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- 1. PowerPoint slides by R.Dennis Middlemist Colorado State University Chapter 16Chapter 16 ControlControl
- 2. 2 ©2005 Learning ObjectivesLearning Objectives Discuss the effects of too much or too little control in an organization. Describe the four basic elements of the control process and the issues involved in each. After studying this chapter, you should be able to:
- 3. 3 ©2005 Learning ObjectivesLearning Objectives Differentiate between the different levels of control and compare their implications for managers. Explain the concept of standards and why they are so important in organizations. After studying this chapter, you should be able to:
- 4. 4 ©2005 Learning ObjectivesLearning Objectives Compare bureaucratic and clan controls. Identify the important qualities required for information to be useful in the control process. After studying this chapter, you should be able to:
- 5. 5 ©2005 Control Function inControlFunction in ManagementManagement Control Regulation of activities and behaviors within organizations Adjustment or conformity to specifications or objectives Effective control depends heavily on other functions that precede it and feeds back to them Planning Organizing Leading
- 6. 6 ©2005 Ensures adjustment or conformityto specifications Regulates activities Regulates behavior Control Function inControl Function in ManagementManagement Adapted from Exhibit 16.1: The Control Function in Management Ensures adjustment or conformity to objectives Control
- 7. 7 ©2005 Control’s Feedback LoopControl’sFeedback Loop Adapted from Exhibit 16.2: Control’s Feedback Loop Organizing Planning Control Feedback Changes in
- 8. 8 ©2005 Basic Elements inBasicElements in Control ProcessControl Process Adapted from Exhibit 16.3: The Basic Elements in the Control Process Establish standards Establish standards • Specification starts at the top of the organization and involves every level of employee • Standards are the targets of performance • Involving employees in setting standards • Commits the employees to achieving the standards • Results in more appropriate standards
- 9. 9 ©2005 Specificity of StandardsandSpecificity of Standards and Performance MeasurementPerformance Measurement Adapted from Exhibit 16.4: The Effect of Specificity of Standards on Performance Measurement High Low Concrete Abstract Specificity of standards Levelofconfusionin performancemeasurement
- 10. 10 ©2005 Establishing StandardsEstablishing Standards Adaptedfrom Exhibit 16.5: Issues in Establishing Standards Standards How specificshouldtheybe? W hoshouldsetthem? How difficult should they be to reach?
- 11. 11 ©2005 Basic Elements inBasicElements in Control ProcessControl Process Adapted from Exhibit 16.3: The Basic Elements in the Control Process Establish standards Measure performance Measure performance • Obtain consensus about how to assess performance • If performance involves multiple activities, measure must be comprehensive • Measurement is costly and hence usefulness of the information must justify the costs
- 12. 12 ©2005 Measurement ofMeasurement of PerformancePerformance Adaptedfrom Exhibit 16.6: Issues in the Measurement of Performance Performance Measurement Can expensive, but noncritical, controls be eliminated?Are all necessary aspects of actions contributing to performance being measured? Is there consensus among those involved as to how performance will be measured? Can measurement criteria be quantified?
- 13. 13 ©2005 Basic Elements inBasicElements in Control ProcessControl Process Adapted from Exhibit 16.3: The Basic Elements in the Control Process Establish standards Measure performance Compare performance against standards Compare performance against standards • Comparisons are affected b the kinds of measurements available • Managers must interpret the patterns of comparisons (some negative/some positive) • Comparisons often involve subjective and objective measures
- 14. 14 ©2005 Basic Elements inBasicElements in Control ProcessControl Process Adapted from Exhibit 16.3: The Basic Elements in the Control Process Establish standards Measure performance Compare performance against standards Evaluate results and take any necessary corrective action Evaluate results/take necessary corrective action • Not all results require action • Evaluate importance and magnitude of the deviation • Determine what action to take if necessary • Diagnosis skills of managers • Level of expertise • Evaluate the standards and the measures • Employees performing better than “standard” should be recognized and rewarded
- 15. 15 ©2005 Outcomes of PerformanceOutcomesof Performance MeasurementMeasurement Adapted from Exhibit 16.7: Outcomes of Performance Measurement Actual performance measured against standard for performance Gap Detected Reinforcing Action Taken (e.g., increase rewards and recognition, consider increasing production targets, add new product lines) Corrective Action Taken (e.g., increase training, modify supervision, invest in newer equipment) Actual performance better than expected performance + - Actual performance worse than expected performance
