Managerial Control
Operations Management
Managerial control
Control is defined as any process that directs the activities of individuals toward the achievement of organizational goals.
Control has been called one of the conjoined twins of management; the other twin is planning.
Planning lays out a framework for the future and, in this sense, provides a blueprint for control. Control systems, in turn, regulate the allocation and use of resources and, in so doing, facilitate the process of the next phases of planning.
Managerial control
Symptoms of an Out-of-Control Company:
Managerial control
Managers can apply three broad strategies for achieving organizational control:
Managerial control
Concepts | Definition |
Bureaucratic control | Uses formal rules, standards, hierarchy, and legitimate authority. Works best where tasks are certain and workers are independent. |
Market control | Uses prices, competition, profit centres, and exchange relationships. Works best where tangible output can be identified and a market can be established between parties. |
Clan control | Involves culture, shared values, beliefs, expectations, and trust. Works best where there is no one best way to do a job, and employees are empowered to make decisions. |
The Control Cycle
A typical control system has four major steps:
The Control Cycle
Step 1: Setting Performance Standards
Every organization has goals: profitability, innovation, satisfaction of customers and employees, and so on. A standard is the level of expected performance for a given goal.
Standards are targets that establish desired performance levels, motivate performance, and serve as benchmarks against which to assess actual performance. Standards can be set for any activity—financial activities, operating activities, legal compliance, charitable contributions, and so on.
The Control Cycle
Step 2: Measuring Performance
The second step in the control process is to measure performance levels.
For example, managers can count units produced, days absent, papers filed, samples distributed, and dollars earned. Performance data commonly are obtained from three sources: written reports, oral reports, and personal observations.
The Control Cycle
Step 3: Comparing Performance with the Standard
The third step in the control process is comparing performance with the standard. In this process, the manager evaluates the performance. For some activities, relatively small deviations from the standard are acceptable, whereas in others a slight deviation may be serious.
Principle of exception
A managerial principle stating that control is enhanced by concentrating on the exceptions to or significant deviations from the expected result or standard.
The Control Cycle
Step 4: Taking Action to Correct Problems and Reinforce Successes
The last step in the control process is to take appropriate action when there are significant deviations.
This step ensures that operations are adjusted to achieve the planned results—or to continue exceeding the plan if the manager determines that is possible. In cases in which significant variances are discovered, the manager usually takes immediate and vigorous action.
The Control Cycle
After trying corrective action, a growing number of organizations conduct an after-action review, a frank and open-minded discussion of the four questions aimed at continuous improvement.
Approaches to Bureaucratic Control
The three approaches to bureaucratic control are:
Takes place before operations begin and includes policies, procedures, and rules designed to ensure that planned activities are carried out properly.
Examples include inspection of raw materials and proper selection and training of employees.
Takes place while plans are being carried out. It includes directing, monitoring, and fine-tuning activities as they occur.
Focuses on the use of information about results to correct deviations from the acceptable standard after they arise.
Approaches to Bureaucratic Control
One of the most important quality control tools to emerge is Six Sigma.
Six sigma is designed to reduce defects in all organization processes—not just product defects but anything that may result in customer dissatisfaction.
Management Audits
Management audits have developed as a means of evaluating the effectiveness and efficiency of various systems within an organization, from social responsibility programs to accounting control.
External Audits
An external audit occurs when one organization evaluates another organization.
Typically, an external body such as a CPA firm conducts financial audits of an organization
Internal Audits
A periodic assessment of a company’s own planning, organizing, leading, and controlling processes.
Budgetary Controls
Budgetary control is the process of finding out what’s being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences.
Budgetary control is commonly called budgeting.
Sales budget
Production budget
Cost budget
Cash budget
Capital budget
Master budget
Financials Controls
Businesses commonly use other statements for financial control. Two financial statements that help control overall organizational performance are:
The Downside of Bureaucratic Control
A control system cannot be effective without consideration of how people will react to it.
For effective control of employee behavior, managers should consider three types of potential responses to control:
Designing Effective Control Systems
Effective control systems maximize potential benefits and minimize dysfunctional behaviours. To achieve this, management needs to design control systems that:
1. Establish valid performance standards.
2. Provide adequate information to employees.
3. Ensure acceptability to employees.
4. Maintain open communication.
5. Use multiple approaches.
Market Control
The system works like this: when output from an individual, department, or business unit has value to other people; a price can be negotiated for its exchange.
Clan Control: The Role of Empowerment and Culture
Increasingly, managers are discovering that control systems based solely on bureaucratic and market mechanisms are insufficient for directing today’s workforce.
There are several reasons for this:
Clan Control: The Role of Empowerment and Culture
For these three reasons, the concept of empowerment not only has become more popular in organizations but has become a necessary aspect of a manager’s repertoire of control.