Chapter 18 FOUNDATIONS OF CONTROL Prentice Hall 2002

Chapter 18 FOUNDATIONS OF CONTROL © Prentice Hall, 2002 18 -11

Learning Objectives You should learn to: – Define control – Describe three approaches to control – Explain why control is important – Describe the control process – Distinguish among the three types of control – Describe the qualities of an effective control system © Prentice Hall, 2002 18 -22

Learning Objectives (cont. ) You should learn to: – Discuss the contingency factors that influence the design of an organization’s control system – Identify how controls need to be adjusted for cultural differences – Explain how three contemporary issues workplace privacy, employee theft, and workplace violence - affect control © Prentice Hall, 2002 18 -33

What Is Control? Control – the process of monitoring activities to ensure that they are being accomplished as planned and of correcting significant deviations – control systems are judged in terms of how well they facilitate goal achievement – market control - emphasizes the use of external market mechanisms to establish standards of performance • useful where products and services are distinct • useful where marketplace competition is considerable • divisions turned into profit centers and judged by the percentage of total corporate profits each contributes © Prentice Hall, 2002 18 -44

What Is Control? (cont. ) Control – bureaucratic control - emphasizes organizational authority • relies on administrative rules, procedures, and policies • depends on standardization of activities, well-defined job descriptions, and other administrative mechanisms – clan control - behavior regulated by shared values, traditions, and other aspects of organizational culture • dependent on individual and group to identify expected behaviors and performance measures • found where teams are common and technology changes often © Prentice Hall, 2002 18 -55

Why Is Control Important? Control is the Final Link in the Management Process – provides the critical link back to planning – only way managers know whether organizational goals are being met Permits Delegation of Authority – fear that employees will do something wrong for which the manager will be held responsible – provides information and feedback on employee performance © Prentice Hall, 2002 18 -66

The Planning-Controlling Link Planning Goals Objectives Strategies Plans Controlling Standards Measurements Comparisons Actions © Prentice Hall, 2002 Organizing Structure Human Resource Management Leading Motivation Leadership Communication Individual and Group Behavior 18 -77

The Control Process © Prentice Hall, 2002 18 -88

The Control Process Background – controlling is a three-step process – assumes that performance standards already exist • specific goals are created in the planning process Measuring – How We Measure • personal observation - permits intensive coverage – Management By Walking Around (MBWA) – drawbacks - subject to personal biases » consumes a great deal of time » suffers from obtrusiveness © Prentice Hall, 2002 18 -99

The Control Process (cont. ) Measuring (cont. ) – How We Measure (cont. ) • statistical reports - numerical data are easy to visualize and effective for showing relationships – drawbacks - not all operations can be measured » important subjective factors may be ignored • oral reports - includes meetings, telephone calls – may be best way to control work in a virtual environment – technology permits creation of written record from oral report – drawbacks - filtering of information © Prentice Hall, 2002 18 -10 10

The Control Process (cont. ) How We Measure (cont. ) – written reports - often more comprehensive and concise than oral reports • usually easy to file and retrieve – comprehensive control efforts should use all four approaches © Prentice Hall, 2002 18 -11 11

The Control Process (cont. ) What We Measure – what we measure more critical than how we measure – control criteria applicable to any management situation: • employee satisfaction, absenteeism, and turnover • keeping costs within budgets – control system needs to recognize the diversity of activities – some activities difficult to measure in quantifiable terms • most activities can be grouped into some objective segments that can be measured • when objective measures are not available, should rely on subjective measures © Prentice Hall, 2002 18 -12 12

The Control Process (cont. ) Comparing – determines the degree of variation between actual performance and standard – acceptable range of variation - deviations that exceed this range become significant © Prentice Hall, 2002 18 -13 13

Measurement of Performance Defining The Acceptable Range Of Variation Acceptable Upper Limit Acceptable Range of Variation Standard Acceptable Lower Limit t © Prentice Hall, 2002 t+1 t+2 t+3 t+4 Time Period (t) t+5 18 -14 14

Sales Performance Figures For July, Eastern States Distributors Brand Heineken Molson Irish Amber Victoria Bitter Labatt’s Corona Amstel Light Dos Equis Tecate Total cases Standard* 1, 075 630 800 620 540 160 225 80 170 4, 300 Actual* 913 634 912 622 672 140 220 65 286 4, 464 Over (under)* (162) 4 112 2 132 (20) (5) (15) 116 164 * hundreds of cases © Prentice Hall, 2002 18 -15 15

