Business achieving & organizational control

1. Achieving
Organizational Control
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2. Learning Outcomes
1. What Is Control and Why Is It Important?
2. The Control Process
• Explain why “what is measured is more critical than how it’s measured”.
• Explain the three ways managers can take in controlling.
3. Controlling Organizational Performance
4. Tools for Measuring Organizational Performance
5. Contemporary Issues in Control
• Describe how managers adjust controls for cross-cultural differences.
• Discuss the types of workplace concerns managers address.
• Explain why control is important to customer interactions.
• Define corporate governance.
6. Primary Organizational Control Methods & Corporate
Governance

3. What Is Control?
• Managers must monitor whether goals are being
accomplished efficiently & effectively.
• Appropriate controls help managers, look for
specific performance gaps & areas for improvement.
• Controlling
– The process of monitoring, comparing and correcting
work performance
• The Purpose of Control
– To ensure that activities are completed in ways that lead
to accomplishment of organizational goals.

4. Why Is Control Important?
• As the final link in management functions:
– Planning
• Controls let managers know whether their goals and
plans are on target and what future actions to take.
• Planning gives goals & controls help reach goals.
– Empowering employees
Control systems provide managers with information and
feedback on employee performance.
– Protecting the workplace
Controls enhance physical security and help minimize
workplace disruptions.

5. Exhibit 17–1The Planning–Controlling Link
Planning & Control complement and support each other

6. The Control Process

7. Measuring: How and What We Measure
• Sources of
Information (How)
– Personal observation
– Statistical reports
– Oral reports
– Written reports
• Control Criteria
(What)
– Employees
Satisfaction
Turnover
Absenteeism
– Budgets
Costs
Output
Sales

8. Common Sources of Information for Measuring Performance

9. Comparing
• Determining the degree of variation between
actual performance and the standard.
– Significance of variation is determined by:
• The acceptable range of variation from the standard
(forecast or budget).
• The size (large or small) and direction (over or
under) of the variation from the standard (forecast or
budget).

10. Exhibit 17–4 Defining the Acceptable Range of
Variation

11.  Mechanisms intended to reduce the likelihood
of an unwanted event and thereby minimize the
need for corrective action
 A few forms of Preventive Controls:
1. Rules and regulations
2. Budgets
3. Standards
4. Recruitment and selection procedures
5. Training and development programs
Types of Organizational Controls: Preventive & Corrective11

12. Corrective Controls
 Corrective Controls
 Mechanisms intended to reduce or eliminate
unwanted behaviors or results and thereby enable
the situation to conform with the organization’s
regulations and standards
 A few forms of Corrective Controls:
1. Direct supervision and feedback
2. Disciplinary action
3. Procedures for reporting misconduct
4. Monthly or even daily financial MIS
Hotline & Ombudsman: both corrective & preventive control mechanism12

13. Objective controls
Acceptable
controls
Complete
controls
Timely controls
To Achieve
Strategic
Goals
Controls should be linked to the strategic goals of the organization13

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

15. Taking Managerial Action
• Courses of Action (cont’d)
3. Revising the standard
Examining the standard to ascertain whether or not the
standard is realistic, fair, and achievable.
– Upholding the validity of the standard.
– Resetting goals that were initially set too low or too
high.

16. Managerial Decisions in the Control Process

17. Controlling for Organizational
Performance
• What Is Performance?
– The end result of an activity
• What Is Organizational
Performance?
– The accumulated end results of all of the
organization’s work processes and activities
• Designing strategies, work processes, and work activities.
Coordinating the work of employees.

18. Organizational Performance Measures
1. Organizational Productivity
– Productivity: the overall output of goods and/or
services divided by the inputs needed to generate that
output.
Output: sales revenues
Inputs: costs of resources (materials, labor expense, and
facilities)
– Ultimately, productivity is a measure of how
efficiently employees do their work.

