Strategic control

An Introduction toManagement
1- What is the management?
Management is a set of activities including (planning and decision making,
organizing, leading, and controlling) directed at an organization's resources (human,
financial, physical, and information) with the aim of achieving organizational goals in
an efficient and effective manner.
Efficient:using resources wisely and in a cost-effective way.
Effective:making the right decision and successfully implementing them.
Management levels:
Organizations have three basic levels of management: (top management, middle
management, and operational management)
Managers although can be differentiate by levels: (top managers, middle managers,
first line managers) and differentiate by area include (marketing, financial, operations,
human resources)
Figure (1.1)
Top managers
Middle managers
First line managers
human resources others
2- The management process
Management involves four basic activities ---- planning and decision making,
organizing, leading, and controlling. Although there is a basic logic for describing
these activities in this sequence. Most managers engage in more than one activity at a
time often move back and forth between the activities in unpredictable ways.
Planning: setting an organization's goals and deciding how best to achieve them.
Decision making: part of the planning process that involves selecting course of action
from a set of alternatives.
Organizing: determining how activities and resources are to be grouped.
Leading: the set of processes used to get members of the organization to work
together to advance the interests of the organization.
Controlling: monitoring the organization's progress toward its goals.
Figure 1.2 The management process
Planning and decision
Setting the origination's
goals and deciding how
best to achieve them
Determining how best to
group activities and
Monitoring and
correcting ongoing
activities to facilitate
goal attainment
Motivating members
of the organization to
work in the best
interests of the
3- Kind of activities in business
Basic managerial activities including planning and decision making, organizing,
leading, and controlling. Managers engage in these activities to combine human,
financial, physical, and information resources efficiently and effectively and to work
towards achieving the goals of the organization.
Figure 1.3 the managerial activities
Inputs from the environment
Human resources
Financial resources
Physical resources
and decision
Goals attained
4- The essential nature of planning
Planning: setting an organization's goals and deciding how best to achieve them.
The planning process is the first basic managerial function that organization must address.
With an understanding of the environmental contexts, managers develop several different
types of goals and plans. Decision making is the underlying framework of all planning
because every step of the planning process involves a decision.
Figure 1.4the planning process
''The environmental context ''
The organization's mission
Strategic goals
Strategic plans
Tactical goals
Tactical plans
Operational goals
Operational plans
With this understanding of the control process, managers must establish the
organization's mission.
Mission: a statement of an organizational purpose.
This mission outlines the organization's purpose, premises, values, and directions.
Flowing from the mission are parallel streams of goals and plans:
Strategic goals: a goal set by and for top management of the organization. They
focus on broad and general issues.
Strategic plans: A general plan outlining decision of resource allocation, priorities,
and action steps necessary to reach strategic goals. It's set by board of directors and by
top management.
Tactical goals: a goal set by and for middle managers of the organization. They focus
on how to take a necessary action to achieve the strategic goals.
Tactical plans: A plan aimed at achieving tactical goals and developed to implement
specific parts of strategic plans.
Operational goals: a goal set by and for lower managers of the organization. They
focus on short-term issues associate with the tactical goals.
Operational plans: A plan that focuses on carrying out tactical plans to achieve
operational goals.
The Control System and Process in Organization
Control:The regulation of organizational activities so that some targeted element
of performance remains within acceptable limits.
The purpose of control:
Control provides an organization with ways to: 1) adapt to environmental change. 2)
Limit the accumulation of error.
3) Cope with organizational complexity.
Minimize costs.
Figure 2.1 the purpose of control
Adapt to environmental change
Limit the accumulation of error
Cope with organizational
Minimize cost
The purpose of control
1- Adapt to environmental changes:
-Between the times a goal is established and the time it's reached, many events could
be happened.
-A properly designed control systems can result in organizational performance to be
in accepted levels.
1- Limit the accumulation of errors:
-Small mistakes and errors do not often inflict serious damage to the organizations.
But, overtime, small errors may accumulate and become very serious.
2- Cope with organizational complexity:
-Managers can maintain the control systems if systems very simple and basic. In a
complicated organizations designed, need sophisticated system to maintain control.
3- Minimizing cost:
-When the control is practiced effectively, control can reduce cost and boots outputs.
Area of control
Control can focus on any area of an organization. Most organization define areas of
control in terms of the four basic types of resources they use (physical, human,
information, and financial)
Control of physical resources includes inventory management.
Control of human resources includes selection and placement, training.
Control the information resources includes sales, marketing forecasting, and public
relation, production schedule.
Control of financial resources involves managing the organization depts. so that it
does not become excessive, ensuring that the firm always has enough cash on hand.
Steps in the control process
1- Establish standard: the first step in the control process. Control standard is a
target against which subsequence performance will be compared.
2- Measuring performance: the second step in the control process. Performance
measurement is constant ongoing activity (valid, daily, weekly) for most
3- Compare performance against standard: performance may be higher than,
lower than, or identical to the standard. The timbale for comparing
performance to standard depends on a variety of factors, including the
importance and complexity of what is being controlled.
4- Determine need for corrective action: is the final step in control process. After
comparing performance against standard, one of three actions should be made
( 1- change standard, 2- correct the deviation,
3- Maintain the status quo).
