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1. 2004 by Nelson, a division of Thomson Canada Limited 1 Chapter 7 Control
2. 2004 by Nelson, a division of Thomson Canada Limited 2 What Would You Do? Howmet opened a new plant in Laval
Aircraft parts market plummeted
Layoffs were a possibility
How can costs be cut to make up for the sales shortage?
3. 2004 by Nelson, a division of Thomson Canada Limited 3 Learning Objectives:Basics of Control After reading the next two sections, you should be able to:
1. describe the basic control process
2. answer the question: Is control necessary or possible?
4. 2004 by Nelson, a division of Thomson Canada Limited 4 The Control Process Establish clear standards
Compare actual to standard performance
Take corrective action, if needed
Control is a continuous, dynamic process
Three basic methods
5. 2004 by Nelson, a division of Thomson Canada Limited 5 Standards Determine what should be benchmarked
Identify companies against which to benchmark standards
Collect data to determine other companies performance standards
6. 2004 by Nelson, a division of Thomson Canada Limited 6 The Control Process Actual performance
Measure performance
Compare with standards
Identify deviations
Analyze deviations
Develop program for corrections
Implement program for corrections
Desired performance
7. 2004 by Nelson, a division of Thomson Canada Limited 7 Basic Control Methods Feedback control
Gather information about performance deficiencies after they occur
Concurrent control
Gather information about deficiencies as they occur
Feedforward control
Gather information about performance deficiencies before they occur
8. 2004 by Nelson, a division of Thomson Canada Limited 8 Guidelines for Feedforward Control Thorough planning and analysis required
Careful discrimination of input variables
System must be dynamic
System model should be developed
Data regularly collected
Data regularly assessed
Requires action
9. 2004 by Nelson, a division of Thomson Canada Limited 9 Is Control Necessary or Possible? Is more control necessary?
Is more control possible?
Quasi-Control: When control isnt possible
10. 2004 by Nelson, a division of Thomson Canada Limited 10 Is More Control Necessary? Degree of dependence
the extent to which a company needs a particular resource to accomplish its goals
Resource flows
The extent to which a company has easy access to critical resources
11. 2004 by Nelson, a division of Thomson Canada Limited 11 Is More Control Possible? Cost of control
direct costs of control
unintended costs
Cybernetic feasibility
the extent to which it is possible to implement each step in the control process
if a step cannot be implemented, then control may not be possible
12. 2004 by Nelson, a division of Thomson Canada Limited 12 Quasi-Control: When Control Isnt Possible Reducing independence
a choice to abandon or change goals
when control over a critical resource is not possible
Restructure dependence
exchange dependence on one critical resource for dependence on another
13. 2004 by Nelson, a division of Thomson Canada Limited 13 Learning Objectives:How and What to Control After reading the next two sections, you should be able to:
3. Discuss the various methods that managers can use to maintain control
4. Describe the behaviours, processes, and outcomes tat managers are choosing to control in todays organizations
14. 2004 by Nelson, a division of Thomson Canada Limited 14 Control Methods Bureaucratic
Objective
Normative
Concertive
Self-Control
15. 2004 by Nelson, a division of Thomson Canada Limited 15 Bureaucratic Control Top-down control
Use rewards and punishments to influence employee behaviour
Use policies and rules to control behaviour
Bureaucratically controlled companies are resistant to change and slow to respond to customers
16. 2004 by Nelson, a division of Thomson Canada Limited 16 Objective Control Use of observable methods
Behaviour control
regulate actions and behaviours of employees
Output control
measure employee outputs
coupled with use of rewards and incentives
17. 2004 by Nelson, a division of Thomson Canada Limited 17 Normative Control Company values and beliefs guide employee behaviour and decisions.
Created by:
Careful selection of employees
Role-modeling and retelling of stories
18. 2004 by Nelson, a division of Thomson Canada Limited 18 Concertive Control Employees are guided by beliefs that are shaped and negotiated by work groups.
