Management 13th Edition Schermerhorn Solutions Manual

Management 13th Edition
Schermerhorn Solutions Manual

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Schermerhorn & Bachrach / Management, 13th Instructor’s Guide
Chapter 9
CONTROL PROCESSES AND SYSTEMS
Takeaway Questions & Learning Objectives
In studying this chapter, students should consider the following questions and be able to complete the
accompanying objectives:
Takeaway 1: Why and how do managers exercise control?

Learning Objective: Identify the types of controls used by managers and the reasons for them.
Takeaway 2: What are the steps in the control process?

Learning Objective: List and describe the steps in the control process.
Takeaway 3: What are the common control tools and techniques?

Learning Objective: Explain the use of common control tools and techniques.
Overview
The chapter begins with a discussion of controlling which is a process of measuring performance and
taking action to ensure desired results. Management requires control in order to ensure goal
accomplishment and to avoid chaos. The discussion of controlling begins with an examination of the
importance of controlling and the elements of the control process. Specific types of controls are then
described before moving on to examining internal and external control approaches.
Next, steps in the control process are examined. These are establishing objectives and standards,
measuring performance results, comparing results with objectives and standards, and taking corrective
action.
Finally, various organizational systems that facilitate control are discussed. These systems include project
management, inventory control, financial controls and the balanced scorecard.
Lecture Outline
Teaching Objective: The purpose of this chapter is to teach students the fundamentals of controlling.
These fundamentals cover the control process and the systems through which managers achieve control.
Suggested Time: Two or more hours of class time are recommended to present the material in this
chapter.
Takeaway Question 1: Why and how do managers control?

Importance of controlling
Types of controls
Internal and external control
Copyright © 2015 John Wiley & Sons, Inc. 9-1

Takeaway Question 2: What are the steps in the control process?

Establish objectives and standards
Measure actual performance
Compare results with objectives and standards
Take corrective action
Takeaway Question 3: What are the common control tools and techniques?
Project management and control
Inventory control
Breakeven analysis
Financial controls
Balanced scorecards
Supporting Materials
Figures
• Figure 9.1: The Role of Controlling in the Management Process
• Figure 9.2: Feedforward, Concurrent, and Feedback Controls
• Figure 9.3: Four Steps in the Control Process
• Figure 9.4: Use of Breakeven Analysis to Make Informed “What IF” Decisions
• Figure 9.5: Basic foundations of a balance sheet and income statement
Thematic Boxes
• Choices: Some Parents Pay Their Kids for Good Grades
• Insight: Resiliency Offers Strength From Within
• Analysis: Those Small Distractions Can Be Goal Killers
• Ethics: Global Censorship of Search and Social Media
• Wisdom: Bill Gates Calls for Better Measurement to Solve Social Problems
• GANTT Chart
• CPM/PERT Chart
• Economic Order Quantity Chart
• Issues and Trends: iPhone’s Birth Not Always a Smooth Delivery
Management Learning Review

• Summary
• Self-Test
Management Skills & Competencies

• Evaluate Career Situations: What Would You Do?
• Reflect on the Self-Assessment: Internal/External Control
• Contribute to the Class Exercise: After-meeting/ Project Remorse
• Manage a Critical Incident: High Performer but Late for Work
• Collaborate on the Team Activity: Building a Balanced Scorecard
• Case 9: Electronic Arts: Inside Fantasy Sports

Lecture Notes
WHY AND HOW MANAGERS CONTROL

Takeaway 1: Why and how do managers exercise control?
Learning Objective: Identify the types of controls used by managers and the reasons for them.
DISCUSSION TOPIC
A humorous way to introduce this chapter is to ask students if they have ever seen the old television series
or the movie, Get Smart. You can then ask those who are familiar with this show the name of the
organization that employed the series’ hero, Maxwell Smart. The answer, of course, is “Control.” Next,
ask for the name of the villainous organization that Maxwell battled against. The answer to this question
is “C.H.A.O.S.” From here, you can point out that while the series was a farcical comedy, managers share
with Maxwell Smart the desire to maintain control and to avoid organizational chaos.
IMPORTANCE OF CONTROLLING
Controlling is a process of measuring performance and taking action to ensure desired results.
While control has a negative connotation, it plays a positive and necessary role in the
management process by ensuring that things are going according to plan.
Controlling sees to it that the right things happen, in the right way, at the right time.
FIGURE 9.1 illustrates the role of controlling in the management process.
Effective control is important to organizational learning. A control technique that contributes to

organizational learning is the after-action review that identifies lessons learned and results
accomplished in a completed project, task force, or special operation.
Improving performance through learning is one of the opportunities offered by the control
process; however, benefits are realized only when learning is translated into corrective action.
TYPES OF CONTROLS
FIGURE 9.2 illustrates three major types of controls: feedforward, concurrent, and feedback.
Each is relevant to a different phase of the organization’s input-throughput-output cycle.
Feedforward Controls
Feedforward controls or preliminary controls:
• Are employed before a work activity begins.