Figure 2.2 steps in control process
Compare performance
to standards
Maintain the
status quo
Correct the
Determine need for
corrective action
Change standard
The levels of control:
Managers use control at several different levels. There are four levels of control:
1- Operations control: focus on the process of the organization. Use to transform
the resources into products and services.
2- Financial resources:concern with the organization's financial resources.
3- Structure control: concerned with how elements of the organization's structure
are serving their intended purpose.
4- Strategic control: focuses on how effectively the organization's corporate,
business, and functional strategies are succeeding in helping the organization
meet its goals.
Figure 2.3 levels of control
Strategic control
Structural control
Operations control
financial control
Types of operational control:
1- Preliminary control: Attempts to monitor the quality or quantity of (financial,
human, material, and information) resources before they actuallybecome part
of the system.
2- Screening control: relies heavily on feedback processes during the
transformation process.
3- Postactioncontrol: monitors the outputs or results of the organization after the
transformation process is complete.
Figure 2.4 forms of operation control
Preliminary control
Screening control
Postaction control
Focus on inputs to
Focus on how inputs
are being
transforming into
Focus on outputs
from the
organizational system
Forms of control
Financial control
Control of financial resources as they flow into the organization.Are held by organization, and
flow out of organization.
Budgetary:is a plan expressed in numerical terms.
Types of budgets:
1- Financial statement: sources and uses of cash, include:
a- Cash-flow or cash budget: all sources of cash income and cash expenditures in
monthly, weekly, or daily periods.
b- Capital expenditures budget: costs of major assess such as a new plant, machinery or
c- Balance sheet budget: forecast of all the organization's assets in the event all other are
2- Operation budget: planned operations in financial terms. Include:
a- Sales and revenue budget: income the organization expects to receive from normal
b- Expense budget: anticipated expenses for the organization during the coming time
c- Profit budget: anticipated differences between sales or revenues and expenses.
3- Nonmonetary budget: planned operations in non-financial terms. Include:
a- Labor budget: hours of direct labor available fours.
b- Space budget: square feet or meters of space available for various function
c- Production budget: number of unites to be produced during the coming time period.
Tools of financial control:
1- Financial statements: is a profit of some aspect of an organization's finical
2- Balance sheet: lists of assets and liabilities if of the organization at specific point in
3- Income statement: a summary of financial performance over period of time.
4- Ratio analysis: the calculation of one or more financial ratio to assess some aspect of
the organizational financial health.
5- Financial audits: are independent appraisals of an organization accounting, financial,
and operational systems.
Bureaucratic control:
A form of organizational control characterizes by formal and mechanistic structure
Clan control:
An approach to organizational control characterized by informal and organic structure
Bureaucratic control
Clan control
Goal of control
Strict rules, formal
Group norms, culture
Degree of formality
Directed toward
Directed towards
minimum level of
enhance performance
above the minimum
Tall structure, top
Flat structure, shared
down influence
Directed individual
Directed at group
Limited and formal
Extended and format
Organization design
Reward system
Strategic control
Control aimed at ensuring that the organization's is maintaining an effective alignment
with its environments and moving toward achieving its strategic goals.
Managing the control process
Effective control, whether at the operations, financial, or strategic level successfully
regulates and monitors organizational activities to use the control process. Managers
must recognize the characteristics of effective control and understand how to identify
and overcome occasional resistance to control.
Characteristics of effective control
Control systems tend to be most effective when they are integrated with planning and
are when they are flexible, accurate, timely, and objective.
1- Integrated with planning:
Control should be linked with planning. The more explicit and precise this linkage,
the more effective the control system, the best way to integrate planning and control is
to account for control as plans develop.
2- Flexibility:
The control system itself must be flexible enough to accommodate change.
3- Accuracy:
Managers make a surprisingly large number of decisions based on inaccurate
information. In each case the result of inaccurate information is in appropriate
managerial action.
4- timeliness:
A time line does not necessarily mean quickness. Rather, it describes the control
system that provides information as often as is necessary. In general, the more
uncertain and unstable the circumstances, the more frequently measurement is needed.
5- Objectively:
The control system should provide information that is as objective as possible.
Resistance to control
Managers may sometimes make the mistakes of assuming that the value of an
effective control system it self—evident to employees. This is not always accurate.
However, many employees resist control, especially if they feel over controlled, if
they think control is inappropriately focused or that it rewards inefficiently, or if they
are uncomfortable with accountability.
1- Over control:
Organizations try to control too many things. This situation becomes especially
problematic when the control directly affects employee behavior.
2- Inappropriate focus:
The control system may be too narrow or it may focus too much on quantitative
variables and leave no room for analysis.
3- Rewards for inefficiency:
Imagine two operating departments that are approaching the end of the fissile year.
4- Too much accountability:
Effective controls allow managers to determine weather or not successfully done their
Overcoming resistance to control:
Perhaps the best way to overcome resistance to control is to create effective control to
begin with if control systems are properly integrated with organizational planning and
if the controls are flexible, accurate, timely, and objective. The organization will be
less likely to over control, to focus on in appropriate standard or to reward in
efficiency. Two other ways to overcome resistance are encouraging participation and
developing verification procedures.
1- Encourage employee participation:
The participation can help overcome resistance to change by the same token, when
employees are involved.
2- Develop verification procedures:
Multiple standard and information systems provide and checks and balances in
control and allow the organization to verify the accuracy of performance indicators.