Chapter 5 Outline
I. The Building Blocks of Effective Control
A. Introduction
1. Control is the task of ensuring that activities are getting the desired results.
B. Control is important to supervisors
1. Control is keeping an eye on every task that is delegated. Control is a way
to keep track of whether or not a job is done right.
C. How timely are your controls?
1. Steering control predicts results and takes corrective action before the
operation or project is completed.
2. Concurrent controls-at the moment the action to be controlled takes place,
you instantly make a yes or no decision.
3. Post action controls always occur after the fact; compare results to
standard after the project is complete.
D. The basic 3-step control process
1. Set standards (targets, goals).
2. Measure actual performance against standards.
3. Take corrective action if necessary.
E. Comparing traditional and commitment-based controls
1. Traditional control tools
a) Diagnostic controls-formal systems (such as budgets) to zero in to
diagnose gaps
b) Personal (interactive) control-personally observe what is
happening and to influence activities
c) Rules and policies are used to guide behavior and to set limits
beyond which employees should not go unless directed.
2. Commitment and to create an environment in
which employees want to exercise self-control and do what is best for the
firm
II. Understanding Traditional Control Systems
A. Diagnostic controls and budgetary systems
1. Diagnostic controls are formal systems to zero in to diagnose gaps.
2. Principle of exception-in order to conserve supervisors time, only
significant deviations or exceptions from the standard are considered.
3. Budgetary or financial controls form the heart of any companys control
system.
4. Budgets are a formal financial expression of a supervisors plans.
a) Operating budgets show sales and/or expenses by department.
b) Financial responsibility centers-individuals/groups are assigned the
responsibility for a particular set of financial outputs and/or inputs.
c) whose supervisors are held
accountable for profit
d) whose supervisors are held
accountable for generating revenues
B. Activity based costing (ABC)
1. ABC is a system for allocating costs to products or services that takes all
the products or services costs into account including production,
distribution, marketing, and sales.
2. Balanced scorecard is a process for managing employees performance
and for aligning all employees with key objectives.
3. Strategy map is a graph that summarizes the of
activities that contribute to a companys success. (See Figure 5-6)
4. Digital dashboard presents the supervisor a picture of where his or her
department has been and where it is going. (See Figure 5-7)
5. Enterprise resource planning (ERP) systems is a company-wide integrated
computer system with compatible software modules for each department.
6. Personal or interactive control is the oldest and most basic way to stay in
control. Management by walking around is meant to get supervisors out
to personally interact with employees.
III. How Do People React to Control?
A. Unintended consequences of controls
1. Tricky behavior
2. Games-taking actions that improve performance in terms of the control
system
3. Negative attitudes-most people are programmed to resist efforts to control
them.
B. Encouraging self-control
1. Todays empowered work team approach makes encouraging self-control
even more important.
2. How to get subordinates to exercise self-control
a) Use motivation
b) Guide employees values and beliefs
c) Take actions to improve employee commitment
3. Using culture and values to foster self-control
a) Supervisors should set a good example of ethical business
behavior.
b) A companys organizational culture is the characteristic values,
traditions, and behaviors employees share.
4. How supervisors build employee commitment (the relative strength of an
individuals identification with and involvement in an organization)
a) Foster people (values first).
b) Build a sense of shared fate and community.
c) Make it a crusade; promote a grand vision.
d) Use financial rewards and profit sharing.
e) Encourage employee development and self-actualization.
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