Chapter 9

Foundations
of Control
Contemporary Management

9-1


Learning Outcomes
• Explain the nature and importance of control.
• Describe the three steps in the control process.
• Discuss the types of controls organizations and
managers use.
• Discuss contemporary issues in control.

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9.1
Explain the nature
and importance of
control.

Contemporary Management

9-3

Management Myth
Myth: Control only takes place after the
fact.
TRUTH: Many managers are using
“feedforward controls,” which is
preventing problems before they occur.

Contemporary Management

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The Nature of Control
Control:
• The regulatory process that directs the activities
of the organization to achieve its goals.
• The control function is closely linked with planning
function.
• The planning process to prepare courses of action to
achieve organizational goals.
• The control function is the ongoing process to
determine if the organization is meeting its goals.

• Feedback on the performance provide managers
with a method to improve their plan.
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Managers Control
• In controlling, managers monitor and
evaluate:
• Whether their organization’s strategy and
structure are working as intended.
• How they could be improved.
• How they might be changed if they are not
working.

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The Importance of Control
• To determine how efficiently they are using their
resources, managers must be able to accurately
measure how many units of inputs are being used to
produce a unit of output.
• Another important control issue involves the quality of
goods and services.
• Managers can also make their organizations more
responsive to customers if they develop a control
system to evaluate how well customer-contact
employees are performing their jobs.
• Controlling can raise the level of innovation in an
organization.
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Areas of Control
• There are four areas for control:
1.
2.
3.
4.

Financial resources.
Physical resources.
Human resources.
Information resources.

Information
Resources

Financial
Resources

Human
Resources

Physical
Resources

• Financial resources are usually at the
center of controlling process.
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Physical Control
• Managers use operations control to
regulate the process of producing
goods and services.
• help them reduce the amount of time it
takes to produce a product and to
increase the amount of time that critical
machines are operational.

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9-9


Human Resource Control
• This is the process of regulating employee
behavior.
• Human resource control includes both:
• Improving the capabilities of employees
through
Strict hiring policies.
Better training opportunities.

• Implementing
Rewards – Bonuses - Incentive
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Information Control
Example:
• Marketing control is the process used to
evaluate how effectively pricing,
promotion, distribution and products
meets the customer’s expectations.
• Many companies use marketing controls to
monitor sales by region, competitors'
prices, and competitive product
introductions.
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Financial Control
• Financial control enables top – level managers
to assess the overall functioning of the
organization.
• Middle managers in all departments use
budgetary control to keep spending on target.
• Most organizations compare actual spending with
the budget, and they require managers to analyze
and explain any significant deviations.

Contemporary Management


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9.2
Describe the three
steps in the control
process.

Contemporary Management

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Steps In Control

Establish
Standards

Compare

Measure
Performance

Performance

against
Standards

Contemporary Management


Take
Action

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1. Measuring Performance
Sources of information:
• Personal observation: Management by walking around
(MBWA)

• Statistical reports: graphs, bar charts, and numerical displays
• Oral reports: conferences, meetings, one-to-one conversations
• Written reports
Benchmarking
• What are the benefits of benchmarking?
• What are the challenges in doing it?
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Criteria for Measurement
• What managers measure is probably more important to the
control process than how they measure.
• Criteria such as:
• Employee satisfaction or turnover and absence rates
• Keeping costs within budget

• Most activities can be broken down into objective segments

that can be measured.

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3. Correcting Performance
• Immediate corrective action
• Basic correction action
• correct the actual performance, or revise
the standards.

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Revising Standards
If performance consistently exceeds the goal,
then the goal may need to be raised.

Contemporary Management

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9.3

Discuss the types

of controls
organizations and
managers use.

Contemporary Management

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Approaches To Control
• There are 3 basic approaches:
• Feedward control
Deals with inputs from the environment.
• Concurrent control
Focuses on transformation process.
• Feedback control
Deals with outputs from the environment.
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Feedward Control

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Feedward Control

• Monitors the quality and / or quantity
of various resources before they enter
the system.
• For instance, when McDonald’s opened its first restaurant in
Moscow, it sent company quality control experts to help Russian
farmers learn techniques for growing high-quality potatoes
because McDonald’s demands consistent product quality no
matter the geographical location.

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Concurrent Control
Control that takes place while a work activity
is in progress.
• For instance, Google’s team keep a watchful eye on one online ads. They
watch the number of searches and clicks, the rate at which users click on
ads, and the revenue this generates. Everything is tracked hour by hour,
compared with the data from a week earlier, and charted. If something is
not working well, they fine-tune it.

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Feedback Control
• Control that takes place after a work activity

is done.
• Feedback gives managers meaningful information on how
effective their planning efforts were.
• Feedback enhances motivation because people want to
know how well they’re doing.

Contemporary Management

9-24


Keeping Track of an Organization’s
Finances: Ratio Analysis

Contemporary Management

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