Organizational Control Managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals Keeping an organization on track, anticipating events, changing the organization to respond to opportunities and threats

Control Systems Formal, target-setting, monitoring, evaluation and feedback systems that provide managers with information about how well the organization’s strategy and structure are working. A good control system should: be flexible so managers can respond as needed. provide accurate information about the organization. provide information in a timely manner.

Three Types of Control Figure 11.1

Types of Control Feedforward Controls Concurrent Controls Used in the input stage of the process Managers can anticipate problems before they arise. Managers can give rigorous specifications to suppliers to avoid quality problems with inputs. Concurrent Controls Give immediate feedback on how inputs are converted into outputs Allows managers to correct problems as they arise Managers can see that a machine is becoming out of alignment and fix it.

Types of Control Feedback Controls Provide after-the-fact information managers can use in the future Customers’ reactions to products are used to take corrective action in the future.

Control Process Steps Figure 11.2

Three Organizational Control Systems Figure 11.3

Financial Measures of Performance Financial Controls Profit ratios Measures of how efficiently managers convert resources into profits —return on investment (ROI). Liquidity ratios Measures of how well managers protect resources to meet short term debt—current and quick ratios. Leverage ratios Measures of how much debt is used to finance operations—debt-to-asset and times-covered ratios.

Financial Measures of Performance Financial Controls Leverage ratios Measures of how much debt is used to finance operations—debt-to-asset and times-covered ratios. Activity ratios Measures of how efficiently managers are creating value from assets—inventory turnover, days sales outstanding ratios.

Output Control Organizational Goals Each division within the firm is given specific goals that must be met in order to attain overall organizational goals. Goals should be specific and difficult, but not impossible, to achieve (stretch goals). Goal setting and establishing output controls are management skills that are developed over time.

Organization-Wide Goal Setting Figure 11.4

Output Control Operating Budgets Blueprints state how managers intend to allocate and use the resources they control to attain organizational goals effectively and efficiently. Each division is evaluated on its own budgets for cost, revenue or profit. Managers are evaluated by how well they meet goals for controlling costs, generating revenues, or maximizing profits while staying within their budgets.

Problems with Output Control Managers must create output standards that motivate at all levels. They must be careful not to create short-term goals that motivate managers to ignore the future. If standards are set too high, workers may engage unethical behaviors to attain them.

Behavior Control Direct Supervision Managers who directly manage can teach, reward, lead by example, and take corrective action as needed. Can be very expensive since only a few workers can be personally managed by one manager and many managers are needed. Close supervision demotivates workers who desire less scrutiny and more autonomy, causing them to avoid responsibility. Direct supervision is difficult to do effectively in complex job settings.

Management by Objectives Management by Objectives (MBO) A goal-setting process in which managers and subordinates negotiate specific goals and objectives for the subordinate to achieve and then periodically evaluate their attainment of those goals. Specific goals are set at each level of the firm. Goal setting is participatory with manager and worker Periodic reviews of subordinates’ progress toward goals are held (pay raises and promotions are tied to goal attainment). Teams are also measured in this way with goals and performance measured for the team.

Bureaucratic Control Bureaucratic Control Control through a system of rules and standard operating procedures (SOPs) that shapes the behavior of divisions, functions, and individuals. Rules and SOPs tell the worker what to do (standardized actions) so outcomes are predictable. There is still a need for output control to correct mistakes. Bureaucratic control is best used for routine problems in stable environments.

Organizational Culture The set of internalized values, norms, standards of behavior, and common expectations that control the ways in which individuals and groups in an organization interact with each other and work to achieve organizational goals.

Clan Control Clan Control The control through the development of an internal system of values and norms. Both culture and clan control accept the norms and values as their own and then work within them. Examples: Work dress styles, normal working hours, pride taken in work. These methods provide control where output and behavioral control does not work. Strong culture and clan control help worker to focus on the organization and enhance its performance.

Adaptive Culture Strong and cohesive culture that controls employee attitudes and behaviors

Inert Culture Culture that leads to values and norms that fail to motivate or inspire employees

Steps in the Organizational Change Process Figure 11.6

Organization Change Movement of an organization away from its present state and toward some desired future state to increase its efficiency and effectiveness

Organizational Learning Process through which managers try to increase organizational members’ abilities to understand and appropriately respond to changing conditions Impetus for change Can help members make decisions about changes