UNIVERSITY OF TECHNOLOGY, JAMAICA

SCHOOL OF BUSINESS ADMINISTRATION

MODULE: INTRODUCTION TO MANAGEMENT (MAN1006)

PRINCIPLES OF MANAGEMENT (MAN1001)

Tutorial Sheet 9

MANAGERIAL AND QUALITY CONTROL

True or False

1. _____False____ Control is relevant only for actions that occur during a process.

2. ____True_____ The type of control that takes place during a process or event is
called concurrent control.

3. ______False___ There are four steps in the control process: Establish strategic
goals, Measure performance, Compare performance standards and Take
corrective action.

4. ___True______ Financial controls not only tell whether an organization is on

sound financial footing, but they can be useful indicators of other kinds
of performance problems.

5. _____True____ The liquidity ratio is a financial ratio that indicates the

organization’s ability to meet its current debt obligations.

6. _ ___True_____ A profitability ratio measures the organization’s internal performance

with respect to key activities defined by management.
This is the definition for financial ratio.

7. ______False____ Decentralized control involves influencing employee behavior through

extensive rules, policies, hierarchy of authority and written
documentation. ( Bureaucratic control)

8. _______True____ Bureaucratic control involves such activities as monitoring

employee behavior and reward systems.

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 Fill in the Blanks

1. The systematic process through which managers regulate organizational activities is known
as ___Organizational control____.

2. ____Control__ can focus on events before, during, or after the process.

3. Name the three types of control. Feedforward, concurrent, and feedback

4. Control that focuses on human, material, and financial resources flowing into the
organization is known as ___Feedforward____ control.

5. Control that monitors ongoing employee activities to ensure they are consistent with
quality standards is called Concurrent control .

6. Feedback control focuses on the organization’s outputs. (eg. surveys,

evaluation)

7. List the four steps in the feedback control model. establish standards of performance,
measure actual performance, compare performance to standards and the last step is
take corrective action or do nothing if adequate.

8. When _actual performance____ deviates from a ___standard___, managers must

interpret the deviation.

9. Hierarchical or bureaucratic control involves monitoring and influencing

employee behavior through extensive use of rules, policies, hierarchy of authority, written
documentation, reward systems, and other formal mechanisms.

10. ____Decentralized___ control uses cultural values, traditions, shared beliefs, and trust to
generate compliance with organizational goals.

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 Discussion Questions

1. Define organizational control and explain why it is a key management function.

2. Describe differences in control focus, including feed-forward, concurrent, and feedback

control.

3. Explain the four steps in the control process.

4. Contrast bureaucratic and decentralized control approaches.

5. How might a public school system use feed-forward control to identify the
best candidates for its teaching positions?

6. What are some examples of feedback control that might be used in a

family-style restaurant? In a large hospital?

7. In what ways could a university benefit from bureaucratic control? In what

ways might it benefit from decentralized control? Overall, which approach
do you think would be best at your university?

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 CASE STUDY

Lincoln Electric

Imagine having a management system that is so successful people refer to it with capital letters
– the Lincoln Management System – and other businesses benchmark their own systems by it.
That is the situation of Ohio-based Lincoln Electric. For a number of years, other companies
have tried to figure out Lincoln Electric’s secret – how management coaxes maximum
productivity and quality from its workers, even during financial times.

Lincoln Electric is a leading manufacturer of welding products, welding equipment, and

electric motors, with more than USD 1 billion in sales and 6,000 workers worldwide. The
company’s products are used for cutting manufacturing, and repairing other metal products.
Although it is now a publicly traded company, members of the Lincoln family still own more
than 60 percent of the stock.

Lincoln uses a diverse control approach. Tasks are precisely defined, and individual
employees must exceed strict performance goals in order to achieve top pay. The incentive
and control system is powerful. Production workers are paid on a piece-rate basis, plus merit
pay based on performance. Employees also are eligible for annual bonuses, which fluctuate
according to the company’s profits, and they participate in stock purchase plans.
A worker’s bonus is based on four factors – work productivity, work quality, dependability,
and cooperation with others. Some factory workers at Lincoln have earned more than
$100,000 a year.

However, the Lincoln system succeeds largely because of an organizational culture based on
openness and trust, shared control, and an egalitarian spirit. Although the line between
managers and workers at Lincoln is firmly drawn, managers respect the expertise of production
workers and value their contributions to many aspects of the business. The company has an
open-door policy for all top executives, middle managers, and production workers, and regular
face-to-face communication is encouraged. Workers are expected to challenge management if
they believe practices or compensation rates are unfair. Most workers are hired right out of
high school, then trained and cross-trained to perform different jobs. Some eventually are
promoted to executive positions, because Lincoln believes in promoting from within. Many
Lincoln workers stay with the company for life.

One of Lincoln’s founders felt that organizations should be based on certain values, including
honesty, trustworthiness, openness, self-management, loyalty, accountability, and
cooperativeness. These values continue to form the core of Lincoln’s culture, and management
regularly rewards employees who manifest them. Because Lincoln so effectively socializes
employees, they exercise a great degree of self-control on the job. There are 100 workers for
each foreman. There also are less tangible rewards to complement the piece rate incentive
system. Pride of workmanship and feelings of involvement, contribution, and esprit de corps
are intrinsic rewards that flourish at Lincoln Electric. Cross-functional teams, empowered to
make decisions, take responsibility for product planning, development, and marketing.
Information about the company’s operations and financial performance is openly shared with
workers throughout the company.

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Lincoln places emphasis on anticipating and solving customer problems. Sales representatives
are given the technical training they need to understand customer needs, help customers
understand and use Lincoln’s products, and solve problems. This customer focus is backed up
by attention to the production process through the use of strict accountability standards and
formal measurements for productivity, quality and innovation for all employees. In addition, a
software program called Rhythm is used to streamline the flow of goods and materials in the
production process.

Lincoln’s system worked so well in the United States that senior executives decided to extend
it overseas. Lincoln built or purchased eleven plants in Japan, South America, and Europe,
with plans to run the plants from the United States using Lincoln’s expertise with management
control systems. Managers saw the opportunity to beat local competition by applying
manufacturing control incentive systems to reduce costs and raise production in plants around
the world. The results were abysmal and nearly sunk the company. Managers at international
plants failed to meet their production and financial goals every year – they exaggerated the
goals sent to Lincoln’s managers in order to receive more resources, especially during the
recession in Europe and South America. Many overseas managers had no innate desire to
increase sales, and workers were found sleeping on benches because there was not enough
work. The European labour culture was hostile to the piecework and bonus control system.
The huge losses in the international plants, which couldn’t seem to adopt Lincoln’s vaunted
control systems, meant the company would have to borrow money to pay the U.S. workers’
bonuses, or forgo bonuses for the first time in Lincoln’s history. Top managers began to
question whether the Lincoln Management System could be transferred to other countries, and
wondered whether they simply misunderstood how to apply it other cultures.

Questions

1. What types of control--feedforward, concurrent, or feedback--are illustrated in this

case? Would you characterize Lincoln’s control approach as primarily bureaucratic
or decentralized? Explain your answers.

2. Based on what you’ve just read, what do you think makes the Lincoln System so
successful in the United States?

3. What is the problem with transporting Lincoln’s control system to other national
cultures? What suggestions would you make to Lincoln’s manager to make future
international manufacturing plants more successful?

4. Should Lincoln borrow money and pay bonuses to avoid breaking trust with its U.S.
workers? Why?

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