14–2© 2016 Cengage Learning. All rights reserved. Ma.docx

14–2
© 2016 Cengage Learning. All rights reserved. May not be
copied, scanned, or duplicated, in whole or in part, except for
use as permitted in a license distributed with a certain product
or service or otherwise on a password-protected website for
classroom use.
Learning Outcomes
After studying this chapter you should be able to:
Explain the purpose of control, identify different types of
control, and describe the steps in the control process.
Identify and explain the three forms of operations control.
Describe budgets and other tools for financial control.
Identify and distinguish between two opposing forms of
structural control.
Discuss the relationship between strategy and control.
Identify characteristics of effective control, why people resist
control, and how managers can overcome this resistance.
The Nature of Control
Control
The regulation of organizational activities in such a way as to
facilitate goal attainment
The regulation of organizational activities so that some targeted
element of performance remains within acceptable limits.
Purposes of Control
Provides organizations with indications of how well they are
performing in relation to their goals.

Provides a mechanism for adjusting performance to keep
organizations moving in the right direction.
classroom use.
14–3
3
The Planning–Controlling Link
Planning
Controlling
Organizing/
Leading
Organizing/
Leading
Organizing/
Leading
Planning
Controlling
classroom use.
14–4

4
14–5
classroom use.
FIGURE 14.1
The Purpose of Control
Controls
Physical Resources
Human Resources
Information Resources
Financial Resources
Areas of
Control
classroom use.
14–6
6

Types of ControlsAreas of ControlPhysical resourcesInventory
management, quality control, and equipment control.Human
resourcesSelection and placement, training and development,
performance appraisal, and compensation.Information
resourcesSales and marketing forecasts, environmental analysis,
public relations, production scheduling, and economic
forecasting.Financial resourcesManaging capital funds and cash
flow, collection and payment of debts.
classroom use.
14–7
7
14–8
classroom use.
FIGURE 14.2
Levels of Control
Responsibilities for Control
Managers are accountable for and involved in activities for
which control is their responsibility.
Controller

A position in organizations that helps line managers with their
control activities.
classroom use.
14–9
9
Responsibility for Control
CEO
Division Controller
Corporate Controller
Division Controller
Division Controller
Division Head
Division Head
Division Head

classroom use.
14–10
10
14–11
classroom use.
FIGURE 14.3
Steps in the Control Process
Steps in the Control Process
Establishing Standards
Control standard is a target against which subsequent
performance will be compared.
Should be expressed in measurable terms.
Should be consistent with organizational goals.
Should be identifiable indicators of performance.
Measuring Performance
Performance measurement is an ongoing process.
Performance measures must be valid indicators (e.g., sales,
costs, units produced) of performance.

classroom use.
14–12
12
Steps in the Control Process (cont’d)
Comparing Performance Against Standards
Define what is a permissible deviation from the performance
standard.
Utilize the appropriate timetable for measurement.
Considering Corrective Action
Maintain the status quo (do nothing).
Correct the deviation to bring operations into compliance with
the standard.
Change the standard if it was set too high or too low.
classroom use.
14–13
13
14–14

classroom use.
FIGURE 14.4
Forms of Operations Control
Financial Control
Control of financial resources
(e.g., revenues, shareholder investment) as they:
Flow into the organization
Are held by the organization
as working capital and retained earnings
Flow out of the organization
as payment of expenses.
classroom use.
14–15
15
Financial Control (cont’d)
Budgetary Control
Budgets may be established
at any organizational level.
Budgets are typically for
one year or less.
Budgets may be expressed in financial terms, units of output,

or other quantifiable factors.
classroom use.
14–16
16
Purposes of Budgets
Help coordinate resources
and projects.
Help define the established standards for control.
Provide guidelines about
resources and expectations.
Evaluate the performance of managers and organizational units.
14–17
classroom use.
17
Management Challenge Question
How can budgetary controls help prevent conflicts in
organizations?

classroom use.
14–18
18
Types of Budgets
Financial Budgets
Operating Budgets
Nonmonetary Budgets
Cash flow or cash budget
Capital expenditures
budget
Balance sheet
budget
Sales and revenue budget
Expense
budget
Profit
budget
Labor
budget
Space
budget
Production
budget
classroom use.
14–19

