Fundamentals of Management

Sixth Edition

Robbins and DeCenzo

with contributions from Henry Moon

CHAPTER

Part V: Controlling

13
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Foundations of Control

PowerPoint Presentation by Charlie Cook The University of West Alabama

What Is Control?
Control
Monitoring activities to ensure that they are being

accomplished as planned and of correcting any significant deviations Ensures that activities are completed in ways that lead to the attainment of the organizations goals.

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EXHIBIT 131

Characteristics of Three Approaches to Designing Control Systems

Type of Control Market

Characteristics
Uses external market mechanisms, such as price competition and relative market share, to establish standards used in system. Typically used by organizations with clearly specified and distinct products or services that face considerable marketplace competition. Emphasizes organizational authority. Relies on administrative and hierarchical mechanisms, such as rules, regulations, procedures, policies, standardization of activities, well-defined job descriptions, and budgets to ensure that employees exhibit appropriate behaviors and meet performance standards. Regulates employee behavior by the shared values, norms, traditions, rituals, beliefs, and other aspects of the organizations culture. Often used by organizations in which teams are common and technology is changing rapidly.

Bureaucratic

Clan

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EXHIBIT 132

The Control Process

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134

The Control Process

The Process of Control
1. Measuring actual

performance.
2. Comparing actual

performance against a standard.

3. Taking action to correct

deviations or inadequate standards.

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Steps in the Control Process

1. Measuring Actual Performance
Personal observation, statistical reports, oral

reports, and written reports Management by walking around (MBWA)

A phrase used to describe when a manager is out in the work area interacting with employees

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Steps in the Control Process (contd)

2. Comparing actual performance against a standard
Comparison to objective measures: budgets,

standards, goals Range of variation

The acceptable parameters of variance between actual performance and the standard

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EXHIBIT 133

Defining an Acceptable Range of Variation

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138

Steps in the Control Process (contd)

3. Taking managerial action to correct deviations or inadequate standards
Immediate corrective action

Correcting a problem at once to get performance back on track

Determining how and why performance has deviated and then correcting the source of deviation Adjusting the performance standard to reflect current and predicted future performance capabilities

Basic corrective action

Revising the standard

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EXHIBIT 134

South Atlantic Distributors Sales Performance for July (hundreds of cases)

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Types Of Control
Feedforward Control
Prevents anticipated problems.

Concurrent Control
Takes place while an activity is in progress.

Feedback Control
Takes place after an action
Provides evidence of planning effectiveness Provides motivational information to employees

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EXHIBIT 135

Types of Control

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Steps in Performance Feedback

1. Schedule the feedback session in advance and be prepared.
2. Put the employee at ease. 3. Make sure the employee knows the purpose of the feedback session.

4. Focus on specific rather than general work behaviors.

5. Keep comments impersonal and job related. 6. Support feedback with hard data. 7. Direct the negative feedback toward work-related behavior that the employee controls. 8. Let the employee speak. 9. Ensure that the employee has a clear and full understanding of the feedback. 10. Detail a future plan of action.
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The Qualities Of An Effective Control System

Accuracy Timeliness Economy Flexibility Understandability Reasonable criteria Strategic placement Emphasis on the exception Multiple criteria Corrective action

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Accuracy. : reliable and produces valid data. Timeliness. : provides timely information. Economy. Managers should impose only the controls needed to produce the desired behavior. Flexibility. Controls must be adjustable because times and conditions change. Understandability. Employees will misunderstand or ignore a cryptic control system.

Reasonable criteria. Control standards must be reasonable and attainable. If they are unreasonable, they no longer motivate. Strategic placement. Management should control the factors that are strategic to the organization. Emphasis on the exception. Effective controls minimize the routine and pinpoint the exceptional. Multiple criteria. Multiple performance measures expedite (mempercepatkan) accurate performance assessments. Corrective action. Effective controls identify the problem and specify the solution.

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What Contingency Factors Affect the Design of A Control System?

Size of the organization The job/functions position in the organizations hierarchy Degree of organizational decentralization Type of organizational culture Importance of the activity to the organizations success
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First, control systems should vary according to the size of the organization. Second, the higher one moves in the organizations hierarchy, the greater the need for a multiple set of control criteria that are relevant to the units goals. Third, the greater the degree of centralization, the more managers will need feedback on the performance of subordinate decision makers. Fourth, the organizational culture may promote trust, autonomy, and openness, or it may foster fear and reprisal. Fifth, the importance of an activity influences whether, and how, it will be controlled.

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EXHIBIT 136

Contingency Factors in the Design of Control Systems

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A Special Case of Control: Sarbanes-Oxley Act

A law establishing procedures for public companies to report their financial status.
The CEO and CFO must personally certify the

organizations financial reports. The organization must have in place procedures and guidelines for audit committees. CEOs and CFOs must pay back bonuses and stock options if corporate profits are restated. Personal loans or lines of credit for executives are now prohibited.