- 16. 16 ©2005 Scope of ControlScopeof Control Assess and regulate how the organization fits its external environment and meets its long-range objectives and goals Control becomes less efficient in uncertain or changing environments Strategic Control
- 17. 17 ©2005 Types and Scopeof ControlTypes and Scope of Control Adapted from Exhibit 16.8: Types and Scope of Control Scope (Narrow) (Broad) Operational Controls Tactical Controls Strategic Controls
- 18. 18 ©2005 Centralization of ControlandCentralization of Control and Environmental StabilityEnvironmental Stability Adapted from Exhibit 16.9: Degree of Centralization of Control in Relation to Environmental Stability Environmental stability Degreeofcentralization Decentralized Centralized Stable Turbulent
- 19. 19 ©2005 Approaches to StrategicControlApproaches to Strategic Control Adapted from Exhibit 16.10: Approaches to Strategic Control Easy Difficult Ability to specify and measure precise strategic objectives Environmentalturbulence HighLow
- 20. 20 ©2005 Scope of ControlScopeof Control Assess and regulate day-to-day functions of the organization and its major units in implementing its strategy Financial controls Budgetary controls Supervisory structure controls Human resource controls Contrasting approaches to using tactical controls Bureaucratic control Commitment, or clan, control Tactical Control
- 21. 21 ©2005 Strategic and TacticalControlsStrategic and Tactical Controls Adapted from Exhibit 16.11: Characteristics of Strategic and Tactical Controls Tactical Controls Strategic Controls Time Frame Objective Types of Comparisons Focus Limited Long, unspecific Controls relate to specific, functional areas Controls relate to organization as a whole Comparisons made within organization Comparisons made to other organization Implementation of strategy Determination of overall organizational strategy
- 22. 22 ©2005 Ratio Formula Company CompanyFinancial RatiosCompany Financial Ratios Adapted from exhibit 16.12: Examples of Company Financial Ratios The GAP, Inc. 2001 in $ millions The Limited, Inc. 2001 in $ millions Profit Return on Investment Net Profit before taxes Total Assets 241 7,591 0.03 904 4,719 0.19 Liquidity Current Ratio Current Assets Current Liabilities 3,044 2,056 1.4 2,682 1,319 2.0 Liabilities Leverage Debt to Assets Total Debts Total Assets 2,525 7,591 0.33 1,975 4,719 0.42
- 23. 23 ©2005 Ratio Formula Company CompanyFinancial RatiosCompany Financial Ratios Adapted from exhibit 16.12: Examples of Company Financial Ratios The GAP, Inc. 2001 in $ millions The Limited, Inc. 2001 in $ millions Activity Inventory Turnover Sales Inventory 13,847 1,677 8.3 9,363 966 9.7
- 24. 24 ©2005 Issue Questions Budgetary ControlBudgetaryControl Adapted from exhibit 16.13: Issues in Budgetary Control Rolling budgets and revision Should the budget period be for 12 months followed by another 12-month budget a year later, or should a calendar quarter be added each time a new calendar quarter begins? Should the budget remain fixed for the budget period or should it be revised periodically during the period? Fixed or flexible budgets Should performance be evaluated against the original budget or against a budget that incorporates the actual activity level of the business? Bonuses based on budgets Should incentive compensation, if any, be based on actual versus budgeted performance, or on actual performance against some other standard?
- 25. 25 ©2005 Issue Questions Budgetary ControlBudgetaryControl Adapted from exhibit 16.13: Issues in Budgetary Control Evaluation criteria Should the budget used to evaluate performance include only those items over which the evaluated manager has control, or should it include all unit costs and revenues appropriate to the managerial unit? Tightness of the budget What degree of “stretch” should there be in the budget? Source: Adapted from N. C. Churchill, “Budget Choices: Planning vs. Control,” Harvard Business Review 62, no. 4 (1984), pp. 150–164, (p. 151).
- 26. 26 ©2005 Training Control in theHuman ResourceControl in the Human Resource FunctionFunction Adapted from Exhibit 16.14: Opportunities for Control in the Human Resource Function Compensation Selection Human Resource Function Controls Appraisal and evaluation
- 27. 27 ©2005 Type of SocialControl Informational Control Requirementsa Approach Requirements Control in Bureaucracy andControl in Bureaucracy and Clan StructuresClan Structures Adapted from exhibit 16.15: Control in Bureaucracy and Clan Structures Bureaucracy Norm of reciprocity Legitimate authority Adherence to rules and regulations Formal and impersonal Emphasis on detecting deviance Imposed on the individual Rules Clan Norm of reciprocity Legitimate authority Shared values, beliefs Stresses group consensus on goals and their measurement Mutual assistance in meeting performance standards Uses deviations as guidelines in diagnosing problems Control comes from the individuals or groups Traditions Source: Adapted from William G. Ouchi, “A Conceptual Framework for the Design or Organizational Control Mechanisms,” Management Science 25, no. 9 (1980), pp. 833–847 (p. 838). a Social requirements are the basic agreements between people that, at a minimum, are necessary for a form of control to be employed.
