1. Controlling

2. Purpose of Control Adapt to environmental change
Includes changing customer expectations
Limiting the accumulation of error
Errors can pile up
Coping with organizational complexity
Can have many products, raw materials, people, etc.
Minimizing costs
Must measure in order to control

3. Types of Control Theory Control by area
Physical, financial, information, staff
Examples of each
Control by level
Strategic
Structural (are admin areas performing)
Operational
Financial
Responsibility for control
All management
Controller

4. Steps in Control Process
Practice
Establish “control standards”
Must be measureable
Measure performance
Can not fix if don’t measure
Compare performance to standard
Consider corrective action
Can have problems even with success

5. Operations Control Preliminary control
Control factors of production as they come into the business
E.g. screen hires, sample goods
Screening Control
Check as things are made, not just at the end
Postaction control
Monitor final output

6. Financial Control Budgets
Types (examples)
Cash budget
Capital budget
Expense budget
Sales/revenue budget
Profit budget
Headcount budget
Space budget
Production budget
Difference between expense and capital budgets

7. Developing Budgets Practice Two types Incremental Zero-based
Traditionally top-down
Can be iterative
Top-down targets
Bottom-up requests
Need to reconcile the two
Problem with game playing
Set budget proposal high knowing it will get cut

8. Managing to Budgets (How could the book leave this out?)
A good manager can meet budgets
Track:
Current period actual vs. budget
YTD vs. plan
Project EOY (or month/quarter)
Projection vs. budget
Act early!
Problems found early can be fixed
Can not fix a $2M problem on a $10M budget with only 2 months to go

9. Financial Controls Ratio analysis
Operating, profit, expense, liquidity, etc.
Benchmark relative to norm, competition
Audits
Can find problems such as treating current expenses as capital purchases
Internal audits
External audits
Potential for conflict of interest (Enron and Arthur Anderson)
Can also duplicate the function (don’t check, compare)

10. Structural Control
Bureaucratic control
Obtain employee compliance
Formal controls
Rules directed at min. acceptable perf.
Top-down influence
Formal participation
Individual rewards
Decentralized control
Obtain employee commitment
Group norms, culture
Rules directed at perf. above min.
Flat structure
Informal participation
Group rewards
Do you design controls for lowest common denominator or the majority?

11. Strategic Control Evaluate whether corporate strategies are being met
If not, why not?
Revise budgets, structure, operations, etc. to achieve objectives
Centralized vs. decentralized control
Learning from other organizations
Speed of adaptation to conditions

12. Managing Control Integrate with planning Keep flexible
If problems, measure more
Be accurate
If not accurate, worthless
Must be timely
Need information early enough to act
Don’t track data not needed, wasted work
Be objective
Not open to dispute

13. Resistance to Control Similar to resistance to change Problems if
Over control
Inappropriate focus
Measuring the wrong thing
Be careful what you ask for!!
May reward inefficiency
If under run budget in one year, may get cut the next
Staff may not like transparency of their efforts