What Is Control?

2. What Is Control? • Control • The process of monitoring (supervising) activities to ensure that they are being accomplished as planned and of correcting any significant (important) deviations (differences). • The Purpose of Control • To ensure that activities are completed in ways that lead to accomplishment of organizational goals. Page 384

3. Designing Control Systems • Market Control • Emphasizes the use of (external) market mechanisms (processes) to establish the standards used in the control system. • External measures: price competition and relative market share. • Bureaucratic Control • Emphasizes organizational authority and relies (depends) on rules, regulations, procedures, and policies. • Clan Control • Regulates (influences) behavior by shared values, norms, traditions, rituals, and beliefs of the firm’s culture. Page 384

4. Designing Control Systems • Depending on the shape and needs of the organization, when a manager must decide on a system of control, he/she might choose one of these three approaches: Market Control: Which analyses, focuses and relies on the monitoring of market processes such as price competition, sales figures, market share, delivery periods, etc... Bureaucratic Control: Which analyses and focuses on enforcement or implementation of rules, regulations, procedures and policies of the organization. Clan Control: Which analyses and focuses on regulating activities, based on implications (meanings) of the firm's Culture, such as values, norms, traditions, rituals and beliefs that are shared by members of the organization. No page

5. Why Is Control Important? • It is the final link in management functions and the only way managers know whether organizational goals are being met and, if not, the reasons why. • Planning-controlling link • Controls let managers know whether their goals and plans are on target and what future actions to take. • Control and management • Managers need to delegate (give) duties and empower (authorize) employees to make decisions. But because managers are responsible for performance results, they need the feedback mechanism (process) which is provided by the control system. Page 386

6. The Planning–Controlling Link Exhibit 19.2 Page 386

7. The Control Process • The Process of Control • Measuring actual performance. • Comparing actual performance against a standard. • Taking action to correct deviations (differences) or inadequate (unsatisfactory) standards. Page 387

8. The Control Process Exhibit 19.3 Page 387

9. Measuring: How and What We Measure • Sources of Information • Personal observation • Statistical reports • Oral reports • Written reports What we measure is more critical to the control process than how we measure: • -- The selection of wrong criteria can result in serious consequences • -- What we measure determines what people in the organization will attempt to excel at (to improve). • Control Criteria • Employees • Satisfaction • Turnover • Absenteeism • Budgets • Costs • Output • Sales Page 388

10. Common Sources of Information for Measuring Performance

11. Comparing • Determining the degree of variation between actual performance and the standard. • It is critical to determine the acceptable range of variation. • The size (large or small) and direction (over or under) of the variation from the standard (forecast or budget). Page 389

12. Defining the Acceptable Range of Variation Exhibit 19.4 Page 389

13. Sales Performance Figures for July, Eastern States Distributors Exhibit 19.5 Page 390

14. Taking Managerial Action • Courses of Action • “Do nothing” • Only if deviation is judged to be insignificant (minor). • Correct actual performance • Immediate corrective action to correct the problem at once. • Basic corrective action looks at how and why performance has deviated and corrects the source of the deviation. Possible corrective actions: • Change strategy, structure, compensation scheme, or training programs; redesign jobs; or fire employees. Page 390

15. Taking Managerial Action • Courses of Action • Revising the standard • Examining the standard to ascertain (check) whether or not the standard is realistic, and achievable. • Resetting goals that may have been too high or too low. Page 391

16. Managerial Decisions in the Control Process Exhibit 19.6 Page 392

17. Types of Control • Feedforward Control • Focuses on preventing anticipated problems before they occur. • It takes place before the actual work activity. • Concurrent (simultaneous) Control • It takes place while a work activity is in progress. • Direct supervision: management by walking around. • The manager concurrently monitors actions and corrects problems as they occur. Page 393

18. Types of Control • Feedback Control • Takes place after a work activity is done (after-the-fact). • A major drawback (disadvantage) is that by the time the manager has the information, the problems have already occurred. At this point, the manager’s only option is to try and correct the situation. • Advantages of feedback • Feedback provides managers with information on the effectiveness of their planning efforts. • Feedback enhances employee motivation by providing them with information on how well they are doing. Page 394

19. Types of Control Exhibit 19.7 Page 393

20. Types of Control • Contingency Factors in Control These factors include: • Size of the organization • One’s position in the organizational hierarchy • Degree of decentralization • Organizational culture • Importance of a work activity Page 395

21. Types of Control • Contingency factors in Control • The size of the organization • A small organization relies more on informal and personal control approaches. Larger organizations rely on formal control systems and highly formalized feed-forward and feedback controls. • One’s position in the organizational hierarchy • Lower level jobs have clearer definitions of performance. The higher up one moves in the hierarchy, the greater the need for multiple (many) sets of control criteria. Page 396

