Management 200: Control Chapters 18 & 20

Controlling for Organizational Performance w Learning Objectives: Elements of the control process Measure Compare Correct Types of organizational controls New ideas regarding control

Organizational Controls w Definition: “The process of monitoring activities to ensure they are being accomplished as planned and of correcting any significant deviations.” “The process and mechanisms used to ensure behaviors and performance deliver the desired results.”

Controlling w Managers are responsible for producing results, so they need efficient: feedback mechanisms that provide timely information necessary to evaluate activities in order to compare them to desired standards of performance.

Controlling w Effectiveness of the control process is determined by: how well the it helps managers achieve organizational goals

Organizational Control Process w Measure actual performance w Compare actual against standards w Correct deviations

1. Measuring w What to measure? w How to measure? w Types of measurement tools w Common measurement problems

What to Measure? w Goals = the success measures of an organization w Common areas of measurement: Financial Market Employees Community/environment

What to Measure? w Balanced scorecard (article) financial measures alone do not provide enough information evaluate performance in four areas financial customer internal business processes (employee) learning and growth

What to Measure? w Operational Measurements Operating plan should give you measurable objectives What needs to be done By when With what budget Within what standards of performance to achieve the organizational goals

How to Measure? w The greater number of methods used increases the probability of obtaining reliable information: Personal observation Statistical reports Oral reports/meetings Written reports

Types of Measurement Tools w Financial tools w Information systems w Best practices benchmarking w Performance reviews w Project planning tools

Common Measurement Problems w Too much detail w Overly complex measures w Confusing charts and graphs w Conflicting information w No link between the performance data and goal achievement w Unrelated sources of data w Failure to customize to your organization

2. Comparing Actual Against Standards w Evaluate performance compared to the desired results w Identify deviations from the standard

3. Correct Deviations w Find out why there is a gap between performance and goal w Correct performance OR change the plan

Types of Organizational Controls w Preventative controls (“feed forward”) mechanisms to reduce occurrence of errors ahead of time w In process controls (“concurrent”) corrections take place while the activity is taking place w Corrective controls (“feedback”) mechanisms that fix unwanted behaviors or results

Qualities of Effective Controls w Accurate w Timely w Economical to operate w Flexible w Understandable w Reasonable and acceptable w Complete w Impartial/objective w Linked to desired goals/results w Multiple criteria w Emphasis on exceptions w Focus on most important factors w Suggests corrective action

Control Contingency Factors w Organization size w Level within the organization w Degree of decentralization w Organizational culture w Importance of the activity

New Control Ideas w Open Book Management (article) Financial literacy systematic training of people at non-executive levels in the business impact of their decisions Deliberate disclosure Employee ownership

New Control Ideas w Appreciative Inquiry (article) Search for solutions that already exist Amplify what is working well Focus on energy-giving forces Ask: “What is working well around here?”

New Control Ideas w Learning Organizations We can learn as much from our mistakes as from our successes View mistakes as “intellectual capital” of the organization (vs. an expense to be “written off”) Deliberately share mistakes to learn from them

Current Control Issues w International cultural differences w Privacy w Employee theft w Workplace violence w Internet use (Lab assignment for this week)

Control Summary Purpose of control is to achieve organizational performance Steps in the control process: Measure Compare Correct Types of organizational controls New ideas regarding control