• Ensure that objectives are clear.
• Ensure proper directions are established.
• Ensure the right resources are available to accomplish the controls.
• Are used to solve problems before they begin, by asking the often-neglected question:
“What needs to be done before we begin?”

Concurrent Controls
Concurrent controls or steering controls:
• Focus on what happens during the work process.

• Monitor operations and activities to make sure things are being done according to plan.
• Solve problems as they occur.
• Address the question: “What can we do to improve things right now?”
Feedback Controls
Feedback controls or post-action controls:
• Take place after work is completed.

• Focus on the quality of end results rather than on inputs or activities.
• Focus on the question: “Now that we are finished, how well did we do?”
• Provide useful information for improving future operations.
INTERNAL AND EXTERNAL CONTROL
Self- Control
Self-control or internal control allows motivated individuals and groups to exercise self-
discipline in fulfilling job expectations.
The potential for self-control is increased when:
• Capable people have a clear sense of organizational mission, know their performance
objectives, and have the necessary resources to do the job.
• The organization has a participative culture.
Self-control is based on how good you are at taking control of your time and maintaining a
healthy work-life balance.
DISCUSSION TOPIC
Ask the students to provide examples of when they have exercised self-control. Seek to determine the
extent to which the students’ self-management was preceded and facilitated by some form of
objective setting.
Bureaucratic Control
Bureaucratic control or external control uses authority, policies, procedures, job

descriptions, budgets, and day-to-day supervision to make sure people’s behavior is
consistent with organizational interests.
The organization’s external environment also affects bureaucratic control through laws and
regulations.
Clan Control
Clan control influences behavior through norms and expectations set by the organizational
culture. People who share values and identify strongly with one another tend to behave in
ways that are consistent with one another’s expectations.

Market Control
Market control is essentially the influence of market competition on the behavior of

organizations and their members.
Firms adjust products, pricing, promotions, and other practices based on feedback from
customers and the actions of competitors.
THE CONTROL PROCESS

Takeaway 2: What are the steps in the control process?
Learning Objective: List and describe the steps in the control process.
DISCUSSION TOPIC
Before you formally present the steps in the control process, you may want to solicit student input by
asking them to identify some examples of controls that are used in organizations. You can simply record
these controls on the chalkboard or overhead projector as they are offered.
Students typically provide many examples ranging from a minimum GPA requirement to liquor laws to
shoplifting guards. You can then use one or more of the examples provided to illustrate the control
process presented below. For instance, using the example of the minimum GPA requirement, you could
point out that this requirement is a standard against which actual student performance is compared. When
students’ GPAs fall below this standard, they are placed on academic probation and counseled to improve
their performance. If they remain below the standard, they are suspended from the program. Through this
process, the quality of students who graduate from a program is maintained. Students who do
exceptionally well are also singled out for special attention in the form of awards and honors. An example
such as this can make the control process more tangible to students.
FIGURE 9.3 illustrates the four steps in the control process:

1. Establish performance objectives and standards.
2. Measure actual performance.
3. Compare actual performance with objectives and standards.
4. Take necessary action.
STEP 1: ESTABLISH OBJECTIVES AND STANDARDS
The control process begins with planning. Performance objectives and the standards for
measuring them are set.
Output Standards
Output standards measure performance results in terms of quantity, quality, cost, or time.
Input Standards
Input standards measure effort in terms of the amount of work expended in task
performance.
STEP 2: MEASURE PERFORMANCE RESULTS
During this step, attention is devoted to accurately measuring actual performance results (output
standards) and/or performance efforts (input standards).

Measurement must be sufficiently accurate to identify significant differences between actual

results and the original plan.
Without measurement, effective control is not possible.
STEP 3: COMPARE RESULTS WITH OBJECTIVES AND STANDARDS
The comparison made at this step is summarized by the following control equation:
Need for Action = Desired Performance – Actual Performance
Methods of comparing desired and actual performance:

1. An engineering comparison uses engineered standards set scientifically through such
methods as time and motion studies.
2. A historical comparison uses past experience as a baseline for evaluating current
performance.
3. A relative comparison uses the performance of other persons, work units, or organizations as
the evaluation standard.
STEP 4: TAKE CORRECTIVE ACTION
This step involves taking any action necessary to correct problems or make improvements.
Management by exception is the practice of giving attention to situations showing the greatest
need for action.
This practice can save the manager time, energy, and other resources by focusing attention on
high-priority areas.
Managers need to be alert to two types of exceptions:
1. A problem situation where actual performance is less than desired.

