Foundations

of Control

©Prentice Hall, 2001 Chapter 13 1

 Learning Outcomes
• Define control

• Describe three approaches to control

• Explain why control is important

• Define the control process

• Analyze the three types of control

©Prentice Hall, 2001 Chapter 13 2

 Learning Outcomes
• Describe an effective control system
• Identify contingency factors in the control
process
• Learn the dysfunctional side of controls
• Describe how national differences affect the
control process
• Study ethical issues in employee monitoring
©Prentice Hall, 2001 Chapter 13 3
 Three Approaches
to Control Systems

Market Bureaucratic Clan

Control Control Control

©Prentice Hall, 2001 Chapter 13 4

Managerial Decisions in the Control Process
Standard Yes
Compare Do Nothing
Attained?
Performance
to Standard No

Objectives Variance Yes

Do Nothing
Acceptable?

Measure No
Standard
Performance Yes
Standard Identify
Acceptable? Causes
No

Revise Correct
Standard Performance

©Prentice Hall, 2001 Chapter 13 5

Information Operations

What Managers
Measure

Finances People

©Prentice Hall, 2001 Chapter 13 6

 Defining an Acceptable Range of Variation

Acceptable
Upper Limit

Acceptable
Standard Range of
Variation

Acceptable
Lower Limit

t t+1 t+2 t+3 t+4 t+5

©Prentice Hall, 2001 Chapter 13 7

 Mid-Western Distributors’ Sales for July
(in hundreds of cases)
Brand Standard Actual Over (Under)

Heineken 1,075 913 (162)

Molson 630 634 4
Beck’s 800 912 112
Moosehead 620 622 2
Labatt’s 540 672 132
Corona 160 140 (20)
Amstel Light 225 220 (5)
Dos Equis 80 65 (15)
Tecate 170 286 116
Total Cases 4,300 4,464 164
©Prentice Hall, 2001 Chapter 13 8
 Do Nothing

Taking
Correct
Managerial Performance
Action
Revise
the Standard
©Prentice Hall, 2001 Chapter 13 9
 Three Types of Control

Input Processes Output

Feedforward Concurrent Feedback

Control Control Control

Anticipates Corrects Problems Corrects Problems

Problems as They Happen after They Occur

©Prentice Hall, 2001 Chapter 13 10

 Qualities of an Effective
Control System
• Accuracy

• Timeliness

• Economy

• Flexibility

• Understandability

©Prentice Hall, 2001 Chapter 13 11

 Qualities of an Effective
Control System
• Reasonable criteria

• Emphasis on exceptions

• Strategic placement

• Multiple criteria

• Corrective action

©Prentice Hall, 2001 Chapter 13 12

 Contingency Factors in Control Systems
Contingency Variable Control Recommendations
Small Informal, personal management
Organization Size
Large Formal, personal management

High Many complex criteria

Position and Level
Low Few, easy-to-measure criteria

High Increased number of controls

Degree of Decentralization
Low Reduced number of controls

Open Informal, self-control

Organizational Culture
Closed Formal, external controls

High Elaborate, comprehensive controls

Importance of an Activity
Low Loose, informal controls
©Prentice Hall, 2001 Chapter 13 13
 Adjusting Controls
for National Differences

Distance Technology
and the and the
Formality Comparability
of Controls of Data
©Prentice Hall, 2001 Chapter 13 14
Dysfunctional Controls

Inflexible Unreasonable
Controls Standards

©Prentice Hall, 2001 Chapter 13 15

Ethical Issues Inform
and Control Employees

Have a
Written Policy

Monitor for
Questions of Privacy
Business Reasons
©Prentice Hall, 2001 Chapter 13 16