MGT4042EF Business

Organization and Management

Topic 3
Knowledge of the characteristics of effective
control systems in organizations
3.1 The need for control in organizations

Organizational Control

• Managers monitor and regulate

how efficiently and effectively an
organization and its members are
performing the activities
necessary to achieve
organizational goals

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Controlling as a Management Function

• Controlling
• A process of monitoring performance and taking action to ensure desired results.
• It sees to it that the right things happen, in the right ways, and at the right time.
• Done well, it ensures that the overall directions of individuals and groups are
consistent with short and long range plans.
• It helps ensure that objectives and accomplishments are consistent with one
another throughout an organization.
• It helps maintain compliance with essential organizational rules and policies.

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3.2 The characteristics of effective control
systems in organizations

• Control Systems 控制系統

• Formal, target-setting, monitoring, evaluation and feedback

systems that provide managers with information about whether
the organization’s strategy and structure are working efficiently
and effectively.

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Control Systems

A good control system should:

• be flexible so managers can respond as needed.

• provide accurate information about the organization.
• provide information in a timely manner.

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Three Types of Control

Figure 8.1
Types of Control
Feedforward Control
Control that allows managers to anticipate problems
before they arise
Concurrent Control
Give managers immediate feedback on how efficiently
inputs are being transformed into outputs so that
managers can correct problems as they arise
Feedback Control
Control that gives managers information about
customers’ reactions to goods and services so that
corrective action can be taken if necessary
Four Steps in Organizational Control

Figure 8.2
 Control Criteria / Standard
(What to measure?)
- Employees, e.g.
• Behaviour
• Goals
• Satisfaction
• Turnover
• Absenteeism
- Organization (Budgets, goals), e.g.
• Costs
• Output
• Sales
Variation = Actual Performance – Standard

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Publishing as Prentice Hall.
What Management Action Can Be Taken?

• Corrective Action
* improving performance, e.g. compensation scheme, training;
redesign jobs; or discipline employees

• Revising the standard

* standard is realistic, fair, achievable and challenging
Three Organizational Control Systems
Systems

Figure 8.3
Output Control

Use of goals or output performance

standards that will best measure
efficiency, quality, innovation, and
responsiveness to customers
Financial Measures of Performance
Profit Ratios Output Control
• Measures of how efficiently managers convert resources
into profits
• Return on investment (ROI)

Liquidity Ratios
Measures of how well managers protect resources to meet
short term debt—current and quick ratios
Operating Budgets
Output Control
Operating Budget
A blueprint that states how managers
intend to allocate and use the resources they control to attain
organizational goals effectively and efficiently

Lower-level managers are evaluated for their ability to stay within the
budget and to make the best use of available resources
Effective Output Controls
Three components are the essence of effective output
control.
(01) Objective financial measures
(02) Challenging goals and performance standards
(03) Appropriate operating budgets
Problems with Output Control
Managers must create output standards that
motivate at all levels.
Standards should not cause managers to behave
in inappropriate ways to achieve organizational
goals.
Behavior Control– Direct Supervision
Behavior Control : Used to keep employees on track and make
organizational structures work
Direct Supervision : It involves managers who:
(01) Actively monitor and observe the behavior of their
subordinates
(02) Teach subordinates the behaviors that are appropriate and
inappropriate
(03) Intervene to take corrective action as
needed
Direct Supervision

Drawbacks of Direct Supervision :

(01) Expensive

(02) Can demotivate subordinates

(03) More complex a job is, the more

difficult it is for a manager to evaluate
how well a subordinate is performing
Behavior Control
Management by Objectives (MBO)
A goal-setting process in which managers and each of
his or her subordinates negotiate specific goals and
objectives for the subordinate to achieve and then
periodically evaluate the extent to which the
subordinate is achieving those goals
Management by Objectives
(01) Specific goals and objectives are established at each level of
the organization.
(02) Managers and their subordinates together determine the
subordinates’ goals.
(03) Managers and their subordinates periodically review the
subordinates’ progress toward meeting goals.
Behavior Control
Bureaucratic Control
Control of behavior by means of a
comprehensive system of rules and standard
operating procedures

(01) Rules and SOPs guide behavior and specify

what employees are to do when they confront a
problem that needs a solution
(02) Standardized behavior leads to standardized
outputs
Bureaucratic Control
Problems with Bureaucratic Control
(01) Rules easier to make than to discard, leading to
bureaucratic “red tape” and slowing organizational
reaction times to problems
(02) Loss of flexibility, new ideas, and creative
problem solving
Organizational Culture and Clan Control (1 of 2)
Organizational Culture
The shared set of beliefs, expectations, values, norms, and
work routines that influences how members of an
organization relate to one another and work together to
achieve organizational goals
Organizational Culture and Clan Control (2 of 2)
Clan Control
Control exerted on individuals and groups in an organization
by shared values, norms, standards of behavior, and
expectations
 Types of Controls

Managers have Two broad options with respect to control.

• They can rely on people to exercise self-control (internal) over their

own behavior.

• Alternatively, managers can take direct action (external) to control

the behavior of others.

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Types of Control

Internal Controls 內部管控

Allows motivated individuals to exercise self-control in fulfilling job

expectations.

The potential for self-control is enhanced when capable people

have clear performance objectives and proper resource support.

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Types of Control

External Controls 外部控管控

It occurs through personal supervision and the use of formal

administrative systems.

• Performance appraisal systems, compensation and benefit

systems, employee discipline systems, and management-by-
objectives.
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Organizational Control Systems
Compensation and Benefits 薪酬和福利

Attract Motivate Recognize

Attract talented Motivate people to Recognize the value

people and retain exert maximum of their
them. effort in their work. performance
contributions.

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Organizational Control Systems

• Employee Discipline 員工紀律

• Discipline is defined as influencing behavior through reprimand.

• Progressive Discipline ties reprimand to the severity and
frequency of the employee’s infractions.
• Positive Discipline tries to involve people more positively and
directly in making decisions to improve their behavior.

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