Chapter 13: Foundations of Control

Chapter 13: Foundations of Control
Section 13.1 - What is Control?
Key Terms
 Control
 Market control
 Bureaucratic control
 Clan control
 Management by walking around (MBWA)
 Range of variation
 Immediate corrective action
 Basic corrective action
Effective management requires well-designed control system—one that assists the
organization in achieving its strategic goals. Control is the management function
involving the process of monitoring activities to ensure that they are being accomplished
as planned and correcting any significant deviations. The effectiveness of a control
system is determined by how well it facilitates goal achievement. There are generally
three different approaches to designing control systems. These are market, bureaucratic
and clan controls.
Market control emphasizes the use of external market mechanisms. Controls are built
around such criteria as price competition or market share. Organizations using a market
control approach usually have clearly specified and distinct products and services and
considerable competition.
A second approach to control systems is bureaucratic control, a control approach that
emphasizes authority and relies on administrative rules, regulations, procedures, and
policies. This type of control depends on standardization of activities; well-defined job
descriptions to direct employee work behavior, and other administrative mechanisms—
such as budgets—to ensure that organizational members exhibit appropriate work
behaviors and meet established performance standards.
Clan control is an approach to designing control systems in which employee behaviors
are regulated by the shared values, norms, traditions, rituals, beliefs, and other aspects of
the organization’s culture. In contrast to bureaucratic control, which is based on strict
hierarchical mechanisms, clan control depends on the individual and the group (the clan)
to identify appropriate and expected work-related behaviors and performance measures.
Clan control is typically in organizations in which teams are widely used and
technologies change often. An organization typically chooses to emphasize either
bureaucratic or clan control and then add some market control measures.
Control is the final link in the functional chain of management. However, the value of
the control function lies predominantly in its relation to planning and delegating
The control process consists of three separate and distinct steps: (1) measuring actual
performance, (2) comparing actual performance against a standard, and (3) taking
managerial action to correct deviations or inadequate standards. The control process
assumes that standards of performance already exist, having been created in the planning
function. Planning must precede control.
To determine actual performance, a manager must acquire information about it. The first
step in control is measuring. Four common sources of information frequently used to
measure actual performance are personal observation, statistical reports, oral reports, and
written reports. Control criteria include employee satisfaction or turnover, absenteeism
rates, and keeping costs within budget. Some activities are more difficult to measure in
quantifiable terms. When a performance indicator cannot be stated in quantifiable terms,
managers should look for and use subjective measures.
The comparing step determines the degree of discrepancy between actual performance
and the standard. Some variation in performance can be expected in all activities; it is
therefore critical to determine the acceptable range of variation. Deviations beyond this
range become significant and should receive the manager’s attention.
The third and final step in the control process is managerial action. Managers can choose
among three courses of action: 1) they can do nothing, 2) they can correct the actual
performance, or 3) they can revise the standard. Immediate corrective action corrects
problems at once and gets performance back on track. Basic corrective action asks how
and why performance has deviated and then proceeds to correct the source of deviation.
Effective managers, however, analyze deviations and, when the benefits justify it, take
the time to permanently correct significant variances between standard and actual
Section Outline
What is Control?
The Importance of Control
A. The control process
B. What is measuring?
1. What do managers measure?
2. How do managers compare actual performance to planned goals?
C. What Managerial Action Can Be Taken?
1. Correct actual performance
2. Revise the standard