2. An opportunity situation in which actual performance turns out higher than desired.
CONTROL TOOLS AND TECHNIQUES

Takeaway 3: What are the common control tools and techniques?
Learning Objective: Explain the use of common control tools and techniques.
DISCUSSION TOPIC
Ask the students to cite examples of reprimands they have encountered, and then analyze them in light of
the preceding criteria.
PROJECT MANAGEMENT AND CONTROL
Projects are one-time activities that have clear beginning and end points.
Project management involves making sure that the activities required to complete a project are
completed on time, within budget, and in ways that otherwise meet objectives.

Gantt Charts
A Gantt chart graphically displays the scheduling of tasks required to complete a project.
See p. 205 for an illustration of a simplified Gantt chart which provides a visual overview of
what needs to be done on the project.
CPM/PERT Techniques
A CPM/PERT can handle greater complexity than a Gantt chart. A CPM/PERT is a

combination of the critical path method and the program evaluation and review technique.
See p. 205 of the text for a sample CPM/PERT Network Activity-on-Node Diagram. When
the events associated with various activities are plotted, the result is a diagram showing the
necessary interrelationships that are required for successful completion of the project.
The critical path is the longest pathway in a CPM/PERT network.
INVENTORY CONTROL
One way to achieve cost controls is through inventory control, i.e., ensuring that the inventory is
only big enough to meet customer needs.
Two popular approaches to inventory control are the economic order quantity method which
automatically places an order when inventory levels fall to a predetermined level and just-in-
time scheduling (JIT) which routes materials to work stations just in time for use.
BREAKEVEN ANALYSIS
Breakeven analysis allows managers to perform what-if calculations under different revenue and
cost conditions by determining the breakeven point where revenue just equals cost.
The formula for the breakeven point is Breakeven Point = Fixed Costs ÷ (Price-Variable Costs)
FINANCIAL CONTROLS
Financial analysis information is important in exercising managerial control over resource

utilization and organizational performance.
FIGURE 9.5 shows the foundation financial controls of the:
• Balance sheet – shows assets and liabilities at a point in time.

• Income statement – shows profits or losses at a point in time.
It is important for managers to understand the financial performance measures of
• Liquidity –– the ability to generate cash to pay bills.

• Leverage –– the ability to earn more in returns than the cost of debt.
• Asset management –– the ability to use resources efficiently and operate at minimum cost.
• Profitability –– the ability to earn revenues greater than costs.
The financial ratios that are commonly used for assessing liquidity, leverage, asset management,
and profitability are:

Liquidity: measures the ability to meet short-term obligations. (Higher is better: you want
more assets and fewer liabilities.)
• Current Ratio = Current Assets / Current Liabilities
• Quick Ratio = Current Assets – Inventory / Current Liabilities
Higher is better: You want more assets and fewer liabilities
Leverage: measures use of debt. (Lower is better: you want fewer debts and more assets.)
• Debt Ratio = Total Debts / Total Assets
Lower is better: You want fewer debts and more assets
Asset management: measures asset and inventory efficiency. (Higher is better: you want
more sales and fewer assets or lower inventory.)
• Asset Turnover = Sales / Total Assets
• Inventory Turnover = Sales / Average Inventory
Higher is better: You want more sales relative to assets and inventory
Profitability: measures ability to earn revenues greater than costs. (Higher is better: you
want more profit for sales, assets, and equity.)
• Net Margin = Net Profit After Taxes / Sales
• Return on Assets (ROA) = Net Profit After Taxes / Total Assets
• Return on Equity (ROE) = Net Income / Owners Equity
Higher is better: You want high net income relative to sales, assets and equity.
BALANCED SCORECARDS
A balanced scorecard tallies organizational performance in financial, customer service, internal

process, and innovation and learning areas. When using a balanced scorecard, “what gets
measured happens.”
Development of a balanced scorecard begins with the mission and vision of an organization
followed by these questions:
• Financial performance – To improve financially, how should we appear to our shareholders?

