Compared to planning, developing org. structure,
developing strategies, goals and motivating employees
Adeyl Khan, Faculty, BBA, NSU
Why Control?
 Controls help the manager
 Control is a process to
regulate organizational
activities to make them
consistent with established:
 Plans
 Targets
 Standards
Types of control
Physical
• Inventory, QC
Human
• Selection
Informational
Acceptable level? Compare (Financial …)
• Forecasting, PR
Effective? Need a change?
process of monitoring, comparing, and
correcting work performance.
Financial
• Manage Debt, Assets
FedEx- 99.8% On time Delivery
Adeyl Khan, Faculty, BBA, NSU
20 - 2
What Is the Purpose of Control?
 It is one of the four basic management functions
and has four basic functions.
 Functions of control
 Adapts to change.
 Limits accumulation of error.
 Helps coping with complexity.
 Helps minimize costs.
Adeyl Khan, Faculty, BBA, NSU
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Purpose- Control helps the organization
 Many things can happen during
the execution of a plan
 Anticipate, monitor, respond
(contingency)
 Rising quality standard at
Metalloy
 Accumulation creates a huge
Adapt to
environmental change
2. Limit the
accumulation of error
problem!
 Defect rate rose 4% > 9% > 25%
(100/250 People reworking)
 100s of raw material, large market
segments, complicated work
design,
 Calculation based on
implementation of new woodcutting technology
Adeyl Khan, Faculty, BBA, NSU
3. Cope with
organizational
complexity
4. Minimize costs
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Levels of Control
Operational
control:
Focuses on the processes used to transform
resources into products or services. E.g. Quality
Control
Financial
control:
Concerned with financial resources. E.g. Accounts
receivable
Structural
control:
How the elements of structure are serving the
intended purposes. E.g. Administrative ratio
Strategic
control:
How effective are the functional strategies
helping the organization meet its goals. E.g.
Related diversification failed
Adeyl Khan, Faculty, BBA, NSU
20 - 5
Figure 20.2: Levels of Control
Adeyl Khan, Faculty, BBA, NSU
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Who Is Responsible for Control?
 Control rests with all
managers.
 Large corporations
have a controller.
 What does a controller
do?
 Helps line managers
with their control
activities.
U-Form (Single)
H-form (Multiple), M-form (Multiple)
Adeyl Khan, Faculty, BBA, NSU
20 - 7
F20.3: Steps in the Control Process
 Taco Bell
 95% greeted within 3 minutes
 Preheated chips- maximum 30 mins
 Tables Cleaned within 5 mins
Adeyl Khan, Faculty, BBA, NSU
# Graduates/year
…
….
…..
…..
……
(Performance Indicators)
Measurable
Consistent with organization goal
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F20.4: Forms of Operational Control
Adeyl Khan, Faculty, BBA, NSU
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What Does Preliminary Control
Monitor?
 It attempts to monitor quality and quantity of:
 Financial resources.
 Material resources.
 Human resources.
 Information resources.
 Why?
 Before they become part of the system.
 Ex: Employee Interview, Who can buy stocks
Adeyl Khan, Faculty, BBA, NSU
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Purpose of Screening Controls
 They focus on how inputs are being transformed
into outputs.
 They also rely heavily on feedback processes during
the transformation process.
 Ex: LCD panel on TV-
Check before installation
Adeyl Khan, Faculty, BBA, NSU
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Postaction Control- Focus
 Focus is on outputs
from the
organizational system.
 What do they monitor?
 They monitor the
output results of the
organization after the
transformation
process is complete.
 (see Figure 20.4
illustration)
Adeyl Khan, Faculty, BBA, NSU
20 - 12
Financial Controls- Most common
 They control the financial resources as they flow
into the organization.
 Then they are held by the organization.
 Then they flow out of the organization.
 Businesses must manage their finances so that
revenues are sufficient to cover expenses and still
return a profit.
Adeyl Khan, Faculty, BBA, NSU
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What Is a Budget?
 It is a plan expressed in numerical terms.
 What is the time frame for a budget?
 Usually a year, but sometimes broken down into
quarters and months.
 Budgets are quantitative in nature and provide
yardsticks for measuring performance and
facilitating comparisons.
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Strength and Weaknesses of Budget
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20 - 14
Types of Budgets
 Types of budget:
 Financial
 Operating
 Non-monetary
 What the budget
shows:
 Sources and use of
cash.
 Operations in
financial terms.
 Operations in nonfinancial terms.
Capital Budget at Exxon
Vs. Shell and Exxon-Mobil
Adeyl Khan, Faculty, BBA, NSU
20 - 15
Adeyl Khan, Faculty, BBA, NSU
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F20.5: Developing Budgets in
Organizations
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Other Tools for Financial Control
Financial Statement:
Income Statement
• A profile of some aspect of an
organization’s financial
circumstances
• A summary of financial
performance over a period of
time, usually one year.
Other Financial
Control Tools
Balance Sheet
Ratio Analysis
• List of assets and liabilities of
an organization at a specific
point in time, usually the last
day of the fiscal year.
• The calculation of one or more
financial ratios to assess some
aspect of the organization’s
financial health.
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Adeyl An
Khan,
Faculty, BBA,
NSU of an organization’s accounting, financial, and operational system.
Audit:
independent
appraisal
Structural Control
 Bureaucratic Control
 A form of organizational control characterized by
formal and mechanistic structural arrangements.
 Decentralized control
 An approach to organizational control characterized
by informal and organic structural arrangements.
Adeyl Khan, Faculty, BBA, NSU
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Figure 20.6: Organizational Control
Adeyl Khan, Faculty, BBA, NSU
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What Is Meant by Strategic Control
 Control aimed at
ensuring that the
organization is
maintaining an
effective alignment
with its environment
and moving toward
achieving its
strategic goals
Adeyl Khan, Faculty, BBA, NSU
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Characteristics of Effective Control
 Integration with plan
 Flexibility
 Accuracy
 Timeliness
 Objectivity
Adeyl Khan, Faculty, BBA, NSU
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What Influences Resistance to Control?
 Over-control
 Inappropriate focus
 Rewards for inefficiency
 Too much accountability
Adeyl Khan, Faculty, BBA, NSU
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How Can Resistance to Control Be
Overcome?
 When employees are involved with planning and
implementing the control system, they are less
likely to resist.
 Verification procedures need to be developed to
provide checks and balances in order for managers
to verify the accuracy of performance indicators.
Adeyl Khan, Faculty, BBA, NSU
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