19
14–20
classroom use.
Table 14.1
Developing Budgets in Organizations Types of BudgetWhat
Budget Shows Financial BudgetSources and Uses of CashCash-
flow or cash budgetAll sources of cash income and cash
expenditures in monthly, weekly, or daily periodsCapital
expenditures budgetCosts of major assets such as a new plant,
machinery, or landBalance sheet budgetForecast of the
organization’s assets and liabilities in the event all other
budgets are met Operating BudgetPlanned Operations in
Financial TermsSales or revenue budgetIncome the organization
expects to receive from normal operationsExpense
budgetAnticipated expenses for organization during coming
time periodProfit budgetAnticipated differences between sales
or revenues and expenses Nonmonetary BudgetPlanned
Operations in Nonfinancial TermsLabor budgetHours of direct
labor available for useSpace budgetSquare feet or meters of
space available for various functionsProduction budgetNumber
of units to be produced during the coming time period
14–21

classroom use.
FIGURE 14.5
Developing Budgets in Organizations
Strengths and Weaknesses of Budgeting
Strengths
Budgets facilitate effective operational controls.
Budgets facilitate coordination and communication between
departments.
Budgets establish records of organizational performance, which
can enhance planning.
Weaknesses
Budgets can hamper operations if applied too rigidly.
Budgets can be time consuming to develop.
Budgets can limit innovation and change.
classroom use.
14–22
22
Other Tools of Financial Control
Financial Statements
A financial statement is a profile of some aspect of an

organization’s financial circumstances.
Balance sheet
A listing of assets (current and fixed), liabilities (short- and
long-term), and stockholders’ equity at a specific point in time
(typically year-ending) that summarizes the financial condition
of the organization.
Income statement
Summary of financial performance—revenues less expenses as
net income (i.e., profit or loss)—over a period of time, usually
one year.
classroom use.
14–23
23
Other Tools of Financial Control (cont’d)
Ratio Analysis
Is calculation of financial ratios to assess some aspect of the
organization’s financial health.
Liquidity ratios show how readily the firm’s assets can be
converted to cash.
Debt ratios reflect the firm’s ability to meet long-term financial
obligations.
Return ratios show how much investment return the firm is
generating relative to the value of its assets.
Coverage ratios estimate the ability of the firm to pay the
interest expenses on money it has borrowed.
Operating ratios demonstrate the efficiency of the firm’s
functional operations.

classroom use.
14–24
24
Other Tools of Financial Control (cont’d)
Financial Audit
Is an independent appraisal of an organization’s accounting,
financial, and operational systems.
External audits—financial appraisals conducted by experts who
are not employees of the organization.
Internal audits—appraisals conducted by employees of the
organization.
classroom use.
14–25
25
Structural Control
Bureaucratic Control
A form of organizational control characterized by formal and
mechanistic structural
arrangements.
Decentralized Control

An approach to organizational
control characterized by informal
and organic structural arrangements.
classroom use.
14–26
26
14–27
classroom use.
FIGURE 14.6
Organizational Control
Integrating Strategy and Control
Strategic Control
Aims at maintaining an effective alignment with the
environment and achieving strategic goals.
Focuses on structure, leadership, technology, human resources,
and informational and operational systems.
Focuses on the extent to which an implemented strategy

achieves the organization’s goals.
classroom use.
14–28
28
Integrating Strategy and Control (cont’d)
International Strategic Control
Focuses on whether to manage the global organization from a
centralized or decentralized perspective.
Control Choice:
Centralization or Decentralization
Centralization creates more control and coordination, whereas
decentralization fosters adaptability and innovation.
classroom use.
14–29
29
Managing Control in Organizations
Integration with planning
Flexibility
Accuracy
Timeliness

Characteristics of
Effective Controls
Objectivity
classroom use.
14–30
30
Managing Control in OrganizationsCharacteristics of Effective
ControlIntegration with PlanningThe more control is linked to
planning, the more effective the control system.FlexibilityThe
control system must be flexible enough to accommodate
change.Accuracy
Inaccurate information results in bad decision making and
inappropriate managerial actions.Timeliness
A control system should provide information as often as
necessary.Objectivity
A control system must be free from bias and distortion.
classroom use.
14–31
31
Inappropriate

