2. Basic Elements of Control Chapter 20

3. Purpose of Control adapt to environmental change adapt to environmental change limit the accumulation of error limit the accumulation of error cope with organizational complexity cope with organizational complexity minimize costs Control helps the organization

4. Types of Control Area of control Area of control Levels of control Levels of control Responsibilities for control Responsibilities for control

5. Levels of Control Strategic control Structural control Operation controlFinancial control

6. 1 Establish standards 2. Measure performance 4. Evaluate performance & take action Steps in the Control Process Maintain the status quo Correct the deviation Change standards 3. Compare Performance & Standards

7. Forms of Operational Control Outputs Feedback Transformation Preliminary Control Focus is on inputs to the organizational system Screening Control Focus is on how inputs are being transformed into outputs Postaction Control Focus is on outputs from the organizational system Inputs

8. Importance of the Controlling Function Controlling: is the process of comparing actual performance with standards, taking corrective action when performance falls short of the standards, and reinforcing individuals when they exceed standards If controlling is given insufficient attention, all the energy the manager has expended in the planning, organizing, and leading functions may go to waste

9. Why Controls are Needed Unexpected developments may make a plan inoperable Employees do not always do what they are supposed to do Organizations are complex entities, and they require a system for assessing the progress that is being made toward objectives As the delegation of authority increases, more employees acquire the right to make decisions

10. Sources of Control in Organizations Stakeholder Control: is applied by those who are concerned about how the organization operates Organizational Controls: are those which are introduced by management as part of the formal activity of the organization Group Control: exercised over individuals by the work groups they belong to Individual Control: a person voluntarily behaves in a way that facilitates the goals of the organization

11. The Controlling Process The controlling process ensures that planned activities and results actually occurs: Setting performance standards Measuring performance Comparing actual performance to the standard Taking corrective action as necessary

12. Setting Performance Standards Standards: are criteria for evaluating the quality and quantity of the products or services produced by employees Types of Standards: Time Standards Output Standards Cost standards Quality standards Behavioral standards Control Tolerances

13. Measuring Performance The goal of this phase is to accurately measure the output that has resulted from employees efforts Measuring employee output in certain professions may be difficult: professor who drinks to much coffee! doctor scientist

14. Take Corrective Action As Necessary This phase requires the manager to decide what corrective action is required When comparing performance with the standard, the manager will find that it exceeds, meets, or falls short of the standard When performance is not up to standard managers will choose to: Take corrective action Change the standard Do nothing and hope it will improve

15. The Problems of Corrective Action Managers must possess a good understanding of why the problem has arisen, and must possess the necessary interpersonal skills to resolve it Disciplinary Action: is the process of invoking a penalty against an employee who fails to adhere to some work related standards Progressive Discipline: increasing severe penalties are applied

16. Controlling Inputs Input Controls: monitor the material, human, and capital resources that come into the organization Materials Control i.e.. production process Personnel Selection Control i.e.. hiring process Capitial Controls i.e.. capital budgeting, investment valuation etc...

17. Controlling Processes Process controls: focus on the activities that transform inputs into outputs Process controls are applied while the product or service is produced Process controls include rules, policies, procedures etc....

18. Controlling Output Output Controls: are used to determine whether deviations from standards have occurred in a product or service Output controls can be applied where the product or service is produced Output controls for one organization can become input controls for another Types of Output Controls: Employee Performance Evaluation Quality and Quantity Controls Financial Analysis

19. Employee Reaction to Controls Employees seem generally willing to accept these reasons as a justification for the control of their behavior, but there are many specific situations where employees object to controls

20. Resistance & Overcoming Resistance to Control Resistance to control Overcontrol Inappropriate focus Rewards for inefficiency Too much accountability Too much accountability Overcoming resistance to control Encourage employee participation Develop verification procedures

21. Reasons for Negative Reactions to Controls Employees do not understand the need for controls Employees lack control over the situation Standards are inappropriate for the needs of the situation Employees do not know what the standards are Employees feel that standards are unattainable Standards are contradictory Standards are used as threats instead of motivators

22. Characteristics of Effective Control Systems Objectivity Accuracy Understandability Timeliness Economy Instrumentality Reality Flexibility Strategic Control Points Acceptability Proactivity Multiple Criteria

23. Types of Budgets Cash budget Capital expenditures budget Balance sheet budget Sales or revenue budget Expense budget Profit budget Labour budget Space budget Production budget Financial Budget Financial Budget Operating Budget Operating Budget Non-monetary Budget Non-monetary Budget

24. Organizational Control Clan Control Employee commitment Group norms, culture, self- control Flat structure, shared influence Directed at group performance Extended & informal Clan Control Employee commitment Group norms, culture, self- control Flat structure, shared influence Directed at group performance Extended & informal Bureaucratic Control Employee compliance Strict rules, formal contracts, rigid hierarchy Tall structure, top-down influence Directed at individual performance Limited & Formal Bureaucratic Control Employee compliance Strict rules, formal contracts, rigid hierarchy Tall structure, top-down influence Directed at individual performance Limited & Formal

25. Managing Control in Organizations Integration with planning Flexibility Accuracy Timeliness Objectivity