11-1© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Chapter 11

Controlling the organisation

11-2© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Lecture outline• Control as a management function• The control process• Types of controls• Managerial approaches to implementing

controls• Assessing control systems

11-3© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Control as a management function

Controlling:

Process of regulating organisational activities so that actual performance conforms to expected organisational standards and goals.

11-4© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Control as a management function

Significance of the control system:

Set of mechanisms designed to increase probability of meeting organisational standards and goals.

Controlling ensures resources are used for organisational objectives, supporting organising and leading functions.

11-5© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Control as a management function

Role of controls:

• Coping with uncertaintyWatching environmental factors for change

• Detecting irregularitiesSuch as quality, cost, or staff turnover

• Identifying opportunitiesAlerting management to opportunities

11-6© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Control as a management function

Role of controls (cont.):

• Handling complex situationsAiding coordination of complex situations

• Decentralising authorityControls allow decision-making at lower levels

11-7© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Control as a management function

Levels of control:

• Strategic controlMonitoring critical environmental factors

• Tactical controlAssessing implementation of tactical plans at department level

• Operational controlOverseeing implementation of operating plans, monitoring day-to-day results

11-8© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Control as a management function

• Levels of control:• Top

management

Middle

management

1st level

management

Strategic planning

Tactical planning

Operational planning

Strategic control

Tactical control

Operational control

11-9© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

The control process

Steps in the control process:

1. Determine areas to control2. Establish standards3. Measure performance4. Compare performance against standards5. Recognise positive performance; take

corrective action as necessary6. Adjust standards and measures as

necessary

11-10© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

The control processSteps in the control process:

Determine areas to controlDetermine areas to control

Establish standardsEstablish standards

Measure performanceMeasure performance

Compare performanceCompare performance

Recognise positive performance

Recognise positive performance

Control processsteps

Control processsteps

Take corrective actionTake corrective action

Adjust standardsAdjust standards

11-11© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

The control processDeciding what to control:

• Resource dependence – Approach that argues that managers need to

control areas where they depend on others for resources.

– Four conditions must be met before a final decision is made.

– Areas meeting all four conditions are known as: Strategic control points

11-12© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

The control processDeciding what to control:• Four conditions for control

1. Is dependence on the resource sufficiently high?

2. Is expected resource flow unacceptable?

3. Is control process feasible?

4. Is control process cost acceptable?

11-13© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

The control processDeciding what to control:

High dependence on the resourceHigh dependence on the resource

Chance that expected resource flow will be unacceptable

Chance that expected resource flow will be unacceptable

Control-process feasibilityControl-process feasibility

Cost acceptabilityCost acceptability

Determining strategic control points

Determining strategic control points Alternatives to control:

•Change dependence relationships•Change nature of dependence relationships

Alternatives to control:•Change dependence relationships•Change nature of dependence relationships

11-14© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

The control processDeciding what to control:• Alternatives to control

If the first of these conditions show a need for control, but such control process is either not feasible or too costly, then managers must develop alternatives to control, e.g.– Change dependence relationship on suppliers etc.– Change nature of dependence relationship– Build reliability– Eliminate dependence

11-15© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

The control process• Major control types by timing

– Feedforward controlRegulation of inputs to ensure they meet standards

– Concurrent controlRegulation of ongoing activities to ensure they conform to standards

– Feedback controlRegulation of completed product to ensure standards are met

11-16© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

The control processControl types by timing:

InputInput Transformationprocesses

Transformationprocesses OutputsOutputs

Feed-forwardcontrol

Anticipatingproblems

Feed-forwardcontrol

Anticipatingproblems

Concurrentcontrol

Attending toproblems asthey occur

Concurrentcontrol

Attending toproblems asthey occur

Feedbackcontrol

Correctingproblems afterproduct/service

is produced

Feedbackcontrol

Correctingproblems afterproduct/service

is produced

11-17© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

The control process• Multiple controls

Systems using two or more of the feedforward, concurrent and feedback control processes and involving several strategic control points.

• Cybernetic controlSelf-regulating control system which, once operating, can automatically monitor the situation and take corrective action when necessary.

• Non-cybernetic controlControl system relying on human discretion as a basic part of its process.

11-18© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Managerial approaches to implementing controls

• Bureaucratic control

• Clan control

• Market control

• Control and innovation

11-19© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Managerial approaches to implementing controls

Bureaucratic control:Managerial approach relying on regulation through rules, policies, supervision, budgets, schedules, reward systems and other administrative mechanisms aimed at ensuring employees exhibit appropriate behaviours and meet performance standards.

11-20© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Managerial approaches to implementing controlsClan control:

Managerial approach relying on values, beliefs, traditions, corporate culture, shared norms and informal relationships to regulate employee behaviours and facilitate reaching of organisational goals.

11-21© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Managerial approaches to implementing controls

Market control:Managerial approach relying on market mechanisms to regulate prices for certain clearly-specified goods and services needed by an organisation.

11-22© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Managerial approaches to implementing controls

Control and innovation:• Four levers for strategic control as well as fostering

innovation– Belief systems– Boundary systems– Performance management systems– Interactive monitoring systems

• Incrementalist approachControl of an innovative project that relies on clan control but also involves a phased set of plans and accompanying bureaucratic controls.

11-23© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Assessing control systems

Potential dysfunctional aspects:

• Behavioural displacement

• Game playing

• Operating delays

• Negative attitudes

11-24© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Assessing control systems

Overcontrol versus undercontrol:• Overcontrol

Limiting individual job autonomy to the point where it seriously inhibits effective job performance.

• UndercontrolGranting autonomy to an employee to the point where the organisation loses its ability to direct individual effort towards achieving organisational goals.

11-25© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Assessing control systems

Characteristics of an effective control system:

• Future-oriented• Multidimensional• Cost effective• Accurate• Realistic

11-26© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Assessing control systems

Characteristics of effective control

Systems (continued):

• Timely

• Monitorable

• Acceptable to organisation members

• Flexible

11-27© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Lecture summary• Control as a management function

– Significance of the control process – Role of controls– Levels of control

• The control process– Steps in the process – Strategic control points

• Types of control– Types by timing, multiple, cybernetic, non-

cybernetic

11-28© 2008 McGraw-Hill Australia Pty Ltd. Power Points t/a Management Foundations: A Pacific Rim Focus 2e by Bartol et al Slides prepared by Rob Lawrence, Victoria University (Australia) and Dr Raveendra Nayak, University of Ballarat

Lecture summary

• Managerial approaches to control– Bureaucratic, clan, market– Balancing control and innovation

• Assessing control systems– Dysfunctional aspects– Over-control/under-control– Characteristics of an effective control system