ninth edition
STEPHEN P. ROBBINS
© 2007 Prentice Hall, Inc.
© 2007 Prentice Hall, Inc.
All rights reserved.
All rights reserved.
PowerPoint Presentation by Charlie Cook
PowerPoint Presentation by Charlie Cook
The University of West Alabama
The University of West Alabama
MARY COULTER
Foundations
Foundations
of Control
of Control
Chapter
Chapter
18
18
© 2007 Prentice Hall, Inc. All rights
reserved. 18–2
L E A R N I N G O U T L I N E
L E A R N I N G O U T L I N E
Follow this Learning Outline as you read and study this chapter.
Follow this Learning Outline as you read and study this chapter.
What Is Control and Why Is It Important?
What Is Control and Why Is It Important?
•
Define control.
Define control.
•

Contrast the three approaches to designing control
Contrast the three approaches to designing control
systems.
systems.
•
Discuss the reasons why control is important.
Discuss the reasons why control is important.
•
Explain the planning-controlling link.
Explain the planning-controlling link.
The Control Process
The Control Process
•
Describe the three steps in the control process.
Describe the three steps in the control process.
•
Explain why what is measured is more critical than how
Explain why what is measured is more critical than how
it’s measured.
it’s measured.
•
Explain the three courses of action managers can take in
Explain the three courses of action managers can take in
controlling.
controlling.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–3
L E A R N I N G O U T L I N E (cont’d)
L E A R N I N G O U T L I N E (cont’d)
Follow this Learning Outline as you read and study this chapter.

Follow this Learning Outline as you read and study this chapter.
Controlling Organizational Performance
Controlling Organizational Performance
•
Define organizational performance.
Define organizational performance.
•
Describe the most frequently used measures of
Describe the most frequently used measures of
organizational performance.
organizational performance.
Tools for Organizational Performance
Tools for Organizational Performance
•
Contrast feedforward, concurrent, and feedback controls.
Contrast feedforward, concurrent, and feedback controls.
•
Explain the types of financial and information controls
Explain the types of financial and information controls
managers can use.
managers can use.
•
Describe how balanced scorecards and benchmarking are
Describe how balanced scorecards and benchmarking are
used in controlling.
used in controlling.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–4
L E A R N I N G O U T L I N E (cont’d)
L E A R N I N G O U T L I N E (cont’d)

Follow this Learning Outline as you read and study this chapter.
Follow this Learning Outline as you read and study this chapter.
Contemporary Issues in Control
Contemporary Issues in Control
•
Describe how managers may have to adjust controls for
Describe how managers may have to adjust controls for
cross-cultural differences.
cross-cultural differences.
•
Discuss the types of workplace concerns managers face
Discuss the types of workplace concerns managers face
and how they can address those concerns.
and how they can address those concerns.
•
Explain why control is important to customer interactions.
Explain why control is important to customer interactions.
•
Discuss what corporate governance is and how it’s
Discuss what corporate governance is and how it’s
changing.
changing.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–5
What Is Control?
What Is Control?
•
Controlling
Controlling


The process of monitoring activities to ensure that
The process of monitoring activities to ensure that
they are being accomplished as planned and of
they are being accomplished as planned and of
correcting any significant deviations.
correcting any significant deviations.
•
The Purpose of Control
The Purpose of Control

To ensure that activities are completed in ways that
To ensure that activities are completed in ways that
lead to accomplishment of organizational goals.
lead to accomplishment of organizational goals.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–6
Designing Control Systems
Designing Control Systems
•
Market Control
Market Control

Emphasizes the use of external market mechanisms
Emphasizes the use of external market mechanisms
to establish the standards used in the control system.
to establish the standards used in the control system.

External measures:
External measures:
price competition and relative

price competition and relative
market share
market share
•
Bureaucratic Control
Bureaucratic Control

Emphasizes organizational authority and relies on
Emphasizes organizational authority and relies on
rules, regulations, procedures, and policies.
rules, regulations, procedures, and policies.
•
Clan Control
Clan Control

Regulates behavior by shared values, norms,
Regulates behavior by shared values, norms,
traditions, rituals, and beliefs of the firm’s culture.
traditions, rituals, and beliefs of the firm’s culture.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–7
Exhibit 18–1
Exhibit 18–1
Characteristics of Three Approaches to Control Systems
Characteristics of Three Approaches to Control Systems
Type of Control
Type of Control
Characteristics
Characteristics
Market