- 28. 28 ©2005 Scope of ControlScopeof Control Assess and regulate specific activities and methods used to produce goods and services Precontrol of operations Concurrent control of operations Postcontrol of operations Operational Control
- 29. 29 ©2005 Operational ControlsOperational Controls Adaptedfrom Exhibit 16.16: Operational Controls Concurrent Control • Evaluates the conversion process as it occurs • Provides immediate feedback, which impacts worker motivation Precontrol • Controls the quality, quantity, and other characteristics of the inputs to the process Postcontrol • Traditionally, quality control • Many of these controls are being changed to pre- and concurrent controls
- 30. 30 ©2005 Control EffectivenessControl Effectiveness Focus of control Balanced scorecard Financial perspective Customer perspective Internal business perspective Innovation and learning perspective Amount of control
- 31. 31 ©2005 Control EffectivenessControl Effectiveness Quality of information Usefulness Accuracy Timeliness Objectivity Flexibility Favorable cost-benefit ratio Source of control
- 32. 32 ©2005 Key Factor Concerns Effectivenessof ControlsEffectiveness of Controls Adapted from exhibit 16.17: Key Factors in Determining the Effectiveness of Controls Focus of control What will be controlled? Where should controls be located in the organizational structure? Who is responsible for which controls? Amount of control Is there a balance between over- and undercontrol? Quality of information collected by the controls Is the information useful? Is the information accurate? Is the information timely? Is the information objective? Flexibility of controls Are the controls able to respond to varying conditions? Favorable cost- benefit ratio Is the information being gathered worth the cost of gathering it? Source of control Is control imposed by others? Is control decided by those who are affected?
Editor's Notes
- #3 These learning objectives are expressed in the chapter and you may prefer to move directly to slide 5, if you are comfortable that students agree with the objectives. It should be noted at this point, that all slides that have been prepared for this and the other chapters, have been animated to assist in the presentation. The most important animations are not the bulleted text items (which are animated) but rather the animation of models and exhibits. Models and exhibits contain “sequenced” animations and attempt to portray in visual terms, what the text attempts to portray in words. Many of the models contained in the textbook are taken out of their “static” context and shown here as the “dynamic” constructs they are. A dynamic construct is one that shows how one variable or event is affected by another, and this implies change. Such concepts should be presented dynamically, which means the animation should reflect the change implied by the construct or model. It is a good idea to “play” through the slides before presenting the materials to be sure you understand how they work. Although these slides can be printed and displayed as “transparencies”, the dynamic nature of the concepts will be less obvious. The slides are best shown in the classroom with your computer connected to the overhead projector. To view the animated presentation, select “View Show” from the Slide Show pull-down menu, or press the F5 key at the top of the keyboard, or select “Slide Show” from the View pull-down menu. . The slides were prepared using Office 2000 to facilitate the likely lowest common denominator for software. However, they will also play under Office XP and newer software.
- #7 Exhibit 16.1, found on page 568 of the textbook, has been animated to permit point-by-point discussion of the four control functions in management. Each mouse click will advance an arrow and its associated function for discussion.
- #8 Exhibit 16.2 (see page 570 of the text) is animated to permit some discussion as the model unfolds. The first mouse click will bring up planning and organizing, the second click will bring up control and the third click will finish the model in terms of the feedback loop.
- #9 Exhibit 16.3 (page 570 of the textbook) has been animated and will presented over four slides, but punctuated with the various models that are contained within the section in the textbook. You will need to play this sequence of slides (through slide 14) before class to ensure you know how the model and related discussion unfolds. After this slide, for instance, exhibits 16.4 and 16.5 are inserted. Then the model will continue on the slide following exhibit 16.5. Although the model itself will automatically build when the slides open, the explanatory points on the right side of the slide are activated by mouse clicks as bulleted text.
- #10 Exhibit 16.4, found on page 572 in the text, illustrates the relationship between confusion in measuring performance and the degree to which standards have been concretely or abstractly specified. It is animated to permit you to discuss the scales if you wish. If you prefer not to elaborate on them, simply click quickly to the final element of the slide, the up-right pointing arrow. This requires only three mouse clicks.
- #11 Exhibit 16.5 (page 572) is animated to permit point-by-point discussion of the three questions managers should ask as they establish standards.
