1. MANAGEMENT Part Six: The Controlling Process
TWELFTH EDITION
MANAGEMENT
Ricky W. Griffin
Part Six: The Controlling Process
Chapter Nineteen: Basic Elements of Control
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2. Learning Outcomes
Explain the purpose of control, identify different types of control, and describe steps in the control process.
Identify and explain three forms of operations control.
Describe budgets and other tools for financial control.
Identify and distinguish between two opposing forms of structural control.
Discuss the relationship between strategy and control, including international strategic control.
Identify characteristics of effective control, why people resist control, and how managers can overcome this resistance.
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3. The Nature of Control Control
Is the regulation of organizational activities in such a way as to facilitate goal attainment.
Control
Without this regulation, organizations have no indication of how well they are performing in relation to their goals.
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4. The control function has four basic purposes.
Figure 19.1
The Purpose of Control
The control function has four basic purposes.
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5. Types of Control Organizations practice control
in a number of different areas, and
at different levels, and the
responsibility for managing control is widespread.
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6. Types of Control Control areas Physical Human Information Financial
Control can focus on any area of the organization but most define areas of control in terms of the four basic types of resources they use.
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7. Types of Control Control can be broken down by level.
Operations control
focuses on the processes used to transform resources into products and services.
Financial control
is concerned with financial resources.
Structural control
focuses on how structure serves its intended purpose.
Strategic control
focuses on if strategies are succeeding in meeting goals.
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8. Levels of Control Figure 19.2
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9. Types of Control Control is the responsibility of all managers
Most organizations have one or more specialized managers called controllers.
A controller is a position that helps line managers with their control activities.
Organizations are increasingly giving employees more control over their jobs.
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10. Steps in the Control Process
Figure 19.3
Steps in the Control Process
A control standard is a target against which subsequent performance is compared.
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11. Operations Control Operations control
Focuses on the processes used by the organization to transform inputs into finished products or services.
The three forms of operations control are preliminary, screening, and postaction.
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12. Operations Control Preliminary control Screening control
monitors the quality or quantity of financial, physical, human, and information resources before they become part of the system.
Screening control
relies heavily on feedback processes during the transformation process.
Postaction control
monitors the outputs or results of the organization after the transformation process is complete.
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13. Forms of Operations Control
Figure 19.4
Forms of Operations Control
Most organizations employ a wide variety of techniques to facilitate operations control.
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14. Financial Control Financial control
is concerned with the organization’s financial resources.
This means control of financial resources as they flow into the organization,
(revenues, shareholder investments)
are held by the organization
(working capital, retained earnings)
and flow out of the organization.
(pay, expenses)
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15. Budgetary Control A budget Budgets serve four primary purposes.
Is a plan expressed in numerical terms.
Budgets serve four primary purposes.
They help managers coordinate resources and projects.
They help define the established standards for control.
They provide guidelines about resources and expectations.
Budgets allow evaluation of manager performance and organizational units.
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16. Budgetary Control Organizations use three types of budgets
A financial budget indicates where the cash will come from and plans to use the cash.
An operating budget is concerned with planned operations.
A nonmonetary budget expresses the budget in nonfinancial terms such as
units of output, hours of direct labor, machine hours, or square-foot allocations.
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17. Developing Budgets in Organizations
Table 19.1
Developing Budgets in Organizations
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18. Developing Budgets in Organizations
Figure 19.5
Developing Budgets in Organizations
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19. Budgetary Control Budget Strengths Budget Weaknesses
Facilitate effective control.
Facilitate coordination and communication between departments.
Maintain records of performance and complement planning.
Budgets link plans and control.
Managers may fail to adjust budgets for changing circumstances.
Developing budgets is very time consuming.
Budgets may limit innovation and change.
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20. Other Tools for Financial Control
A financial statement
is a profile of some aspect of an organization’s financial circumstances.
The balance sheet
is a list of assets and liabilities at a specific point in time.
The income statement
is a summary of financial performance over a period of time, usually a year.
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21. Other Tools for Financial Control
Ratio analysis
is the calculation of one or more financial ratios to assess some aspect of the organization’s financial health.
Liquidity ratios.
Debt ratios.
Return ratios.
Coverage ratios.
Operating ratios.
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22. Other Tools for Financial Control
An audit is an independent appraisal of an organization’s accounting, financial, and operational systems.
External audits are conducted by experts who are not employees of the organization.
Publicly traded companies require regular audits.
Internal audits are handled by employees.
Its objectives are the same as an external audit, to verify the accuracy of financial and accounting procedures.
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23. Structural Control
There are two major forms of structural control: bureaucratic and decentralized.
Bureaucratic control
is characterized by formal and mechanistic structural arrangements.
It follows the bureaucratic model with the goal of employee compliance.
Decentralized control
is based on informal and organic structural arrangements.
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24. Organizational Control
Figure 19.6
Organizational Control
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25. Strategic Control Integrating strategy and control
ensures the organization is maintaining an effective alignment with its environment and moving toward achieving its strategic goals.
International strategic control
Global organizations must take a pronounced strategic view of their control systems.
A basic question is whether to manage control from a centralized or decentralized perspective.
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26. Characteristics of Effective Control
Explicit and precise linkages between planning and control.
Flexible enough to accommodate changes.
Must be based on accurate information.
Provides information as often as necessary.
Provided information must be as objective as possible.
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27. Resistance to Control
Overcontrol occurs when an organization tries to control too many things.
Employees resist.
The control system may be too strict.
If the organization rewards inefficiency, others resist.
Some people resist increased accountability.
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28. Overcoming Resistance to Control
The best way is to create effective control to begin with.
Employee participation lowers resistance.
Use checks and balances to ensure the system is providing data needed to compare to standards.
Use multiple systems to crosscheck the accuracy of the control system reports.
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29. Summary
The chapter first explained the purpose of control, then looked at the types of control and the steps in the control process.
Next, the chapter examined the four levels of control: operations, financial, structural, and strategic.
The chapter concluded by discussing the characteristics of effective control, noting why some resist control and describing ways to overcome that resistance.
© 2017 Cengage Learning. All rights reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.