Market
Uses external market mechanisms, such as price competition
Uses external market mechanisms, such as price competition
and relative market share, to establish standards used in
and relative market share, to establish standards used in
system. Typically used by organizations whose products or
system. Typically used by organizations whose products or
services are clearly specified and distinct and that face
services are clearly specified and distinct and that face
considerable marketplace competition.
considerable marketplace competition.
Bureaucratic
Bureaucratic
Emphasizes organizational authority. Relies on administrative
Emphasizes organizational authority. Relies on administrative
and hierarchical mechanisms, such as rules, regulations,
and hierarchical mechanisms, such as rules, regulations,
procedures, policies, standardization of activities, well-
procedures, policies, standardization of activities, well-
defined job descriptions, and budgets to ensure that
defined job descriptions, and budgets to ensure that
employees exhibit appropriate behaviors and meet
employees exhibit appropriate behaviors and meet
performance standards.
performance standards.
Clan
Clan
Regulates employee behavior by the shared values, norms,
Regulates employee behavior by the shared values, norms,
traditions, rituals, beliefs, and other aspects of the

traditions, rituals, beliefs, and other aspects of the
organization’s culture. Often used by organizations in which
organization’s culture. Often used by organizations in which
teams are common and technology is changing rapidly.
teams are common and technology is changing rapidly.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–8
Why Is Control Important?
Why Is Control Important?
•
As the final link in management functions:
As the final link in management functions:

Planning
Planning

Controls let managers know whether their goals
Controls let managers know whether their goals
and plans are on target and what future actions to
and plans are on target and what future actions to
take.
take.

Empowering employees
Empowering employees

Control systems provide managers with information
Control systems provide managers with information
and feedback on employee performance.
and feedback on employee performance.


Protecting the workplace
Protecting the workplace

Controls enhance physical security and help
Controls enhance physical security and help
minimize workplace disruptions.
minimize workplace disruptions.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–9
Exhibit 18–2
Exhibit 18–2
The Planning–Controlling Link
The Planning–Controlling Link
© 2007 Prentice Hall, Inc. All rights
reserved. 18–10
The Control Process
The Control Process
•
The Process of Control
The Process of Control
1.
1.
Measuring actual
Measuring actual
performance.
performance.
2.
2.
Comparing actual

Comparing actual
performance against a
performance against a
standard.
standard.
3.
3.
Taking action to correct
Taking action to correct
deviations or inadequate
deviations or inadequate
standards.
standards.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–11
Exhibit 18–3
Exhibit 18–3
The Control Process
The Control Process
© 2007 Prentice Hall, Inc. All rights
reserved. 18–12
Measuring: How and What We Measure
Measuring: How and What We Measure
•
Sources of
Sources of
Information (How)
Information (How)

Personal observation

Personal observation

Statistical reports
Statistical reports

Oral reports
Oral reports

Written reports
Written reports
•
Control Criteria
Control Criteria
(What)
(What)

Employees
Employees

Satisfaction
Satisfaction

Turnover
Turnover

Absenteeism
Absenteeism

Budgets
Budgets


Costs
Costs

Output
Output

Sales
Sales
© 2007 Prentice Hall, Inc. All rights
reserved. 18–13
Exhibit 18–4
Exhibit 18–4
Common Sources of Information
Common Sources of Information
for Measuring Performance
for Measuring Performance
© 2007 Prentice Hall, Inc. All rights
reserved. 18–14
Comparing
Comparing
•
Determining the degree of variation between
Determining the degree of variation between
actual performance and the standard.
actual performance and the standard.

Significance of variation is determined by:
Significance of variation is determined by:


The acceptable range of variation from the
The acceptable range of variation from the
standard (forecast or budget).
standard (forecast or budget).

The size (large or small) and direction (over or
The size (large or small) and direction (over or
under) of the variation from the standard (forecast
under) of the variation from the standard (forecast
or budget).
or budget).
© 2007 Prentice Hall, Inc. All rights
reserved. 18–15
Exhibit 18–5
Exhibit 18–5
Defining the Acceptable Range of Variation
Defining the Acceptable Range of Variation
© 2007 Prentice Hall, Inc. All rights
reserved. 18–16
Exhibit 18–6
Exhibit 18–6
Sales Performance Figures for July,
Sales Performance Figures for July,
Eastern States Distributors
Eastern States Distributors
© 2007 Prentice Hall, Inc. All rights
reserved. 18–17
Taking Managerial Action
Taking Managerial Action
•

Courses of Action
Courses of Action

“
“
Doing nothing”
Doing nothing”

Only if deviation is judged to be insignificant.
Only if deviation is judged to be insignificant.

Correcting actual (current) performance
Correcting actual (current) performance

Immediate corrective action to correct the problem
Immediate corrective action to correct the problem
at once.
at once.