• Customer satisfaction – To achieve our vision, how should we appear to our customers?
• Internal process improvement – To satisfy our customers and shareholders, at what internal
business processes should we excel?
• Innovation and learning – To achieve our vision, how will we sustain our ability to change
and improve?
When balanced scorecard measures are taken and routinely recorded for critical management
review, organizations are expected to perform in the four above listed areas.

Takeaway Summary
Takeaway Question 1: Why and how do managers control?

• Controlling is the process of measuring performance and taking corrective action as needed.
• Feedforward controls are accomplished before a work activity begins; they ensure that directions are
clear, and that the right resources are available to accomplish them.
• Concurrent controls make sure that things are being done correctly; they allow corrective actions to
be taken while the work is being done.
• Feedback controls take place after an action is completed; they address the question “Now that we are
finished, how well did we do, and what did we learn for the future?”
• Internal control is self-control and occurs as people take personal responsibility for their work.
• External control is based on the use of bureaucratic, clan and market control systems.
FOR DISCUSSION: Can strong input and output controls make up for poor concurrent controls?
Takeaway Question 2: What are the steps in the control process?

• The first step in the control process is to establish performance objectives and standards that create
targets against which later performance can be evaluated.
• The second step in the control process is to measure actual performance and specifically identify what
results are being achieved.
• The third step in the control process is to compare performance results with objectives to determine if
things are going according to plans.
• The fourth step in the control process is to take action to resolve problems or explore opportunities
that are identified when results are compared with objectives.
FOR DISCUSSION: What are the potential downsides to management by exception?
Takeaway Question 3: What are common control tools and techniques?

• A project is a unique event that must be completed by a specified date; project management is the
process of ensuring that projects are completed on time, on budget, and according to objectives.
• Gantt charts assist in project management and control by displaying how various tasks must be
scheduled in order to complete a project on time.
• CPM/PERT analysis assists in project management and control by describing the complex networks
of activities that must be completed in sequences for a project to be completed successfully.
• Economic order quantities and just-in-time deliveries are common approaches to inventory cost
control.
• The breakeven equation is: Breakeven Point = Fixed Costs ÷ (Price - Variable Costs).
• Breakeven analysis identifies the points where revenues will equal costs under different pricing and
cost conditions.
• Financial control of business performance is facilitated by a variety of financial ratios, such as those
dealing with liquidity, leverage, assets, and profitability.
• The balanced scorecard measures overall organizational performance in four areas: financial,
customers, internal processes, and innovation.
FOR DISCUSSION: Should all employees of a business be regularly informed of the firm’s overall
financial performance?
Key Terms
After action review: a systematic assessment of lessons learned and results accomplished in a completed project.
Balance sheet: shows assets and liabilities at one point in time.
Balanced scorecard: tallies organizational performance in financial, customer service, internal process, and
innovation and learning areas.

Breakeven analysis: performs what-if calculations under different revenue and cost conditions.
Breakeven point: occurs where revenues just equal costs.
Bureaucratic control: influences behavior through authority, policies, procedures, job descriptions, budgets, and
day-to-day supervision.
Clan control: influences behavior through norms and expectations set by the organizational culture.
CPM/PERT: a combination of the critical path method and the program evaluation and review technique.
Concurrent control: a control that focuses on what happens during the work process.
Control equation: states: Need for action = Desired performance – Actual performance.
Controlling: the process of measuring performance and taking action to ensure desired results.
Critical path: the longest pathway in a CPM/PERT network.
Economic order quantity: a method of placing new orders when inventory levels fall to predetermined points.
Feedback control: a control that takes place after work is completed.
Feedforward control: a control that takes place before a work activity begins to ensure that objectives are clear,
that proper directions are established, and that the right resources are available to accomplish the objectives.
Gantt chart: graphical display of the scheduling of tasks required to complete a project.
Income statement: shows profits or losses at one point in time.
Input standard: measures work efforts that go into a performance task.
Inventory control: ensures that inventory is only big enough to meet immediate needs.
Just-in-time scheduling (JIT): routes material to work stations just in time for use.
Management by exception: the practice of giving attention to situations showing the greatest need for action.
Market control: is essentially the influence of market competition on the behavior of organizations and their
members.
Output standard: measures performance results in terms of quantity, quality, cost, or time.
Projects: one-time activities with many component tasks that must be completed in proper order and according to
budget.
Project management: makes sure that the activities required to complete a project are planned well and
accomplished on time.
Self-control or internal control: occurs through self-discipline in fulfilling work and personal responsibilities.
SELF-TEST ANSWERS
1. After objectives and standards are set, what step comes next in the control process? _________
(a) measure results (b) take corrective action (c) compare results with objectives (d) modify
standards to fit circumstances
2. When a soccer coach tells her players at the end of a losing game: “I am pleased you stayed with the
game plan,” she is using a/an _________ as a measure of performance.
(a) input standard (b) output standard (c) historical comparison (d) relative comparison
3. When an automobile manufacturer is careful to purchase only the highest-quality components for
use in production, this is an example of an attempt to ensure high performance through _________
control.
(a) concurrent (b) statistical (c) inventory (d) feedforward
4. Management by exception means _________.

