Management: A Global and Entrepreneurial Perspective by Weihrich, Cannice, and Koontz

MANAGEMENT:
A GLOBAL AND ENTREPRENEURIAL PERSPECTIVE

by Weihrich, Cannice, and Koontz
Chapter
18
The System and Process of Controlling
© 2008 Weihrich and Cannice Chapter 18. The System and Process of Controlling 1
After studying this chapter, you should
understand:
1. The steps in the basic control process.

2. The critical control points, standards, and benchmarking.
3. The feedback system.
4. That real-time information will not solve all the problems of
management control.
5. That feedforward control systems can make management
control more effective.
6. Some of the most widely-used techniques of overall
control of an enterprise.
7. The use and problems of management audits by
accounting firms.
8. The difference between bureaucratic and clan control.
9. The requirements for effective controls.
What is Controlling?
• Controlling is the measurement and

correction of performance in order to
make sure that enterprise objectives
and the plans devised to attain them are
being accomplished.
• Planning and controlling are closely
related.
The Basic Control Process
• The basic control process involves

three steps:
– Establishing standards
– Measuring performance against these
standards
– Correcting variations from standards and
plans
• Standards are criteria of performance
Principle of Critical Point Control
• Effective control requires attention to those

factors critical to evaluating performance
against plans.
• Examples of critical point standards
– 1. physical standards, 2. cost standards, 3. capital
standards, 4. revenue standards, 5. program
standards, 6. intangible standards, 7. goals as
standards, and 8. strategic plans as control points
for strategic control
What is Strategic Control?
• Strategic control comprises systematic

monitoring at strategic control points
and modifying the organization's
strategy on the basis of this evaluation.
What is Benchmarking?
• Benchmarking is an approach for

setting goals and productivity measures
based on best-industry practices.
• Three types of benchmarking:
– Strategic
– Operational
– Management
Control as a Feedback System
• Management control is usually

perceived as a feedback system similar
to that which operates in the common
household thermostat.
Fig. 18-1 Feedback Loop of
Management Control
Real‑Time Information and Control
• Real‑time information is information

about what is happening while it is
happening.
Feedforward Control
• Managers need for effective control a system

that will tell them potential problems, giving
them time to take corrective action before
those problems occur.
• Feedforward systems monitor inputs into a
process to ascertain if the inputs are as
planned; if they are not, the inputs or the
process is changed in order to obtain the
desired results.
Fig. 18-2 Comparison of Simple Feedback
and Feedforward Systems
Requirements for Feedforward Control
1. Make a thorough and careful analysis of the planning and

control system, and identify the more important input
variables.
2. Develop a model of the system.
3. Keep the model up to date, reviewing it regularly to see
whether the input variables identified and their
interrelationships continue to represent realities.
4. Collect data on input variables regularly, and put them into
the system.
5. Regularly assess the variations of actual input data from
planned‑for inputs, and evaluate the impact on the
expected end result.
6. Take action.
Fig. 18-3 System of
Inputs for Feedforward
Inventory Control
Control of Overall Performance
• Many overall controls in business are

financial.
• The profit and loss statement shows all
revenues and expenses for a given time, so it
is a true summary of the results of business
operations.
• Return-on-investment control measures both
the absolute and the relative success of a
company or company unit by the ratio of
earnings to investment of capital.
Bureaucratic and Clan Control
• Bureaucratic control is characterized by

the wide use of rules, regulations,
policies, procedures, and formal
authority.
• Clan control is based on norms, shared
values, expected behavior, and other
cultural variables.
Requirements for Effective Controls
• Tailoring controls to plans and positions

• Tailoring controls to individual managers
• Designing controls to point up exceptions at critical
points
• Seeking objectivity of controls
• Ensuring flexibility of controls
• Fitting the control system to the organization culture
• Achieving economy of controls
• Establishing controls that lead to corrective action
KEY IDEAS AND CONCEPTS FOR REVIEW
• Controlling • Profit and loss control

• Steps in controlling • Return-on-investment
• Critical point control control
• Types of critical point • Management audit
standards • Bureaucratic control
• Benchmarking • Clan control
• Feedback system • Requirements for
• Real-time information effective controls
system • Exception principle
• Feedforward control • Principle of critical point
control

Management: A Global and Entrepreneurial Perspective by Weihrich, Cannice, and Koontz

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MANAGEMENT:

A GLOBAL AND ENTREPRENEURIAL PERSPECTIVE

1. The steps in the basic control process.

• Controlling is the measurement and

• The basic control process involves

• Effective control requires attention to those

• Strategic control comprises systematic

• Benchmarking is an approach for

• Management control is usually

• Real‑time information is information

• Managers need for effective control a system

1. Make a thorough and careful analysis of the planning and

• Many overall controls in business are

• Bureaucratic control is characterized by

• Tailoring controls to plans and positions

• Controlling • Profit and loss control

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