Transcript Ch. 16 Outline

Ch. 16 Outline
1. Bureaucratic Control Systems
The Control Cycle
Different Approaches to Bureaucratic control
Financial Controls
The Downside to Bureaucratic Control
2. Other Controls
Market Control
Clan Control
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Characteristics of Control
• Managers can apply three broad strategies for
achieving organizational control
– Bureaucratic control is the use of rules, regulations, and
formal authority to guide performance
– Market Control involves the use of pricing mechanisms
to regulate activities in organizations as though they were
economic transactions
– Clan Control Is based on the idea that employees may
share the values, expectations, and goals of the
organization and act in accordance with them
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Control
• Control is essential for the attainment of
any management objective
– Our Text—Control is any process that directs
the activities of individuals toward the
achievement of organizational goals
– Other Texts—The Process of monitoring
activities to ensure that they are being
accomplished as planned and of correcting
any significant deviations.
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Approaches to Bureaucratic
Control
• There are three approaches to bureaucratic control
– Feed forward Control takes place before operations
begin and includes policies, procedures, and rules
designed to ensure that planned activities are carried out
properly
– Concurrent Control takes place while plans are being
carried out and includes directing, monitoring, and finetuning activities
– Feedback Control focuses on the use of information
about results to correct deviations from the acceptable
standard after they arise
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Management Audits
• Management audits are an evaluation of
the effectiveness and efficiency of various
systems within an organization
• Management audits may be
– External – this occurs when one organization
evaluates another organization
– Internal – these are a periodic assessment of a
company’s own planning, organizing, leading,
and controlling processes
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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
• This is one of the most widely recognized and
commonly used methods of managerial control
• It is commonly called budgeting
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Budgetary Control
• Budgetary control begins with an estimate
of sales and expected income
• One of the primary considerations is the
length of the budget period
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Financial Controls
• Two financial statements that help
control overall organizational
performance are:
– Balance sheet shows the financial picture of a
company at a given time
– Profit and loss statement is an itemized
financial statement of the income and expenses
of a company’s operations
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Financial Controls
• Financial ratios are also an effective
approach for checking on the overall
performance of the enterprise
• They allow managers to effectively
compare their organization’s
performance with other organization’s
performance
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Designing Effective Control
Systems
• Effective control systems maximize potential benefits
and minimize dysfunctional behaviors
• Five characteristics of effective control systems
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They are based on valid performance standards
They communicate adequate information to employees
They are acceptable to employees
They use multiple approaches
They recognized the relationship between empowerment
and control
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Market Control
• Market controls involve the use of economic forces
– and the pricing mechanisms that accompany
them – to regulate performance
• System is based on the principle that as output
from an individual, department, or business unit
creates value to other people, a price can be
negotiated for its exchange
• Two effects of this occur
– Price becomes an indicator of the value of the product
or service
– Price competition has the effect of controlling
productivity and performance
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Market Controls
• At the corporate level market controls
are used to regulate independent business
units
• At the business unit level market controls
are used to regulate exchanges among
departments and functions
– Transfer price is the price charged by one unit
for a product or service provided to another
unit within the organization
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Market Controls
• Market controls are
used at the
individual level to
determine wage
levels for the skills
that employees
possess
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Clan Control: The Role of
Empowerment and Culture
• Managers are discovering that control systems
based solely on bureaucratic and market
mechanisms are insufficient for directing
today’s workforce because
– Employee’s jobs have changed
– The nature of management has changed
– The employment relationship has changed
• Because of this empowerment has become a
necessary aspect of a manager’s repertoire of
control
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Clan Control: The Role of
Empowerment and Culture
• Clan control involves creating relationships
built on mutual respect and encouraging each
individual to take responsibility for his or her
actions
• Employees work within a guiding framework of
values, and they are expected to use good
judgment
• The emphasis in an empowered organization is
on satisfying customers, not on pleasing the boss
• Clan control takes a long time to develop and an
even longer time to change
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