(a) managing only when necessary (b) focusing attention where the need for action is greatest (c)
the same thing as concurrent control (d) the same thing as just-in-time delivery

5. When a supervisor working alongside an employee corrects him or her when a mistake is made, this
is an example of _________ control.
(a) feedforward (b) concurrent (c) internal (d) clan
6. If an organization’s top management visits a firm in another industry to learn more about its
excellent record in hiring and promoting minority and female candidates, this is an example of using
_________ for control purposes.
(a) a balanced scorecard (b) relative comparison (c) management by exception (d) progressive
discipline
7. The control equation states: _________ = Desired Performance – Actual Performance.

(a) Problem Magnitude (b) Management Opportunity (c) Planning Objective (d) Need for Action
8. When a UPS manager compares the amount of time a driver takes to make certain deliveries against
a standard set through quantitative analysis of her delivery route, this is known as _________.
(a) a historical comparison (b) an engineering comparison (c) relative benchmarking (d) concurrent
control
9. Projects are unique one-time events that _________.

(a) have unclear objectives (b) must be completed by a specific time (c) have unlimited budgets (d)
are largely self-managing
10. The _________ chart graphically displays the scheduling of tasks required to complete a project.
(a) exception (b) Taylor (c) Gantt (d) after-action
11. When one team member advises another team member that “your behavior is crossing the line in
terms of our expectations for workplace civility”, she is exercising a form of _____________ control
over other’s inappropriate behavior. .
(a) clan (b) market (c) internal (d) preliminary
12. In a CPM/PERT analysis the focus is on _________ and the event _________ that link them
together with the finished project.
(a) costs, budgets (b) activities, sequences (c) timetables, budgets (d) goals, costs
13. If fixed costs are $10,000, variable costs are $4 per unit, and the target selling price per unit is $8,
what is the breakeven point?
(a) 2 (b) 500 (c) 2500 (d) 4800
14. Among the financial ratios used for control. Current Assets/Current Liabilities is known as the
_________.
(a) debt ratio (b) net margin (c) current ratio (d) inventory turnover ratio
15. In respect to return on assets (ROA) and the debt ratio, the preferred directions when analyzing them
from a control standpoint are _________.
(a) decrease ROA, increase debt (b) increase ROA, increase debt (c) increase ROA, decrease debt
(d) decrease ROA, decrease debt
16. List the four steps in the controlling process and give examples of each.
The four steps in the formal planning process are: (1) establish objectives and standards, (2)
measure actual performance, (3) compare actual performance with objectives and standards, and
(4) take necessary action.

17. How might feedforward control be used by the owner/manager of a local bookstore?
Feedforward control involves the careful selection of system inputs to ensure that outcomes are of
the desired quality and up to all performance standards. In the case of a local bookstore, one of the
major points of influence over performance and customer satisfaction is the relationship between the
customers and the store’s employees who serve them. Thus, a good example of feedforward control
is exercising great care when the manager hires new employees and then trains them to work
according to the store’s expectations.
18. How does Douglas McGregor’s Theory Y relate to the concept of internal control?
Douglas McGregor’s concept of Theory Y involves the assumption that people can be trusted to
exercise self-control in their work. This is the essence of internal control—people controlling their
own work by taking personal responsibility for results. If managers approach work with McGregor’s
Theory Y assumptions, they will, according to him, promote more self control— or internal control—
by people at work.
19. What four questions could be used to organize the presentation of an up-to-the-moment balanced
scorecard in the executive dashboard for a small business?
The four questions to ask when developing a balanced scorecard for inclusion on an executive
dashboard are: (1) Financial Performance—To improve financially, how should we appear to our
shareholders? (2) Customer Satisfaction—To achieve our vision, how should we appear to our
customers? (3) Internal Process Improvement—To satisfy our customers and shareholders, at what
internal business processes should we excel? (4) Innovation and Learning—To achieve our vision,
how will we sustain our ability to change and improve?
20. Assume that you are given the job of project manager for building a new student center on your
campus. List just five of the major activities that need to be accomplished to complete the new
building in two years. Draw a CPM/PERT network diagram that links the activities together in
required event scheduling and sequencing. Make an estimate for the time required for each sequence
to be completed and identify the critical path.
There are a very large number of activities required to complete a new student center building on a
college campus. Among them, one might expect the following to be core requirements: (1) land
surveys and planning permissions from local government, (2) architect plans developed and
approved, (3) major subcontractors hired, (4) site excavation completed, (5) building exterior
completed, (6) building interior completed and furnishings installed. Use the CPM/PERT diagram in
the chapter as a guide.
MANAGEMENT SKILLS AND COMPETENCIES
CAREER SITUATIONS FOR MANAGEMENT CONTROL: WHAT WOULD YOU DO?
Students’ answers will vary.