Autonomous work groups
operate without managers
Members responsible for controlling work group process, outputs, and behaviour
19. 2004 by Nelson, a division of Thomson Canada Limited 19 Self-Control Employees control their own behaviour
Employees make decisions within clear boundaries
Managers and employees set goals and monitor their own progress
20. 2004 by Nelson, a division of Thomson Canada Limited 20 When to Use Different Methods of Control Use bureaucratic control when
standard operating procedures needed
necessary to establish limits
Use behaviour control when
easier to measure activities than outputs
cause-effect relationships are clear
good measures of behaviour are available
21. 2004 by Nelson, a division of Thomson Canada Limited 21 When to Use Different Methods of Control Use output control when
easier to measure outputs than behaviours
good measures of output are available
clear goals and standards are available
cause-effect relationships are unclear
Use normative control when
culture is strong
difficult to create behaviour measures
difficult to create output measures
22. 2004 by Nelson, a division of Thomson Canada Limited 22 When to Use Different Methods of Control Use concertive control when
group responsible for task accomplishment
workers take ownership of behaviour and outputs
strong worker-based control needed
Use self-control when
workers are intrinsically motivated
difficult to create behaviour measures
difficult to create output measures
workers have self-control and self-leadership
23. 2004 by Nelson, a division of Thomson Canada Limited 23 What to Control The Balanced Scorecard
Customer perspective
Internal perspective
Innovation and learning perspective
Financial perspective
24. 2004 by Nelson, a division of Thomson Canada Limited 24 Example of a Balanced Scorecard Financial Perspective Financial perspective
Goals Measures
Survive Cash flow
Succeed Sales growth
by division
Prosper Increased market share
25. 2004 by Nelson, a division of Thomson Canada Limited 25 Balanced Scorecard Managers look beyond traditional financial measures
Managers set specific goals and measure performance in four areas
Helps minimize suboptimization
26. 2004 by Nelson, a division of Thomson Canada Limited 26 The Financial Perspective: Controlling Economic Value Added The amount by which company profits exceed the cost of capital in a given year.
Important because:
It shows if a business or profit centre is paying for itself
Focuses attention on specific departments
Encourage creative ways to improve organizational performance
27. 2004 by Nelson, a division of Thomson Canada Limited 27 The Customer Perspective: Controlling Customer Defections Which customers are leaving and at what rate
Dont rely completely on customer satisfaction surveys
Cost of replacing old customers with new ones is great
28. 2004 by Nelson, a division of Thomson Canada Limited 28 The Internal Perspective: Controlling Quality Managers focus on quality.
Quality is measured as:
excellence
value
conformance to expectations
29. 2004 by Nelson, a division of Thomson Canada Limited 29 Quality as Excellence Advantages
promotes organizational vision
motivates and inspires
appeals to customers Disadvantages
provides little practical guidance
what does excellence mean?
difficult to measure and control
30. 2004 by Nelson, a division of Thomson Canada Limited 30 Quality as Value Advantages
customers recognize differences in value
easy to measure and compare value of different products/services Disadvantages
difficult to determine which factors account for value
difficult to control balance between excellence and cost
31. 2004 by Nelson, a division of Thomson Canada Limited 31 Quality as Conformance to Specifications Advantages
specifications, if written, are measurable
increased efficiency
consistent quality Disadvantages
difficult to evaluate some products/services
increased standardization may make change difficult
less appropriate for services
32. 2004 by Nelson, a division of Thomson Canada Limited 32 The Innovation and Learning Perspective: Controlling Waste and Pollution Four levels of waste minimization
Waste prevention and reduction
Recycle and reuse
Waste treatment
Waste disposal
33. 2004 by Nelson, a division of Thomson Canada Limited 33 What Really Happened? Focused on customer satisfaction
Implemented Six Sigma system
Quality and on-time delivery improved dramatically
Howmet is an industry model