Management

A Practical Introduction
Third Edition
Angelo Kinicki &
Brian K. Williams

Kinicki/Williams, Management: A Practical Introduction 3e ©2008, McGraw-Hill/Irwin

 Chapter 16: Control

Techniques for Enhancing

Organizational Effectiveness
Managing for Productivity
Control
The Balanced Scorecard, Strategy Maps, & Measurement
Management
Levels & Areas of Control
Some Financial Tools for Control
Total Quality Management
Managing Control
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 16.1 Managing for Productivity

WHAT IS PRODUCTIVITY?

Productivity is defined as outputs divided by inputs

where: outputs are the goods and services produced,
and inputs are labor, capital, materials, and energy
Productivity is important because it determines
whether a company will make a profit and affects a
country’s standard of living
Maintaining productivity depends on control

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 16.1 Managing for Productivity

Figure 16.1: Managing for Productivity and Results

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 16.2 Control: When Managers
Monitor Performance
WHY IS CONTROL IMPORTANT?

Control is making something happen the way it was planned

to happen, while controlling is monitoring performance,
comparing it with goals, and taking corrective action as
needed
Recall that:
-planning is setting goals and deciding how to achieve them
-organizing is arranging tasks, people, and other resources
to accomplish the work
-leading is motivating people to work hard to achieve the
organization’s goals
-controlling is making sure performance meets objectives

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16.2 Control: When Managers
Monitor Performance

Figure 16.2: Controlling for Productivity

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 Chapter 16: Control

CLASSROOM PERFORMANCE SYSTEM

The four management functions include all of the

following except

A) implementing
B) organizing
C) planning
D) controlling

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 16.2 Control: When Managers
Monitor Performance
There are six reasons why control is needed:
1. To adapt to change & uncertainty - organizations
need to be able to deal with change and uncertainty
in the environment
2. To discover irregularities and errors - without
checks and balances, companies might not survive
3. To reduce costs, increase productivity, or add
value - control systems can reduce costs, increase
output, and add value to a product

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 16.2 Control: When Managers
Monitor Performance

4. To detect opportunities - controls can help firms

identify opportunities that might otherwise go
unnoticed
5. To deal with complexity - controls help firms deal
with the complexities of multiple product lines,
customer bases, and so on
6. To decentralize decision making & facilitate
teamwork - controls allow top managers to
decentralize control to lower levels and encourage
teamwork

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 16.2 Control: When Managers
Monitor Performance

There are four steps in the control process:

1. Establish Standards
The desired performance level for a given goal is a
control standard, or performance standard
Standards can be broad or narrow
2. Measure Performance
Performance is measured using three sources:
written reports, oral reports, and personal
observation

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 16.2 Control: When Managers
Monitor Performance
3. Compare Performance To Standards
Measured performance is compared to established
standards
The amount of deviation acceptable depends on the
predetermined range of variation
Some firms follow management by exception where
managers are informed of a situation only if data show a
significant deviation from standards
4. Take Corrective Action, If Necessary
Firms can make no changes to the current situation,
recognize and reinforce positive performance, or take action
to correct negative performance

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16.2 Control: When Managers
Monitor Performance

Figure 16.4: Steps in the Control Process

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 16.3 The Balanced Scorecard, Strategy
Maps & Measurement Management
HOW CAN MANAGERS ESTABLISH STANDARDS
AND MEASURE PERFORMANCE?

The balanced scorecard, strategy maps, and

measurement management are all techniques that
managers use to establish standards and measure
performance
The balanced scorecard gives top management a
fast but comprehensive view of the organization
using four indicators: customer satisfaction, internal
processes, innovation and improvement activities,
and financial measures
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16.3 The Balanced Scorecard, Strategy
Maps & Measurement Management

Figure 16.5:
The
Balanced
Scorecard

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 Chapter 16: Control

CLASSROOM PERFORMANCE SYSTEM

The balanced score card sets goals and performance

measures from all of the following perspectives
except

A) innovation and learning

B) financial
C) customer
D) productivity
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 16.3 The Balanced Scorecard, Strategy
Maps & Measurement Management
A strategy map is a visual representation of the
four perspectives of the balanced scorecard that
enables managers to communicate their goals so
that everyone in the company can understand how
their jobs are linked to the overall objectives of the
organization
There are two types of organizations:
-measurement-managed companies are ones that
have set measurable criteria that are linked to
performance goals
-non-measurement managed firms do not have
measurable criteria linked to goals
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16.3 The Balanced Scorecard, Strategy
Maps & Measurement Management
Figure 16.6: The Strategy Map

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 16.4 Levels & Areas of Control

HOW SHOULD CONTROL BE IMPLEMENTED?

There are three levels of control:

1. Strategic control is monitoring performance to
ensure that strategic plans are being implemented
and taking corrective action as needed
Strategic control is performed by top managers
with reports being issued quarterly, semi-annually, or
annually

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 16.4 Levels & Areas of Control

2. Tactical control is monitoring performance to

ensure that tactical plans – those at the divisional or
departmental level – are being implemented and
taking corrective action as needed
Control is done by middle managers with reports
on a weekly or monthly basis
3. Operational control is monitoring performance to
ensure that operational plans – day-to-day goals –
are being implemented and taking corrective action
as needed
Control is by first-line managers with reports on a
daily basis
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 Chapter 16: Control

CLASSROOM PERFORMANCE SYSTEM

Which type of control issues reports on a weekly or

monthly basis?