REFLECT ON THE SELF-ASSESSMENT: INTERNAL/EXTERNAL CONTROL
Instructions
Circle either “a” or “b” to indicate the item you most agree within each pair of the following statements.
1. (a) Promotions are earned through hard work and persistence.

(b) Making a lot of money is largely a matter of breaks.
2. (b) Many times the reactions of teachers seem haphazard to me.
(a) In my experience I have noticed that there is usually a direct connection between how hard I study and the
grades I get.
3. (a) The number of divorces indicates that more and more people are not trying to make their marriages work.
(b) Marriage is largely a gamble.
4. (a) It is silly to think that one can really change another person’s basic attitudes.
(b) When I am right I can convince others.
5. (a) Getting promoted is really a matter of being a little luckier than the next guy.
(b) In our society an individual’s future earning power is dependent upon his or her ability.
6. (a) If one knows how to deal with people, they are really quite easily led.
(b) I have little influence over the way other people behave.
7. (a) In my case the grades I make are the results of my own efforts; luck has little or nothing to do with it.
(b) Sometimes I feel that I have little to do with the grades I get.
8. (a) People like me can change the course of world affairs if we make ourselves heard.
(b) It is only wishful thinking to believe that one can really influence what happens in society at large.
9. (a) Much of what happens to me is probably a matter of chance.
(b) I am the master of my fate.
10. (a) Getting along with people is a skill that must be practiced.
(b) It is almost impossible to figure out how to please some people.
Scoring
Give 1 point for 1b, 2a, 3a, 4b, 5b, 6a, 7a, 8a, 9b, and 10a.
8–10 = high internal locus of control, 6–7 = moderate internal locus of control, 5 = mixed locus of
control, 3–4 = moderate external locus of control, 0-2 = high external locus of control.
Interpretation
This instrument offers an impression of your tendency toward an internal locus of control or external
locus of control. Persons with a high internal locus of control tend to believe they have control over their
own destinies. They may be most responsive to opportunities for greater self-control in the workplace.
Persons with a high external locus of control tend to believe that what happens to them is largely in the
hands of external people or forces. They may be less comfortable with self-control and more responsive
to external controls in the workplace.
Instructor’s Note
By providing students with insight into their locus of control, this assessment can serve as a valuable tool
for increasing their self-awareness. You can supplement your discussion of locus of control with the
following summary of key research findings regarding the differences between internals and externals.
Some Ways in Which Internals Differ from Externals

Information processing: Internals make more attempts to acquire information, are less satisfied with the
amount of information they possess, and are better at utilizing information.
Job satisfaction: Internals are generally more satisfied, less alienated, less rootless, and there is a stronger
job satisfaction/performance relationship for them.
Performance: Internals perform better on learning and problem-solving tasks, when performance leads to
valued rewards.

