability, reasonable criteria, strategic placement, emphasis on the exception, multiple criteria, and corrective action.

35. Discussions • What is the role of control in management? • Control is the process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations.

36. Discussions • What would an organization have to do to change its dominant control approach from bureaucratic to clan? From clan to bureaucratic? • Changing from a bureaucratic approach to a clan approach would entail a radical change in corporate culture because you would be going from a control system that emphasized rules and administrative mechanisms to a control system that emphasized the cultural values, rituals, and beliefs. Changing from a clan approach to a bureaucratic approach would mean having in place the rules, standardized activities, procedures, and other administrative mechanisms that would be used to control employee behavior.