Focus
Overcontrol
C
o
n
t
r
o
l
Too Much
Accountability
Rewards for Inefficiency
Sources of Resistance to Control
classroom use.
14–32
32
Resistance to Control
Overcontrol
Trying to control too many details affects employee behavior
when employees perceive control attempts as unreasonable.
Inappropriate Focus
The control system may be too narrow or it may focus too much
on quantifiable variables and leave no room for analysis or
interpretation.

classroom use.
14–33
33
Resistance to Control (cont’d)
Rewards for Inefficiency
Rewarding operational inefficiency can lead employees to
behave in ways that are not in the best interests of the
organization.
Too Much Accountability
Efficient controls are resisted by poorly performing employees.
classroom use.
14–34
34
Overcoming Resistance to Control
Design controls properly integrated with organizational
planning and aligned with the organization’s goals and
standards.
Create flexible, accurate, timely, and objective controls.
Avoid overcontrol in implementation of controls.
Guard against controls that reward inefficiencies.

Encourage employee participation in the planning and
implementing of control systems.
Develop a system of checks and balances to verify the accuracy
of performance indicators.
classroom use.
14–35
35
ADM 303 Applied Paper Example
Assignment Cover Sheet
Course ADM 303 ____
Title of Assignment:
______________________________________
Submitted by:
___________________________________________
Date of Submission: _____________
CERTIFICATION OF AUTHORSHIP:
By including this cover sheet, I certify that I am the author of
this submittal and that any assistance I received in its
preparation is fully acknowledged and disclosed. I have also
cited any sources from which I used data, ideas, or words, either
quoted directly or paraphrased. I also certify that this paper was
prepared by me specifically for this course only and was not
previously submitted in any other course. I understand that
papers may be run through plagiarism detection software and I
agree to this process. I have read the PACE Academic
Dishonesty Policy regarding cheating and plagiarism and

understand its consequences and penalties.
XYZ Insurance Co.
1 – Identify the issue and define the decision situation-
The first week of every month experiences a high percentage of
unexpected/unexcused absences from work. This problem stems
from the level of burnout that many sales agents face at the end
of a stressful month. The goals are very high and many agents
really have to hustle to meet the goal requirements. Because we
start over on the first of the next month, the agents can feel a
little like a hamster stuck in a hamster wheel. This is
compounded when the month ends in the middle of the week
because there is not an opportunity to achieve a mental break
and refresh their mindset. Many agents take off work the first
few days of the new month because they feel exhausted and,
sometimes, frustrated. Several may be related to stress (Griffin,
2016, p. 276). To make matters worse, these agents don’t
always work extra during the remainder of the month to make
up for the missed time. Although this would not alleviate the
problem that shorthanded staff creates in the first few days of
the month, if the agents are exhausted from trying to hit goal
and they take off for a few days on the next month, they are
cutting out valuable sales days and repeating the cycle on the
new month. It is going to be even harder to hit goal with
reduced selling days and so it is a perpetuating cycle. Since we
work in a call-center environment and our company, XYZ
Insurance, has various contracts with thousands of affiliates, we
are required to supply a certain service level to those that are
referred to our company for insurance quotes. To fail to do this
is a breach of our contracts and XYZ stands to lose some very
important and lucrative referral sources. We must have people
available to answer calls to keep hold times down to a minimum
or our service levels suffer. In order to prevent this from
happening, we need to develop a way to either incentivize the
agents to come in or penalize the ones that do not. This is a
problem that cannot continue, as it is detrimental to the