A) strategic
B) operational
C) supervisory
D) tactical

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 16.4 Levels & Areas of Control

There are six areas of organizational control:

1. Physical area control includes things like
equipment controls to monitor computer use,
inventory management controls to keep track of
inventory levels, and quality controls to ensure that
products are being produced properly
2. Controls to monitor human resources include
personality tests, drug tests, and performance tests
3. Controls of informational areas include production
schedules, sales forecasts, and analyses of the
competition
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 16.4 Levels & Areas of Control

4. Financial controls affect debt payments, payroll,

budgets, and so on
5. Structural control involves the organizational
hierarchy
Bureaucratic control is characterized by rules,
regulations, and formal authority
Decentralized control is characterized by informal
and organic structural arrangements
6. Cultural controls influence the norms and values of
the organization’s culture which then affect the work
process and performance levels
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 16.3 Some Financial Tools For Control

WHAT ARE THE MAJOR FINANCIAL TOOLS FOR

MANAGERS?

Financial controls including budgets and financial

statements are especially important to firms
A budget is a formal financial projection
Budgets provide a yardstick against which
performance can be measured and comparisons can
be made to other time periods, departments, and so
on
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 16.3 Some Financial Tools For Control

There are two different ways to budget:

Incremental budgeting allocates increased or decreased
funds to a department by using the last budget as a reference
point—only incremental changes in the budget request are
reviewed
Zero-based budgeting forces each department to start from
zero in projecting its funding needs for the budget period
There two different types of budgets:
Fixed budgets allocate resources on the basis of a single
estimate of costs
Variable budgets allow the allocation of resources to vary in
proportion with various levels of activity

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 16.3 Some Financial Tools For Control

A summary of some aspect of an organization’s financial

status is a financial statement
There are two basic types of financial statements:
A balance sheet summarizes an organization’s overall
financial worth (assets and liabilities) at a specific point in time
where:
-assets are the resources the organization controls, current
assets are cash and other assets that are readily convertible
to cash fixed assets are property, buildings, and equipment
that are harder to convert to cash, and liabilities are claims by
suppliers, lenders, and others

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 16.3 Some Financial Tools For Control

The income statement summarizes an organization’s

financial results - revenues (the assets from the sale of goods)
and expenses (the costs required to produce goods and
services) - over a specified period of time
Liquidity ratios indicate how easily a company’s assets can
be converted to cash
Debt-management ratios indicate the degree to which an
organization can meet its long-term financial obligations
Asset management ratios indicate how effectively an
organization is managing resources
Return ratios indicate how effective management is at
generating a return on assets

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 Chapter 16: Control

CLASSROOM PERFORMANCE SYSTEM

Ratios that indicate how effectively an organization is

managing resources are

A) return ratios
B) liquidity ratios
C) asset management ratios
D) debt management ratios

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 16.3 Some Financial Tools For Control

Formal verifications of an organization’s financial

and operational systems are called audits
There are two types of audits:
An external audit is a formal verification of an
organization’s financial accounts and statements by
outside experts
An internal audit is a verification of an
organization’s financial accounts and statements by
the organization’s own professional staff

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 16.6 Total Quality Management

HOW CAN QUALITY BE IMPROVED?

Total quality management (TQM) is a comprehensive

approach, led by top manager and supported throughout the
organization, dedicated to continuous quality improvement,
training, and customer satisfaction
The two core principles of TQM are people orientation
(everyone involved in the organization should focus on
delivering value to customers), and improvement orientation
(everyone should work on continuously improving work
processes)
There are several techniques for improving quality including
employee involvement, benchmarking, outsourcing, reduced
cycle time, and statistical process control
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 16.7 Managing Control Effectively

HOW CAN CONTROL BE MANAGED

SUCCESSFULLY?

Successful control systems are:

1. Strategic & results oriented – they support strategic plans
and focus on activities that will make a real difference to the
firm
2. Timely, accurate, & objective
3. Realistic, positive, & understandable & encourage self-
control
4. Flexible - so that they can be modified as needed
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 Chapter 16: Control
There are several barriers that can limit successful control:
1.Too much control - when companies exert too much control,
employees may rebel
2. Too little employee participation - employee participation
can enhance productivity
3. Overemphasis on means instead of ends
4. Overemphasis on paperwork - unnecessary emphasis on
paperwork can reduce effort in other areas
5. Overemphasis on one instead of multiple approaches -
using multiple control activities can increase accuracy and
objectivity

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 Chapter 16: Control

CLASSROOM PERFORMANCE SYSTEM

Which of the following is not a barrier to successful

control?

A) flexibility
B) too much control
C) overemphasis on paperwork
D) too little employee participation

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 Finale: Some Life Lessons

WHAT ARE THE KEYS TO MANAGERIAL

SUCCESS?

Initiative is always in short supply

If you have an active desire to learn new things,
you’ll be ready for the next step
Think ahead, understand what your obstacles are,
and develop a strategy to win
Be flexible, keep your cool, and take yourself lightly
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