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

20. Industry and Company Rankings
• Industry rankings on:
– Profits
– Return on revenue
– Return on
shareholders’ equity
– Growth in profits
– Revenues per employee
– Revenues per dollar of
assets
– Revenues per dollar of
equity
• Corporate Culture Audits
• Compensation and
benefits surveys
• Customer satisfaction
surveys

21. Tools for Measuring Organizational
Performance
1. Feedforward Control
– A control that prevents anticipated problems before
actual occurrences of the problem.
• Building in quality through design.
• Requiring suppliers conform to ISO 9002.
2. Concurrent Control
– A control that takes place while the monitored
activity is in progress.
Direct supervision: management by walking around.

22. Tools for Measuring Organizational
Performance (cont’d)
3. Feedback Control
– A control that takes place after an activity is done.
• Corrective action is after-the-fact, when the problem has
already occurred.
– Advantages of feedback controls:
• Provide managers with information on the effectiveness of
their planning efforts.
• Enhance employee motivation by providing them with
information on how well they are doing.

23. Exhibit 17–8 Types of Control

24. Tools for Measuring Organizational
Performance (cont’d.)
• Balanced Scorecard
– Is a measurement tool that uses goals set by managers in
four areas to measure a company’s performance:
1. Financial
2. Customer
3. Internal processes
4. People/innovation/growth assets
– Is intended to emphasize that all of these areas are
important to an organization’s success and that there
should be a balance among them.

25. Information Controls
• Purposes of Information Controls
– As a tool to help managers control other organizational
activities.
• Managers need the right information at the right time and
in the right amount.
– As an organizational area that managers need to control.
• Managers must have comprehensive and secure controls in
place to protect the organization’s important information.

26. Information Controls (cont’d)
• Management Information Systems (MIS)
– A system used to provide management with needed
information on a regular basis.
Data: an unorganized collection of raw, unanalyzed
facts (e.g., unsorted list of customer names).
Information: data that has been analyzed and
organized such that it has value and relevance to
managers.

27. Benchmarking of Best Practices
• Benchmark
– The standard of excellence against which to
measure and compare.
• Benchmarking
– Is the search for the best practices among
competitors or noncompetitors that lead to their
superior performance.
– Is a control tool for identifying and measuring
specific performance gaps and areas for
improvement.

28. Contemporary Issues in Control
• Cross-Cultural Issues
– The use of technology to increase direct corporate
control of local operations
– Legal constraints on corrective actions in foreign
countries
– Difficulty with the comparability of data collected
from operations in different countries

29. Contemporary Issues in Control (cont’d)
• Workplace Concerns
– Workplace privacy versus workplace monitoring:
• E-mail, telephone, computer, and Internet usage
• Productivity, harassment, security, confidentiality,
intellectual property protection
– Employee theft
• The unauthorized taking of company property by
employees for their personal use.
– Workplace violence
• Anger, rage, and violence in the workplace is affecting
employee productivity.

30. Exhibit 17–12 Controlling Employee Theft
Sources: Based on A.H. Bell and D.M. Smith. “Protecting the Company
Against Theft and Fraud,” Workforce Online (www.workforce.com)
December 3, 2000; J.D. Hansen. “To Catch a Thief,” Journal of
Accountancy, March 2000, pp. 43–46; and J. Greenberg, “The Cognitive
Geometry of Employee Theft,” in Dysfunctional Behavior in
Organizations: Nonviolent and Deviant Behavior, eds. S.B. Bacharach,
A. O’Leary-Kelly, J.M. Collins, and R.W. Griffin (Stamford, CT: JAI
Press, 1998), pp. 147–93.

31. Contemporary Issues in Control (cont’d)
• Customer Interactions
– Service profit chain
Is the service sequence from employees to customers to profit.
– Service capability affects service value which impacts
on customer satisfaction that, in turn, leads to
customer loyalty in the form of repeat business
(profit).

32. Contemporary Issues in Control (cont’d)
• Corporate Governance
– The system used to govern a corporation so that the
interests of the corporate owners are protected.
Changes in the role of boards of directors
Increased scrutiny of financial reporting (SEBI,
Company & other Business Laws)
– More disclosure and transparency of corporate
financial information
– Certification of financial results by senior
management/Audits,etc.