functional efficiency of our company.
2 – Identify the alternatives –
· XYZ Insurance now has a points system to keep track of staff
attendance and tardiness. If an agent comes to work more than
5 minutes but less than 30 minutes late, they get .25 points. If
they miss more than 30 minutes, they get .5 and if they miss
more than half the day, they get a full point. Once an employee
hits 6 points in a 12-month period, they are coached. When they
hit 10, they get a written warning and, upon hitting 12, they are
terminated. Some agents would like a way to eliminate some
of the points that have accrued over the year and a points-
removal system could be implemented if the staff member is
here the first week of the month.
· Another option might be to have year-end bonuses awarded to
those that are here the first week of every month throughout the
year. XYZ could present a plaque and the bonus to the employee
in front of their peers, since employee recognition is possibly
the most important element to motivating fellow the staff.
(Hopkins, 1995).
· A third option could be to have a drawing at the end of the
first week of every month that is only available to those with
perfect attendance for that week. A drawing for things like an
Ipad, an Apple Watch, a vacation (not to be taken the first week
of any month, of course), or some extra vacation proration days.
Currently, the agents’ sales goals are prorated if they schedule
vacations so that they can still make a good bonus and do not
have the fear of missing goal, which can lead to disciplinary
action. More of these days might be a valuable gift.
3 – Evaluate pros and cons of each alternative solution –
· Points removal system-
Pros – This would be inexpensive to implement, compared to
other options; it would motivate many agents that are nervously
close to disciplinary action due to too many points accrued
(many of the staff members that are creating the problem to
begin with); Staff may feel like they are truly receiving
something for their efforts in helping the company (I scratch

your back and you scratch mine).
Cons – The points system is kind of a joke because, although
points do accrue, they really don’t mean a whole lot if you are a
top seller. A top-seller will, likely, never be pulled into an
office because of their attendance points. The points system is
viewed, by many of the agents, as the administration’s
ammunition to get rid of an employee that they no longer wish
to have. Because of this, it may not have the impact that we
would hope unless we truly start cracking down on the points,
regardless of sales skills; This may only motivate the staff that
are having points issues. If an agent maintains low points, this
may not be an incentive to work when they would rather have
off.
· Year-end bonus awards –
Pros – For agents that already value attendance and like the
acknowledgement of standing out, this would be a huge
motivator. The award would be few and far between, so an
agent that received this kind of bonus would be perceived as a
reliable employee to the whole organization. This type of
loyalty may, otherwise, go unnoticed; Agents might view it as
profit-sharing, since the dedication that it took to come in every
week of the month for the whole year created much more
revenue for the company and the increased revenue would
directly financially benefit the agents that helped make that
happen.
Cons – This will not motivate agents that find it hard to be
reliable because it would require too much dedication over a
long period of time; many people like the instant gratification
that comes from their contribution and this would not meet that
desire.
· Prize drawings –
Pros – Agents like “stuff” and, in the past, these types of
giveaways have proven very effective; there is a relatively short
investment on the agent’s time because it only requires
dedication for a week a month. They could choose to miss here
and there but still have the opportunity to win during the

months that they chose to attend the whole first week. It’s not
an “all or nothing” type of solution.
Cons – There really aren’t any that I can think of except for
cost.
4 -Selecting the best alternative –
I believe that, in the sales environment, very different things
motivate certain people. In the insurance industry, the office
rains money. It really is not a financial strain to implement
ALL of these solutions. In the past, when XYZ Insurance
needed us to work massive amounts of overtime, the agents
would win prizes and money all day long as an incentive to
pitch in and help resolve the service level issues. Giving away
four Ipads a month is not even putting a dent in the budget and
awarding the “Attendance Superstars” at the end of the year
with a few thousand dollars is a drop in the bucket compared
the amount of benefit that the reliability of these agents bring to
the table. Some agents could care less about eliminating
attendance points but like to win pricey gadgets that they can’t
afford to buy for themselves; Others, could care less about the
gadgets because they make enough money that they buy what
they want but they would love to eliminate some of these
points; another group of individuals (like myself) just love to be
acknowledged and to feel like a superior employee and that
would be the only motivation they need. In this case, I believe
a multi-level approach is going to be the best solution to the
emergent problem.
5 - Implementing the chosen alternatives -
All of the options are going to require an approval on the
budget requirements. There will have to be financial
allocations for each of the three options.
· To implement the points-removal system, IT may be able to
create a program that would automate the process but until then,
HR is going to have to be in charge of making sure that the
points are properly accounted for. Although this is the least
expensive of the three options, I think, there will still be a
financial burden due to the staff required to implement it and