Self-control, risk, and anxiety: Internals exhibit greater self-control, are more cautious, engage in less
risky behavior, and are less anxious.
Motivation, expectancies, and results: Internals display greater work motivation, see a stronger
relationship between what they do and what happens to them, expect that working hard leads to good
performance, and feel more control over their time.
Response to others: Internals are more independent, more reliant on their own judgment, and less
susceptible to the influence of others; they are more likely to accept information on its merit.
(Source: Instrument from Rotter, J.P. “External Control and Internal Control,” Psychology Today, June 1971, p. 42.
Used by permission.)
CONTRIBUTE TO THE CLASS EXERCISE: AFTER MEETING/PROJECT REMORSE
This exercise provides an opportunity for students to conduct an after action review by applying feedback
control principles to their experiences with group meetings and projects. This exercise illustrates the
importance of including control measuring into the project management process. The discussion allows
students to a plan for corrective action. The often neglected learning point here is that without reflecting
on one’s performance and implementing changes in the future, there is less apt to be any improvement in
the outcome of their next group meeting or project.
MANAGE A CRITICAL INCIDENT: HIGH PERFORMACE BUT LATE FOR WORK
You are an elementary school principal. One of your best teachers—perhaps the best—is causing a bit of
an uproar. She is in her second year on staff after graduating from college and is doing a wonderful job
with the second graders. They’re happy, the parents are happy, and you’re happy. The other teachers
aren’t happy, at least some of them aren’t. Two of the more outspoken and senior teachers came to you
today with a request. “Do something about her,” they said. “She is consistently late in the mornings. You
know our policy is for the teacher to be in the classroom at least 30 minutes before school starts.” You are
aware of her tardiness, but you also know that she consistently stays late and is most often the last teacher
out of the building at the end of the day. She isn’t aware that her co-workers have complained about her.
You can’t put this off because the grumbling is starting to spread.
Questions
What do you do, and why? How can you turn this into an opportunity to develop an approach that
accommodates a range of personal work styles and different classroom approaches, all while holding up
high performance standards?
While being complementary for her outstanding job with the second graders, you do need to offer the
developmental feedback. After that, you need to apply the concurrent controls to ensure that the tardiness
issue is resolved. You do not need to identify that some teachers have complained as this falls in your
supervising and control parameters. There is also an opportunity to introduce the flex system with input
from all stakeholders to accommodate the different work styles while responding to the needs to the
students and parents.

COLLABORATE ON A TEAM ACTIVITY: BUILDING A BALANCED SCORECARD
Instructions
In your assigned teams do the following.
1. Choose a local organization of interest to team members and about which you collectively have some
information and insights.
2. Build a Balanced Scorecard that can be used for control purposes by this organization’s top
management. Make sure your scorecard covers these four areas—financial performance, customer
satisfaction, internal process improvement, and innovation and learning.
3. For each of the four scorecard performance areas, be very specific in identifying what you recommend
as possible performance goals and areas of performance measurement.
4. Design a scorecard format that makes analysis easy and informative. If possible demonstrate how your
proposed scorecard might fi t into an Executive Dashboard.
5. Present your proposed Balanced Scorecard to the entire class, along with justification for all suggested
goals and measures. Explain in your presentation why you believe this scorecard could help the
organization perform better in the future.
Student answers will vary.
CHAPTER 9 CASE: ELECTRONIC ARTS
Discussion Questions
1. How can feedforward, concurrent, and feedback controls help Electronic Arts meet its quality goals
for video games?
Feedforward, Concurrent and Feedback controls are three types of managerial controls that
illustrate how organizations react with their environments as they control internal processes. For
EA, these types of control would help achieve quality goals for video games by:
• Feedforward or preliminary controls ensure that EA is producing the correct products to
achieve their mission and excite their target market. To do this they must keep track of their
own product sales, track the sales of competing products and keep on top of the popularity of
the celebrity players depicted in the sports games they develop. Students may have many
other suggestions such as new gaming technology or economic trends. It is also important to
use the right resource inputs. This might include talented programmers, licensing of the NFL,
rights to use player likeness.
• Concurrent Controls ensure that the right things are being done in the work-flow process to
make sure that a quality product is being produced. For EA, this would include accurate
development and programming of the game to prevent glitches.
• Feedback Controls ensure that the final results are up to desired standards. Product testing
and customer feedback would be two ways to effectively test games. Students with a strong
background in testing prototype games are very likely to have much greater insight into this
process than all but the most game-savvy instructor or professor!
2. Which of the control systems and techniques can be most useful to EA’s next round of business
decisions, and why?
Recent sales have been below expectations, in the case, the company has fallen from first to third
place in the gaming industry and competitors such as Wii and Apple are changing the nature and

