Foundations
of Control
©Prentice Hall, 2001
Chapter 13
1
Learning Outcomes
• Define control
• Describe three approaches to control
• Explain why control is important
• Define the control process
• Analyze the three types of control
©Prentice Hall, 2001
Chapter 13
2
Learning Outcomes
• Describe an effective control system
• Identify contingency factors in the control
process
• Learn the dysfunctional side of controls
• Describe how national differences affect the
control process
• Study ethical issues in employee monitoring
©Prentice Hall, 2001
Chapter 13
3
Three Approaches
to Control Systems
Market
Control
©Prentice Hall, 2001
Bureaucratic
Control
Chapter 13
Clan
Control
4
Managerial Decisions in the Control Process
Compare
Performance
to Standard
Measure
Performance
Yes
Do Nothing
No
Variance
Acceptable?
Objectives
Standard
Standard
Attained?
Yes
Do Nothing
No
Standard
Acceptable?
Yes
Identify
Causes
No
Revise
Standard
©Prentice Hall, 2001
Chapter 13
Correct
Performance
5
Information
Operations
What Managers
Measure
Finances
©Prentice Hall, 2001
People
Chapter 13
6
Defining an Acceptable Range of Variation
Acceptable
Upper Limit
Acceptable
Range of
Variation
Standard
Acceptable
Lower Limit
t
©Prentice Hall, 2001
t+1
t+2
t+3
Chapter 13
t+4
t+5
7
Mid-Western Distributors’ Sales for July
(in hundreds of cases)
Brand
Standard
Heineken
1,075
913
(162)
Molson
630
634
4
Beck’s
800
912
112
Moosehead
620
622
2
Labatt’s
540
672
132
Corona
160
140
(20)
Amstel Light
225
220
(5)
80
65
(15)
170
286
116
4,300
4,464
164
Dos Equis
Tecate
Total Cases
©Prentice Hall, 2001
Actual
Chapter 13
Over (Under)
8
Do Nothing
Taking
Managerial
Action
Correct
Performance
Revise
the Standard
©Prentice Hall, 2001
Chapter 13
9
Three Types of Control
Input
Processes
Output
Feedforward
Control
Concurrent
Control
Feedback
Control
Anticipates
Problems
Corrects Problems
as They Happen
Corrects Problems
after They Occur
©Prentice Hall, 2001
Chapter 13
10
Qualities of an Effective
Control System
• Accuracy
• Timeliness
• Economy
• Flexibility
• Understandability
©Prentice Hall, 2001
Chapter 13
11
Qualities of an Effective
Control System
• Reasonable criteria
• Emphasis on exceptions
• Strategic placement
• Multiple criteria
• Corrective action
©Prentice Hall, 2001
Chapter 13
12
Contingency Factors in Control Systems
Contingency Variable
Organization Size
Position and Level
Degree of Decentralization
Organizational Culture
Importance of an Activity
©Prentice Hall, 2001
Control Recommendations
Small
Informal, personal management
Large
Formal, personal management
High
Many complex criteria
Low
Few, easy-to-measure criteria
High
Increased number of controls
Low
Reduced number of controls
Open
Informal, self-control
Closed
Formal, external controls
High
Elaborate, comprehensive controls
Low
Loose, informal controls
Chapter 13
13
Adjusting Controls
for National Differences
Distance
and the
Formality
of Controls
©Prentice Hall, 2001
Technology
and the
Comparability
of Data
Chapter 13
14
Dysfunctional Controls
Inflexible
Controls
©Prentice Hall, 2001
Unreasonable
Standards
Chapter 13
15
Ethical Issues
and Control
Inform
Employees
Have a
Written Policy
Questions of Privacy
©Prentice Hall, 2001
Monitor for
Business Reasons
Chapter 13
16