Chapter 1

The Nature of Management

Control Systems
 Basic Concepts
 What is control?
 Elements of a control system:
» detector or sensor
» assessor
» effector
» communication network
 Basic Concept
 Examples:
»Thermostat: simple
»Body temperature: more
complex
»Automobile driver: behavior
aspects
 Management
Organization: a group of
people who work together
Organization has goals
Management: leaders in
organization
 Management
hierarchy of management
CEO decides the strategy to
attain goals
MC process: ensure that
members implement the
strategies
 System
A prescribed way of carrying out
activities that are repeating
 Characterized by a rhythmic,
recurring, coordinated series of
steps
 To accomplish specified purpose(s)
 Management Control
 Standard is not preset
 Not automatic
 Coordination among individuals
 MCS is a “black box”
 Much control is self-control
 Boundaries of MC
 See exhibit 1-2:
Strategy Formulation

Management Control

Task Control
 Boundaries of MC
 MC: the process by which
managers influence other
members to implement the
strategies
 MC Activities
 Planning
 Coordinating activities
 Communicating information
 Evaluating information
 Deciding actions
 Influencing people

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 Actions vs Plans
 MC does not necessarily mean that
actions should correspond to a plan
 The purpose is to ensure that
strategies are carried out so that the
organization’s objectives are attained

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 Actions vs Plans

 Conforming to a budget is not

necessarily good, and departure
from it is not necessarily bad

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Behavioral Considerations
MCS involves interactions
among individuals
How to achieve goal
congruence between personal
goals and organization’s goals

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Strategy Implementation
 See exhibit 1-3:
»management controls
»organization structure
»human resource management
»culture

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 Emphasis
 Financial performance
» net income, ROE
 Nonfinancial performance
» quality
» market share
» customer satisfaction
» on-time delivery
» employee morale

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Interactive Control

Today’s Control

Tomorrow’s Strategy

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 Strategy Formulation
 Strategy formulation is the process of
deciding on the goals of the
organization and the strategies for
attaining these goals
 Strategy revision is the process of
reexamining, changing, or adopting
new strategies
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Strategy Formulation vs MC
 Strategyformulation: process of
deciding on new strategies
» unsystematic, judgment, few people, part of
organization
 Management control: process of
deciding how to implement strategies
» systematic, all levels, whole organization

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 Task Control
 Task control is the process of
assuring that specified tasks are
carried out effectively and efficiently
 Transaction-oriented
 Activities are scientific
 Most info in organization is TC

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 Task Control vs MC
 Task control:
» scientific, specific tasks, less judgment
 Management control:
» behavior, organizational units
 See exhibit 1-5 for examples of decisions
in planning and control functions

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 Impact of Internet
 Impact on business:
» Instant access
» multi-targeted communication
» Costless communication
» Display images
» Shifting power and control to individual
 Facilitates coordination and control but
not substitute management control
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