The Control Process (cont. ) Taking Managerial Action – Correct Actual Performance - action taken when the performance variation is unsatisfactory • immediate corrective action - corrects problems at once to get performance back on track • basic corrective action - identifies reason for performance variation – corrects the source of variation – Revise the Standard - variance results from an unrealistic standard • standard, not performance, needs correction • troublesome to revise the standard downward © Prentice Hall, 2002 18 -16 16

Managerial Decisions in the Control Process © Prentice Hall, 2002 18 -17 17

Types Of Control Feedforward Control – prevents anticipated problems – most desirable type of control – requires timely and accurate information that often is difficult to get Concurrent Control – takes place while activity is in progress – corrects problem before it becomes too costly – best-known form is direct supervision © Prentice Hall, 2002 18 -18 18

Types of Control (cont. ) Feedback Control – takes place after the activity is done – problems may already have caused damage or waste – the most popular type of control • feedback may be only viable form of control available – feedback has two advantages • provides meaningful information on the effectiveness of planning • can enhance employee motivation © Prentice Hall, 2002 18 -19 19

Types Of Control Input Processes Output Feedforward Control Concurrent Control Feedback Control Anticipates problems Corrects problems as they happen Corrects problems after they occur © Prentice Hall, 2002 18 -20 20

Qualities Of An Effective Control System Corrective Action Accuracy Multiple Criteria Emphasis on Exceptions Timeliness EFFECTIVE CONTROL SYSTEM Strategic Placement Flexibility Reasonable Criteria © Prentice Hall, 2002 Economy Understandability 18 -21 21

Contingency Factors in the Design of Control Systems © Prentice Hall, 2002 18 -22 22

Implications For Managers Adjusting Controls for Cultural Differences – methods of controlling people and work can be quite different in other countries • differences are most marked in the measurement and corrective action steps – in technologically advanced nations, controls are indirect – in less technologically advanced nations, controls are more direct – laws in different countries provide different constraints on corrective action – data used for controlling may not be comparable in different countries © Prentice Hall, 2002 18 -23 23

Contemporary Issues In Control Workplace Privacy – employers have the right to monitor employee communications, examine employee computers and files, and use surveillance cameras – reasons for monitoring include prevention of: • recreational on-the-job Web surfing • creation of hostile work environments with e-mail • security leaks of critical information – Electronic Communications Privacy Act - 1986 • prohibits unauthorized interception of electronic communication • workplace electronic monitoring is still legal © Prentice Hall, 2002 18 -24 24

Contemporary Issues In Control (cont. ) Workplace Privacy (cont. ) – companies are developing and enforcing workplace monitoring policies • develop unambiguous computer usage policy • inform employees that computers may be monitored • provide clear guidelines on acceptable use of company e-mail system and the Web © Prentice Hall, 2002 18 -25 25

Workplace Monitoring Track telephone calls (numbers and time spent) Store and review employee e-mail messages Store and review computer files Log computer time and keystrokes entered Record and review telephone conversations Store and review voice-mail messages © Prentice Hall, 2002 39% 27% 21% 15% 11% 6% 18 -26 26

Contemporary Issues In Control (cont. ) Employee Theft – unauthorized taking of company property by employees for their personal use – is an escalating problem in all types of organizations – different proposals to explain employee theft • industrial security - opportunity presents itself due to lack of controls and favorable circumstances • criminology - people have financial-based pressures or vice-based pressures • clinical psychology - people are able to rationalize any type of behavior © Prentice Hall, 2002 18 -27 27

Control Measure for Deterring or Reducing Employee Theft or Fraud © Prentice Hall, 2002 18 -28 28

Contemporary Issues In Control (cont. ) Workplace Violence – many factors contribute to workplace violence including: • employee work driven by time, numbers, and crises • rapid and unpredictable change • destructive communication style of manager • authoritarian leadership • defensive attitude • double standards • unresolved grievances • emotionally troubled employees • repetitive, boring work © Prentice Hall, 2002 18 -29 29

Contemporary Issues In Control (cont. ) Workplace Violence (cont. ) – contributing factors (cont. ) • faulty or unsafe equipment • hazardous work environment • culture of violence © Prentice Hall, 2002 18 -30 30

Workplace Violence Witnessed yelling and other verbal abuse Yelled at coworkers themselves Cried over work-related issues Seen someone purposely damage machines or furniture Seen physical violence in the workplace Struck a coworker © Prentice Hall, 2002 42% 29% 23% 14% 10% 2% 18 -31 31