1. Foundations of Controlling
Chapter Seventeen
Foundations of Controlling

2. Learning Objectives Define control
Describe the three approaches to control
Explain why control is important
Describe the control process
Distinguish between the three types of control
Describe the qualities of an effective control system
Explain how controls can become dysfunctional
Identify three current ethical issues in control

3. Characteristics of Three Approaches to Control Systems
Type of Control Characteristics
Market
Uses external market mechanisms, such as price com-
petition and relative market share, to establish stan-
dards used in system. Typically used by organizations
whose products of services are clearly specified and
distinct and how face considerable marketplace
competition.
Bureaucratic
Emphasizes organizational authority. Relies on admin-
istrative and hierarchical mechanisms, such as rules,
regulations, procedures, policies, standardization of
activities, well-defined job descriptions, and budgets,
to ensure that employees exhibit appropriate behaviors
and meet performance standards.
Clan
Regulates employee behavior by the shared values,
norms, traditions, rituals, beliefs, and other aspects of
the organization’s culture. Often used by organizations
where teams are common and where technology is
changing rapidly.
Figure 18-1

4. The Planning-Controlling Link
Goals
Objectives
Strategies
Plans
Controlling
Organizing
Standards
Measurements
Comparisons
Action
Structure
Human
resources
management
Leading
Motivation
Leadership
Communication
Individual and
group behavior
Figure 18-2

5. Defining the Acceptable Range of Variation
upper limit
Acceptable
range of
variation
Standard
Measurement of Performance
Acceptable
lower limit
t t+1 t+2 t+3 t+4 t+5
Figure 18-3

6. Sales Performance Figures for July, Eastern States Distributors
(HUNDREDS OF CASES)
BRAND
STANDARD
ACTUAL
OVER (UNDER)
Heineken
Molson
Beck’s
Moosehead
Labatt’s
Corona
Amset Light
Dos Equis
Tecate
Total Cases
1,075
630
800
620
540
160
225 80
170
4,300
913
634
912
622
672
140
220 65
286
4,464
(162) 4
112 2
132
(20)
(5)
(15)
116
164
Table 18-1

7. The Control Process Is standard being attained? Yes Compare actual
performance
with standard
Do nothing No Is
variance
acceptable?
Yes
Do nothing
Objectives
Measure
actual
performance No Is
standard
acceptable?
Standard
Yes
Identify
cause of
variation No
Revise
standard
Correct
performance
Figure 18-4

8. Types of Control Input Processes Output Feedforward control Concurrent
Feedback
control
Corrects
problems as
they happen
Corrects
problems after
they occur
Anticipates
problems
Figure 18-5

9. Qualities of an Effective Control System
Corrective
action
Accuracy
Multiple
criteria
Timeliness
Effective
Control
System
Emphasis on
exceptions
Economy
Flexibility
Strategic
placement
Understandability
Reasonable
criteria
Figure 18-6