properly follow up on its accuracy.
· To start having year-end bonuses, a certain amount per-person
would have to be set aside for the rewards at the end of the
year. For the first couple of years, it will be hard to determine
how many people will qualify so over-budgeting will be
necessary. Sales staff are not motivated by little amounts of
money for a lot of effort, so the financial gain would have to be
at least $5,000 to create a strong enough dedication in the staff
to pull it off. Also, a plaque would need to be awarded to those
that achieved such a high honor because other accomplishments
already get a plaque and many staff members would be
motivated by that alone.
· Prize drawings are going to require little effort really because
we already do so many things that way. The drawings would
have to take place the Monday after the first week of the month,
that way those that qualified could look forward to the instant
gratification of going home with a new toy. The management
would have to make sure that the items are on the premises,
however, because when I won my Ipad Air 2, I was disappointed
that I had to wait to receive it. Sales agents want what they win
as soon as they win it, so proper planning will be key to keep
the staff engaged every month.
6 - Following up and evaluating the results -
The most difficult part of evaluating the results may be to tell
which method of the three is creating the biggest impact. To
discover this, however, XYZ could use the surveys that they
send out monthly to ask the staff which reward systems they
prefer and label them in order of preference. It would be easy
to tally those results. Ultimately, it may not be important which
one is most productive if incorporating them all at once would
immediately remedy the situation of our service level
drastically dropping at the beginning of every month. The
change would be immediately apparent by calculating the
amount of planned time off and call-ins that occurred after the
change and comparing those results with prior years of the same
months. Ultimately, studies show that a multi-level approach

should be used to deal with absenteeism. People with good
attendance habits tend to be more motived by rewards while
habitually absent staff may still need a disciplinary approach to
fix the problem. (Cole & Kleiner, 1992)
References
Cole, T. C., & Kleiner, B. H. (1992). Absenteeism
Control. Management Decision,30 (2).
doi:10.1108/00251749210011151
Griffin, R. W. (2016). Fundamentals of Management. Boston,
MA: Cengage Learning
Hopkins, H. (1995). A challenge to managers: five ways to
improve employee morale. Executive Development,8 (7), 26-28.
doi:10.1108/09533239510099129
You are responsible for submitting an Applied Paper based on a
real or hypothetical management-related issue relevant to your
own (either current or former) workplace and has a potential
solution. The paper topic could deal with any issue(s) related to
the four management areas of planning, organizing, leading or
controlling discussed in the textbook. It should be prepared as if
it were an internal consulting report to be presented to the
organization’s managerial decision makers.
The paper format should follow the six Steps in the Rational
Decision-Making Process found in Table 4.1 in Chapter 4 (page
106):
1) Identify the issue and define the decision situation
2) Identify at least two alternative solutions

3) Evaluate pros and cons of each alternative solution
4) Select and recommend one of the alternative solutions and
state your rationale
5) Discuss how you would implement the solution
6) Discuss how you would follow up (evaluate) its
effectiveness.
There should be a minimum of three scholarly citations (at least
one from a textbook chapter related to the topic and two from
other sources - see library link
http://eguides.barry.edu/c.php?g=287200 (Links to an external
site.)Links to an external site.), properly cited using APA
format (see link on course website), and be a minimum of 1000
words (approx. 5 pages), double spaced, in 12 pt. font. Students
are also required to include an Assignment Cover Sheet (see
Appendix). See Embedded Rubric for Applied Paper for grading
criteria.
Submission Instructions:
Complete and submit the assignment online in a Word
document.
Grading Rubric: Your assignment will be graded according to
the grading rubric.

14–2© 2016 Cengage Learning. All rights reserved. Ma.docx

Recommended

Recommended

More Related Content

Similar to 14–2© 2016 Cengage Learning. All rights reserved. Ma.docx

Similar to 14–2© 2016 Cengage Learning. All rights reserved. Ma.docx (20)

More from drennanmicah

More from drennanmicah (20)

Recently uploaded

Recently uploaded (20)

14–2© 2016 Cengage Learning. All rights reserved. Ma.docx