22. Types of Control • Contingency factors in Control • The degree of decentralization • The greater the degree of decentralization, the more managers need feedback on employees’ decisions and performance. Because managers are ultimately (in the end) responsible, they want assurances that their employees’ actions are effective and efficient. • The organizational culture • In a culture of trust, autonomy (independence) and openness, we can expect to find informal self-control. In another of fear, reprisal and mistrust, we find externally imposed (enforced) and formal control systems. Page 396

23. Types of Control • Contingency factors in Control • The importance of a work activity • The degree of importance of a work activity influences (determines) whether, and how, it will be controlled. If an error can be highly damaging to the organization, extensive controls are likely to be implemented. Page 397

24. The Controller and Control The job of the controller • The controller is the staff person who assists managers with the controlling function by gathering (collecting) information and generating (developing) reports. • In smaller organizations, managers may themselves gather this information and develop reports. In medium-sized to large companies, the controller handles this work. Page 399

25. The Controller and Control The job of the controller • The controller is responsible for generating information managers need to exercise the control function. He/she usually works with information about: • Profits • Revenues (income & taxation) • Costs • Investments • Discretionary (undetermined) expenses. Page 400

26. The Controller and Control How Much Control is Needed? • The process of comparing the cost of an activity with the expected benefit of implementing the activity is called cost-benefit analysis. • Control activities should be implemented if the expected benefits of such activities exceed (are greater than) the cost of these activities. Page 400

27. Power and Control • Power: • The degree to which an individual is able to influence others so that they respond to orders. • The greater this ability, the more power an individual is said to have. • Orders given by a manager may or may not be followed precisely (exactly), depending on how much power the manager has over others. Page 402

28. Power and Control • Total Power • The total power a manager has is made up of two different kinds of power. • Position power: Power derived (gained) from the organizational position a manager holds. • Personal power: Power derived (gained) from a manager’s relationship with others. Page 402

29. Power and Control • Increasing Total Power • Managers can increase their total power by enhancing (increasing) their position power, their personal power or both. Importance of developing personal power • Trying to control others solely on the basis of one’s position simply does not work. • Not many will passively accept and completely obey a constant stream of orders from someone just because he/she is the “boss”. Page 402

30. Power and Control • Increasing Personal Power • To increase personal power managers should encourage and develop these beliefs and attitudes in other organization members. • A sense of obligation toward the manager. • A belief that the manager possesses a high level of expertise. • A sense of identification with the manager. • The perception that they are dependent on the manager. Page 403

31. Increasing Personal Power • A sense of obligation toward the manager:Do personal favors for people. • A belief that the manager possesses a high level of expertise: Quietly make your achievements visible to others, build up a successful track record and a solid professional reputation. • A sense of identification with the manager: Behave (act) in ways that other members respect; share their goals, values and ideals. • The perception that they depend on the manager: Convey (make known) the amount of authority you have over organizational resources such as salaries and bonuses. The Golden Rule: “He who has the gold makes the rules”. Page 403

32. Performing the Control function • Barriers to Successful Controlling • Long-Term Versus Short-Term Production Quotas (numbers). • E.g. To ensure that performance meets the production quotas (numbers) in the short term, machines might be “pushed” hard for a higher output, by managerial decision. This kind of action could prevent the machines to be serviced properly, cause them to deteriorate, and make it impossible to meet long-term production standards. Page 404

33. Performing the Control function • Barriers to Successful Controlling • Employee Frustration (disappointment) and Morale (team spirit). • Worker morale tends to be low when management exerts too much control and will not allow them the freedom they need to do a good job. Page 404

34. Performing the Control function • Barriers to Successful Controlling • Filing of Reports. • Employees may feel pressured (obliged, compelled) to falsify (cheat on) reports so that corrective action concerning their organizational unit will not be drastic (forceful) or too severe (strong). Page 404

35. Performing the Control function • Barriers to Successful Controlling • Perspective (view) of Organization units. • Managers must remember to consider any corrective action not only in relation to the specific activity being controlled, but also in relation to its effect on all other organizational units. Page 405

36. Performing the Control function • Barriers to Successful Controlling • Means (method) Versus Ends(goals). • Managers must keep in mind that the information gathering and report generating in the control process can be costly (expensive), and should only be justified (acceptable) if those activities yield (provide) benefits that exceed the cost of performing them. Page 405

37. Performing the Control function • Making Controlling Successful • To make the control process more effective, managers should consider the following factors. • Specific organizational activities being focused on. • Different kinds of organizational goals. • Timely (prompt) corrective action. • Communication of the mechanics (procedure) of the control process. Page 403