delivery of the product. Clearly, Electronic Arts is aware of these factors and as a result is
turning its attention to trying to regain market share.
3. Problem Solving Break the video game production process down into its various components, a
start-to-finish workflow model. Identify for each phase in the process the control standards that could be
set so that managers make the process work best overall.
First, work inputs should involve market research on the latest trends in gaming technology and
turnings attention to product development and/or strategic alliances. Here feed forward controls
ensure that the organization is headed in the right direction and has people, resources and
technology needed to compete. Next, they need to implement concurrent controls by ensuring
that gamest are manufactured according to high quality standards and pre-tested to correct any
glitches before the products are released. Lastly, Electronic Arts needs to put in place a feedback
control system that gathers data from retailers, consumers, social media sites, etc. to determine
what needs to be changed going forward.
The control process involves: 1.) establishing objectives and standards; 2.) measuring actual
performance; 3.) comparing actual performance with objectives and standards; 4.) taking
necessary action as needed. The gaming business operates in a rapidly changing environment.
Today’s best seller is on the mark-down rack tomorrow. However, difficult it is to plan
methodically in this industry, it needs to be done. Electronic Arts appears to be more reactive to
its external environment (new technologies, consumer demands, and increasing competition) than
proactive.
4. Further Research What is the latest in Electronic Arts’ quest to regain its former glory as the top
gaming publisher? How well is EA positioned for future competitive advantage? Overall, is EA’s
executive team still on “top of its game”? How well is EA positioned for future competitive advantage?
Overall, is EA’s executive team still on “top of its game?”
Students’ responses may be somewhat influenced by their personal experiences with Electronic
Arts products. However, since this case was written, the company has slipped from 3rd to 4th place
(behind Sega, Konami and Nintendo) in the video game industry. Students may also find blogs
online that detail quality problems and complaints with Electronic Arts products. Currently, their
best-selling games are Wing Commander (a spaceship cockpit flight simulator), Sim City and its
variations, and Need for Speed (a racing game). It does not appear that Electronic Arts is moving
forward fast enough into newer types of game delivery and taking advantage of emerging markets
and changes in technology.

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Takeaway Questions & Learning Objectives

Takeaway 1: Why and how do managers exercise control?

Takeaway 2: What are the steps in the control process?

Takeaway 3: What are the common control tools and techniques?

Takeaway Question 1: Why and how do managers control?

Copyright © 2015 John Wiley & Sons, Inc. 9-1

Takeaway Question 2: What are the steps in the control process?

Management Learning Review

Management Skills & Competencies

Copyright © 2015 John Wiley & Sons, Inc. 9-2

WHY AND HOW MANAGERS CONTROL

FIGURE 9.1 illustrates the role of controlling in the management process.

Effective control is important to organizational learning. A control technique that contributes to

Feedforward controls or preliminary controls:

• Are employed before a work activity begins.

Copyright © 2015 John Wiley & Sons, Inc. 9-3

Concurrent controls or steering controls:

• Focus on what happens during the work process.

Feedback controls or post-action controls:

• Take place after work is completed.

INTERNAL AND EXTERNAL CONTROL

The potential for self-control is increased when:

Bureaucratic control or external control uses authority, policies, procedures, job

Copyright © 2015 John Wiley & Sons, Inc. 9-4

Market control is essentially the influence of market competition on the behavior of

THE CONTROL PROCESS

FIGURE 9.3 illustrates the four steps in the control process:

STEP 1: ESTABLISH OBJECTIVES AND STANDARDS

STEP 2: MEASURE PERFORMANCE RESULTS

Copyright © 2015 John Wiley & Sons, Inc. 9-5

Measurement must be sufficiently accurate to identify significant differences between actual

Without measurement, effective control is not possible.

STEP 3: COMPARE RESULTS WITH OBJECTIVES AND STANDARDS

Need for Action = Desired Performance – Actual Performance

Methods of comparing desired and actual performance:

STEP 4: TAKE CORRECTIVE ACTION

Managers need to be alert to two types of exceptions:

1. A problem situation where actual performance is less than desired.

CONTROL TOOLS AND TECHNIQUES

PROJECT MANAGEMENT AND CONTROL

Copyright © 2015 John Wiley & Sons, Inc. 9-6

A CPM/PERT can handle greater complexity than a Gantt chart. A CPM/PERT is a

The critical path is the longest pathway in a CPM/PERT network.

Financial analysis information is important in exercising managerial control over resource

FIGURE 9.5 shows the foundation financial controls of the:

• Balance sheet – shows assets and liabilities at a point in time.

It is important for managers to understand the financial performance measures of

• Liquidity –– the ability to generate cash to pay bills.

Copyright © 2015 John Wiley & Sons, Inc. 9-7

Higher is better: You want more assets and fewer liabilities

• Debt Ratio = Total Debts / Total Assets

Lower is better: You want fewer debts and more assets

A balanced scorecard tallies organizational performance in financial, customer service, internal

• Financial performance – To improve financially, how should we appear to our shareholders?

Copyright © 2015 John Wiley & Sons, Inc. 9-8

Takeaway Question 1: Why and how do managers control?

Takeaway Question 2: What are the steps in the control process?

Takeaway Question 3: What are common control tools and techniques?

Copyright © 2015 John Wiley & Sons, Inc. 9-9

4. Management by exception means _________.

Copyright © 2015 John Wiley & Sons, Inc. 9-10

7. The control equation states: _________ = Desired Performance – Actual Performance.