10

Chapter

Foundations
of
Control

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Learning Outcomes
• Explain the nature and importance of control
• Describe the three steps in the control process
• Discuss the types of controls organizations
and managers use
• Discuss contemporary issues in control

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What is Control?

• Control
– The management
function that
involves monitoring
activities to ensure
that they’re being
accomplished as
planned and
correcting any
significant deviations
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What is the Control Process?
• Control Process
– A three-step process of measuring actual
performance, comparing actual performance
against a standard, and taking managerial action
to correct deviations or to address inadequate
standards

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How Do Managers Measure?
To determine actual performance, a manager
must first get information about it. Thus, the
first step in control is measuring
Four common sources of information frequently
used to measure actual performance are
– personal observation
– statistical reports
– oral reports
– written reports
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What is Managing By Walking
Around?
• Management By
Walking Around
(MBWA)
– When a manager is
out in the work area
interacting with
employees

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How Do Managers Compare
Performance to Planned Goals?
• Range of Variation
– The acceptable parameters of variance between
actual performance and a standard
Deviations outside this range need attention

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What Management Action Can Be
Taken?
• Immediate Corrective Action
– Corrective action that addresses problems at once
to get performance back on track
• Basic Corrective Action
– Corrective action that looks at how and why
performance deviated before correcting the
source of deviation

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When Does Control Take Place?

• Feedforward Control
– Control that takes place
before a work activity is
done
• Concurrent Control
– Control that takes place
while a work activity is in
progress

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Feedback Control

• Feedback Control
– Control that takes
place after a work
activity is done

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How Do Managers Keep Track of
Finances?
• In order to meet profitability goals, managers
need financial controls
• Traditional financial measures managers might
use include
– ratio analysis
– budget analysis

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Financial Ratios by Type
• Liquidity ratios
– measure an organization’s ability to meet its
current debt obligations
• Leverage ratios
– examine the organization’s use of debt to finance
its assets and whether it’s able to meet the
interest payments on the debt

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Financial Ratios (cont.)
• Activity ratios
– assess how efficiently a company is using its
assets.
• Profitability ratios
– measure how efficiently and effectively the
company is using its assets to generate profit

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How is an Organization’s
Information Controlled?
Managers deal with information controls in two
ways:
1. as a tool to help them control other
organizational activities
2. as an organizational area they need to control
• Management Information System (MIS)
– A system used to provide management with
needed information on a regular basis

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What is The Balanced Scorecard?

• Balanced Scorecard
– A performance
measurement tool
that looks at more
than just the
financial perspective

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