Basic corrective action to locate and to correct the
Basic corrective action to locate and to correct the
source of the deviation.
source of the deviation.

Corrective Actions
Corrective Actions
–
Change strategy, structure, compensation scheme, or
Change strategy, structure, compensation scheme, or
training programs; redesign jobs; or fire employees

training programs; redesign jobs; or fire employees
© 2007 Prentice Hall, Inc. All rights
reserved. 18–18
Taking Managerial Action (cont’d)
Taking Managerial Action (cont’d)
•
Courses of Action (cont’d)
Courses of Action (cont’d)

Revising the standard
Revising the standard

Examining the standard to ascertain whether or not
Examining the standard to ascertain whether or not
the standard is realistic, fair, and achievable.
the standard is realistic, fair, and achievable.
–
Upholding the validity of the standard.
Upholding the validity of the standard.
–
Resetting goals that were initially set too low or too high.
Resetting goals that were initially set too low or too high.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–19
Exhibit 18–7
Exhibit 18–7
Managerial Decisions in the Control Process
Managerial Decisions in the Control Process
© 2007 Prentice Hall, Inc. All rights
reserved. 18–20

Controlling for Organizational
Controlling for Organizational
Performance
Performance
•
What Is Performance?
What Is Performance?

The end result of an activity
The end result of an activity
•
What Is Organizational
What Is Organizational
Performance?
Performance?

The accumulated end results of all of the
The accumulated end results of all of the
organization’s work processes and activities
organization’s work processes and activities

Designing strategies, work processes, and work
Designing strategies, work processes, and work
activities.
activities.

Coordinating the work of employees.
Coordinating the work of employees.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–21

Organizational Performance Measures
Organizational Performance Measures
•
Organizational Productivity
Organizational Productivity

Productivity:
Productivity:
the overall output of goods and/or
the overall output of goods and/or
services divided by the inputs needed to generate
services divided by the inputs needed to generate
that output.
that output.

Output: sales revenues
Output: sales revenues

Inputs: costs of resources (materials, labor
Inputs: costs of resources (materials, labor
expense, and facilities)
expense, and facilities)

Ultimately, productivity is a measure of how efficiently
Ultimately, productivity is a measure of how efficiently
employees do their work.
employees do their work.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–22
Organizational Performance Measures

Organizational Performance Measures
•
Organizational Effectiveness
Organizational Effectiveness

Measuring how appropriate organizational goals are
Measuring how appropriate organizational goals are
and how well the organization is achieving its goals.
and how well the organization is achieving its goals.

Systems resource model
Systems resource model
–
The ability of the organization to exploit its environment in
The ability of the organization to exploit its environment in
acquiring scarce and valued resources.
acquiring scarce and valued resources.

The process model
The process model
–
The efficiency of an organization’s transformation process
The efficiency of an organization’s transformation process
in converting inputs to outputs.
in converting inputs to outputs.

The multiple constituencies model
The multiple constituencies model
–
The effectiveness of the organization in meeting each

The effectiveness of the organization in meeting each
constituencies’ needs.
constituencies’ needs.
© 2007 Prentice Hall, Inc. All rights
reserved. 18–23
Industry and Company Rankings
Industry and Company Rankings
•
Industry rankings on:
Industry rankings on:

Profits
Profits

Return on revenue
Return on revenue

Return on shareholders’
Return on shareholders’
equity
equity

Growth in profits
Growth in profits

Revenues per employee
Revenues per employee

Revenues per dollar of
Revenues per dollar of

assets
assets

Revenues per dollar of
Revenues per dollar of
equity
equity
•
Corporate Culture
Corporate Culture
Audits
Audits
•
Compensation and
Compensation and
benefits surveys
benefits surveys
•
Customer satisfaction
Customer satisfaction
surveys
surveys
© 2007 Prentice Hall, Inc. All rights
reserved. 18–24
Exhibit 18–8
Exhibit 18–8
Popular Industry and Company Rankings
Popular Industry and Company Rankings
© 2007 Prentice Hall, Inc. All rights
reserved. 18–25

Tools for Controlling Organizational
Tools for Controlling Organizational
Performance
Performance
•
Feedforward Control
Feedforward Control

A control that prevents anticipated problems
A control that prevents anticipated problems
before
before


actual occurrences of the problem.
actual occurrences of the problem.

Building in quality through design.
Building in quality through design.

Requiring suppliers conform to ISO 9002.
Requiring suppliers conform to ISO 9002.
•
Concurrent Control
Concurrent Control

A control that takes place while the monitored activity
A control that takes place while the monitored activity
is in progress.
is in progress.


Direct supervision
Direct supervision
: management by walking
: management by walking
around.
around.