- #12 This slide is the continuation of the basic elements in the control process exhibit. Text on the right side of the slide is activated by mouse clicks as used for bulleted text.
- #13 Exhibit 16.6 is found on page 573 of the textbook. The exhibit has been animated to permit you to discuss each of the four questions separately if you wish.
- #14 This slide continues exhibit 16.3.
- #15 And this slide finishes exhibit 16.3. The next slide moves to a new topic.
- #16 Exhibit 16.7 is on page 576 of the textbook. The model is animated to permit you to discuss point-by-point the outcomes of performance measurement. When the lables “actual performance better (worse) than expected performance” appear, it will require a mouse click to activate the arrow pointing to the “action taken” boxes. This will permit you to elicit from the students what they think the action that should be taken will be.
- #17 The topic of scope of control is divided into strategic, tactical, and operational control. The general field of healthcare was chosen for photos that are periodically inserted and will permit you to have a good discussion in this rapidly evolving field as it pertains to these three levels of control.
- #18 Exhibit 16.8 is found on page 577 of the textbook. The textbook has a brief discussion of this exhibit and relates the scope of control to the three control levels, operational, tactical and strategic (left to right in the exhibit). Examples in healthcare (from maintenance and routine functions such as record keeping to broader functions such as determination of growth and implementation of hospital goals) can be fit nicely to a discussion here.
- #19 Exhibit 16.9 (page 578 of the textbook) us animated to permit discussion of the scales (2 mouse clicks) and the relationship (3rd mouse click). You can simply click three times if you do not wish to discuss the scales.
- #20 Exhibit 16.10 (found on page 579 of the text) is animated to permit point-by-point discussion. The scales can be discussed and then subsequent mouse clicks will activate each of the four quadrants in the exhibit, in the order left to right, bottom to top.
- #22 Exhibit 16.11 is found on page 581 of the textbook. The model is animated to permit you to discuss each variable (time frame, objective, types of comparisons, and focus) independently.
- #23 Exhibit 16.12, found on page 582, and is animated to permit you to discuss the ratios point-by-point. One click will bring up the ratio label and formula, a second mouse click will bring up the GAP data and ratio calculation, and the third click will bring up the Limited data and ratio calculation. Continue in this fashion until all four ratios have been discussed. The exhibit takes two slides, which will appear seamlessly as one if presented in the “View Show’ mode.
- #25 Exhibit 16.13 (see page 584 of the textbook) is animated to permit point-by-point discussion. It requires only four mouse clicks, each bringing up one issue and its related question(s). The exhibit is presented over two slides which will appear seamlessly as one, if presented in the “View Show” mode.
- #27 Exhibit 16.14 (see page 586 of the text) is animated to permit point-by-point discussion of the four sub-functions in the HRM function.
- #28 Exhibit 16.13 (see page 584 of the textbook) has been animated to permit point-by-point discussion of Bureaucratic and Clan structures. Due to the volume of information on this slide, the font size is at the margin of readability in traditional classrooms. Handouts may be a good idea in rooms where students seated at the back of the room cannot read the text.
- #29 This slide is followed by exhibit 16.16 which illustrates the precontrol, concurrent control and postcontrol activities. You may prefer to delay detailed discussion of these four activities until that slide.
- #30 Exhibit 16.16 (page 589 in the text) has been animated to permit point-by-point discussion of the three operational controls. It requires only three mouse clicks. I sometimes relate this model to the “systems model” of organizations, as input, transformation and output activiteis. If your students are familiar with that model, then you can elicit what types of organizational activities are control functions at each level. For instance, precontrol activities would include such things as “selection” of human inputs, “inspection of raw materials” for raw materials, etc. Concurrent control might include training and inspection of “in-process” work at the concurrent control level. In this sense, it might be suggested that control activities are a normal part of everyday management activities, and that we are just now understanding that a big part of managerial work is control.
- #31 Exhibit 16.17 which is a compilation of informational points beginning with “focus of control” and ending with “source of control” is presented on slide 32 (two slides later). You might prefer to delay detailed discussion until that slide, using this slide for overview purposes.
- #32 The next slide presents exhibit 16.17 which is a compilation of informational points beginning with “focus of control” and ending with “source of control.” You might prefer to delay detailed discussion until that slide, using this slide for overview purposes.
- #33 Exhibit 16.17 (see page 590 of the textbook) has been animated to permit point-by-point discussion of the key factors in effectiveness control. Some of the points will have been covered in previous slides, but discussion of the questions will serve a useful purpose. Six mouse clicks are required, each will bring up a key factor and its related question(s).