MGMT 3202: Chapter 8

Controlling
Process where managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals.
Four Steps in Organizational Control
Step 1: Establish the standards of performance, goals, or targets against which performance is to be evaluated.
Step 2: Measure actual performance.
Step 3: Compare actual performance against chosen standards of performance.
Step 4: Evaluate the result and initiate corrective action if the standard is not being achieved.
Three Types of Control
Feedforward Control, Concurrent Control, and Feedback Control.
Feedforward Control
Control that allows managers to anticipate problems before they arise.
Concurrent Control
Give managers immediate feedback on how efficiently inputs are being transformed into outputs so that managers can correct problems as they arise.
Feedback Control
Control that gives managers information about customers’ reactions to goods and services so that corrective action can be taken if necessary.
Control Systems
Formal, target-setting, monitoring, evaluation and feedback systems that provide managers with information about how well the organization’s strategy and structure are working.
Output Control System
Financial measures of performance.
Organizational goals.
Operating budgets.
Profit Ratios (Financial Measures)
Measures of how efficiently managers convert resources into profits.
Return On Investment (ROI)
Liquidity Ratios (Financial Measures)
Measures of how well managers protect resources to meet short term debt- current and quick ratios.
Leverage Ratios (Financial Measures)
Measures of how much debt or equity is used to finance operations- debt-to-asset and times-covered ratios.
Activity Ratios (Financial Measures)
Measures of how efficiently managers are creating value from assets- inventory turnover, days sales outstanding ratios.
Output Control Goals
Goals should be specific and difficult, but not impossible, to achieve (stretch goals).
Goal setting and establishing output controls are management skills that are developed over time.
Operating Budget
A blueprint that states how managers intend to allocate and use the resources they control to attain organizational goals effectively and efficiently.
Problems with Output Control
Managers must create output standards that motivate at all levels.
Standards may cause managers to behave in inappropriate ways to achieve organizational goals.
Behavioral Control System
Direct supervision.
Management by objectives.
Rules and standard operating procedures.
Direct Supervision
Managers who:
Actively monitor and observe the behavior of their subordinates.
Teach subordinates the behaviors that are appropriate and inappropriate.
Intervene to take corrective action as needed.
Bureaucratic Control
Control through a system of rules and standard operating procedures (SOPs) that shapes the behavior of divisions, functions, and individuals.
Management by Objectives (MBO)
A goal-setting process in which managers and subordinates negotiate specific goals and objectives for the subordinate to achieve and then periodically evaluate their attainment of those goals.
3 MBOs
1. Specific goals and objectives are established at each level of the organization.
2. Managers and their subordinates together determine the subordinates’ goals.
3. Managers and their subordinates periodically review the subordinates’ progress toward meeting goals.
Organizational culture/clan Control System
Values.
Norms.
Socialization.
Organizational Culture
The shared set of beliefs, expectations, values, norms, and work routines that influences how members of an organization interact with one another and work together to achieve organizational goals.
Clan Control
Control exerted on individuals and groups in an organization by shared values, norms, standards of behavior, and expectations.