38. Performing the Control function • Making Controlling Successful • Specific organizational activities being focused on. • Managers must make sure the various aspects of the control process are appropriate for the control activity that is being carried out (executed). • E.g. Standards of measurements concerning line workers’ productivity are different from standards of measurements concerning a vice president’s performance. Page 405

39. Performing the Control function • Making Controlling Successful • Different Kinds of Organizational Goals. • The control process can be applied to many different facets (aspects) of organizational life. Each of these facets must be considered to provide maximum benefit from controlling. Page 406

40. Performing the Control function • Making Controlling Successful • Timely Corrective Action. • Managers should take the corrective action as promptly as possible to ensure that the situation depicted (shown) by the control process has not changed. Page 406

41. Performing the Control function • Making Controlling Successful • Communication of the Mechanics (procedure) of the Control Process. • All individuals involved in controlling must have a working knowledge of how the control operates. Page 406

42. Contemporary Issues in Control • Cross-Cultural Issues • In technologically advanced nations , managers use indirect control devices -- computer generated reports and analyses -- in addition to standardized rules and direct supervision to ensure that work activities are going as planned. • In less technologically advanced countries, managers tend to rely more on direct supervision and highly centralized decision making for control. Page 407

43. Contemporary Issues in Control • Workplace Concerns • Workplace privacy • Employee theft • Workplace violence Page 408

44. Contemporary Issues in Control • Workplace Concerns • Workplace privacy versus workplace monitoring • Many companies monitor employee usage of E-mail, telephone, computer, and Internet. • Concerns about offensive messages, inappropriate images displayed on workers’ computer screens, racial and sexual harassment (mistreatment, annoyance) including leaking (telling) of company secrets are reasons for workplace monitoring. Page 408

45. Types of Workplace Monitoring by Employers Internet use 54.7% Telephone use 44.0% E-mail messages 38.1% Computer files 30.8% Job performance using video cameras 14.6% Phone conversations 11.5% Voice mail messages 6.8% Source:Based on S. McElvoy, “E-Mail and Internet Monitoring and the Workplace: Do Employees Have a Right to Privacy?” Communications and the Law, June 2002, p. 69. Exhibit 19.9 Page 408

46. Contemporary Issues in Control • Workplace Concerns • Employee theft • The unauthorized taking of company property by employees for their personal use. • Fraudulent (dishonest) filing of expense reports. • Removing equipment, parts, software, and office supplies from company premises. • We can use the concept of feedforward, concurrent, and feedback control (see slide #46) to identify measures for reducing employee theft. Page 409

47. Control Measures for Employee Theft or Fraud Sources:Based on A.H. Bell and D.M. Smith. “Protecting the Company Against Theft and Fraud,” Workforce Online (www.workforce.com) December 3, 2000; J.D. Hansen. “To Catch a Thief,” Journal of Accountancy, March 2000, pp. 43–46; and J. Greenberg, “The Cognitive Geometry of Employee Theft,” in Dysfunctional Behavior in Organizations: Nonviolent and Deviant Behavior, eds. S.B. Bacharach, A. O’Leary-Kelly, J.M. Collins, and R.W. Griffin (Stamford, CT: JAI Press, 1998), pp. 147–93. Exhibit 19.10 Page 410

48. Contemporary Issues in Control • Workplace Concerns • Workplace violence • Anger, rage, and violence in the workplace is affecting employee productivity. • Factors contributing to workplace violence include employee stress caused by rising layoffs (firings), long working hours, unrealistic deadlines and uncaring managers. • The competitive demands of succeeding in a global economy put pressure on organizations and employees in many ways. • We can use the concept of feedforward, concurrent, and feedback control (see slide #49) to identify actions for managers. Page 410

49. Workplace Violence Witnessed yelling or other verbal abuse 42% Yelled at co-workers themselves 29% Cried over work-related issues 23% Seen someone purposely damage machines or furniture 14% Seen physical violence in the workplace 10% Struck a co-worker 2% Source:Integra Realty Resources, October-November Survey of Adults 18 and Over, in “Desk Rage.” BusinessWeek, November 20, 2000, p. 12. Exhibit 19.11 Page 410

50. Control Measures for Deterring or Reducing Workplace Violence Sources: Based on M. Gorkin, “Five Strategies and Structures for Reducing Workplace Violence,” Workforce Online (www.workforce.com). December 3, 2000; “Investigating Workplace Violence: Where Do You Start?” Workforce Online (www.forceforce.com), December 3, 2000; “Ten Tips on Recognizing and Minimizing Violence,” Workforce Online (www.workforce.com), December 3, 2000; and “Points to Cover in a Workplace Violence Policy,” Workforce Online (www.workforce.com), December 3, 2000. Exhibit 19.12 Page 412