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A Special Case of Control: Sarbanes-Oxley Act (contd)

Penalties for Noncompliance:
Falsely stating corporate financials, can result in the

executive being fined up to $1 million and imprisoned for up to 10 years. If the executives action is determined to be willful, both the fine and the jail time can be doubled.

Reporting of Corporate Misdeeds (kesalahan)

Establish an environment free from reprisals

Protection for employees who come forward (whistleblowing) and report wrongdoing by executives.

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Controls And Cultural Differences

Methods of controlling employee behavior and operations can be quite different in different countries.
Distance creates a tendency for formalized controls

in the form of extensive, formal reports. In less technologically advanced countries, direct supervision and highly centralized decision making are the basic means of control. Local laws constraint the corrective actions that managers can take foreign countries.

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The Dysfunctional Side Of Control

Problems with Unfocused Controls
Failure to achieve desired or intended results occur

when control measures lack specificity

Problems with Incomplete Control Measures

Individuals or organizational units attempt to look

good exclusively on control measures.

Problems with Inflexible or Unreasonable Control Standards

Controls and organizational goals will be ignored or

manipulated.

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Contemporary Issues In Control

The right to personal privacy in the workplace versus:
Employers monitoring of employee activities in the

workplace Employers liability for employees creating a hostile environment Employers need to protect intellectual property

Remember: The computer on your desk belongs to the company.

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Contemporary Issues in Control

Cross-Cultural Issues
The use of technology to increase direct corporate

control of local operations

Legal constraints on corrective actions in foreign

countries
Difficulty with the comparability of data collected from

operations in different countries

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Contemporary Issues in Control (contd)

Workplace Concerns
Workplace privacy versus workplace monitoring:
E-mail, telephone, computer, and Internet usage Productivity, harassment, security, confidentiality, intellectual property protection

Employee theft

The unauthorized taking of company property by employees for their personal use. Anger, rage, and violence in the workplace is affecting employee productivity.
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Workplace violence

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Exhibit 1711 Top Internet Video Sites Viewed at Work Top 10 Internet video brands viewed in the U.S. while
at work for January 2008, in millions of streams YouTube Yahoo Fox Interactive Media MSN/Windows Live ESPN CNN Digital Turner Entertainment NBC Universal Disney Online
Source: Bobby White, The New Workplace Rules: No Video Watching, Wall Street Journal, March 4, 2008, p. B3.

674.2 156.5 92.8 74.2 68.3 41.6 41.4 30.5 27.2 23.5
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Nickelodeon

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Exhibit 1712 Controlling Employee Theft

Sources: Based on A.H. Bell and D.M. Smith. Protecting the Company Against Theft and Fraud, Workforce Online (www.workforce.com) December 3, 2000; J.D. Hansen. To Catch a Thief, Journal of Accountancy, March 2000, pp. 4346; and J. Greenberg, The Cognitive Geometry of Employee Theft, in Dysfunctional Behavior in Organizations: Nonviolent and Deviant Behavior, eds. S.B. Bacharach, A. OLeary-Kelly, J.M. Collins, and R.W. Griffin (Stamford, CT: JAI Press, 1998), pp. 14793.

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Exhibit 1713

Workplace Violence 42% 29% 23%

Witnessed yelling or other verbal abuse Yelled at co-workers themselves Cried over work-related issues Seen someone purposely damage machines or furniture Seen physical violence in the workplace Struck a co-worker

14%
10% 2%

Source: Integra Realty Resources, October-November Survey of Adults 18 and Over, in Desk Rage. BusinessWeek, November 20, 2000, p. 12. Copyright 2010 Pearson Education, Inc. Publishing as Prentice Hall 1727

Exhibit 1714 Controlling Workplace Violence

Sources: Based on M. Gorkin, Five Strategies and Structures for Reducing Workplace Violence, Workforce Online (www.workforce.com). December 3, 2000; Investigating Workplace Violence: Where Do You Start? Workforce Online (www.forceforce.com), December 3, 2000; Ten Tips on Recognizing and Minimizing Violence, Workforce Online (www.workforce.com), December 3, 2000; and Points to Cover in a Workplace Violence Policy, Workforce Online (www.workforce.com), December 3, 2000.

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Contemporary Issues in Control (contd)

Customer Interactions
Service profit chain

Is the service sequence from employees to customers to profit.

Service capability affects service value which

impacts on customer satisfaction that, in turn, leads to customer loyalty in the form of repeat business (profit).

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Contemporary Issues in Control (contd)

Corporate Governance
The system used to govern a corporation so that the

interests of the corporate owners are protected.

Changes in the role of boards of directors

Increased scrutiny of financial reporting (Sarbanes-Oxley Act of 2002)

More disclosure and transparency of corporate financial information

Certification of financial results by senior management

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Perspective on Employee Theft

Industrial Security
The opportunity to steal presents itself through lax

controls and favorable circumstances.

Criminologists
Employees steal to relieve themselves of financial-

based or vice-based pressures.

Clinical Psychologists
Employees steal because they can rationalize

whatever they are doing as being correct and appropriate behavior.

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