33. Cost-Benefit Model of Organizational Control
• Managers need to consider trade-offs that
affect the amount of organizational control;
1. Too little control –controls are ineffective
2. As control increases – effectiveness also
increases, up to a point
3. Beyond a certain point: effectiveness declines
with further increases in control exercised
(example changing span of control)
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34. Primary Organizational Control Methods
(adapted from Figure 10.3)
Mechanistic
And Organic
Control
Organizational
Control
Market
Control
Financial and
Accounting
Controls
Automation-
Based
Control
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35. • Mechanistic Control: involves extensive use
of rules & procedures, top-down authority,
tightly written job descriptions, and other
formal methods of preventing & correcting
deviations from desired behaviors & results.
• Organic Control: involves the use of flexible
authority, relatively loose job descriptions,
individual self-controls, and other informal
methods for preventing & correcting
deviations from desired behaviors & results
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36.  Use of detailed rules and
procedures whenever
possible
 Top-down authority, with
emphasis on positional
power
 Activity-based job
descriptions that prescribe
day-to-day behaviors
 Use of detailed rules and
procedures only when
necessary
 Flexible authority, with
emphasis on expert power
and networks of influence
 Results-based job
descriptions that emphasize
goals to be achieved
Mechanistic Control Methods Organic Control Methods
(continued)
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37.  Emphasis on extrinsic
rewards (wages, pensions,
status symbols)
 Distrust of teams, based on
an assumption that team
goals conflict with
organizational goals
 Emphasis on both extrinsic
and intrinsic rewards
(meaningful work)
 Use of team, based on an
assumption that team goals
and norms assist in
achieving organizational
goals
Mechanistic Control Methods Organic Control Methods
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38.  The collection and evaluation of data related to sales,
prices, costs, and profits for guiding decisions and
evaluating results
 Market controls require:
1. The costs of the resources used in producing
outputs to be measured monetarily
2. The value of the goods and services produced to
be defined clearly and priced monetarily
3. The prices of the goods and services produced
to be set competitively
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39.  Mechanisms for preventing or correcting the misuse and
misallocation of resources, especially monetary resources
 Comparative financial control: evaluation of a firm’s
financial condition for two or more time periods
 Ratio analysis: selecting two significant figures (or a
combination of a number of figures), expressing their
relationship as a fraction or percent, and comparing
the value for two or more periods of time
 Example: return on investment (ROI) ratio is net profit
before tax divided by net worth (Total Investment) and is a
measure of the efficiency of total assets in generating net
profits 39

40.  Budgetary control: the process of monitoring,
comparing, and evaluating actual expenditure
in various categories in relation to budgeted
amounts, and making changes as needed during the
budget time period
 Purposes of budgeting
1. Help in planning work effectively (linkage
with Goals)
2. Assist in allocating resources
3. Aid in controlling and monitoring resource
utilization during the budget period 40

41. Common Types of Budgets in a Business
Sales budget Capital budget
Materials budget Research and
development budget
Labor budget Cash budget
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42.  Automation: the use of self-regulating devices
and processes that operate independent of
people
 Machine control: utilizes self-regulating
instruments or devices to prevent and correct
deviations from preset standards
 In continuous process or robotic operations,
machines control other machines
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43. Corporate Governance
• A corporation is an organization that allows
different parties to contribute capital, expertise,
and labor for the benefit of all of them.
• Corporate governance is the pattern of
relations and controls between the
stockholders, the board of directors, and the
top management of a company.
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44.  Expectations: set by the organization through
Vision Mission, goals, policies, procedures,
practices and guidelines
 Communication: makes sure that expectations
are understood throughout the organization, and
that there is proper training
 Accountability: holds people accountable for
meeting the expectations that have been set
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45. Board of
directors
Corporate Governance: A Sample of
Key Terms and Elements
Bylaws: rules of internal
governance
Disclosure
Annual
report and
Annual
meeting
Proxy
statement:
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46. Laws and
regulatory
agencies
Possibility of
being acquired
Proxy statements:
voting by
shareholders
Lawsuits by
stakeholders
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47.  Independent Boards of directors
 Compensation contracts that attempt to align the
interests of top executives with those of stockholders
 Corporate bylaws that set ground rules for the
responsibilities of top executives and board members
 Evaluation of CEO by the Board
 Strategic allocation of corporate resources by Board
 Exercise of fiduciary (trustee – beneficiary trust)
responsibility and control by the Board
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48. Thanks……..
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