Professional Documents
Culture Documents
Foundation of
Control
Chapter 8
Control, Change, and
Entrepreneurship
Copyright 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Learning Objectives
1. Define organizational control, and identify the main
output and behaviour controls managers use to
coordinate and motivate employees.
2. Describe the four steps in the control process and
the way it operates over time.
3. Explain the role of clan control or organizational
culture in creating an effective organizational
architecture.
4. Discuss the qualities of a good control system.
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Control Systems
Figure 8.1
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Output Control
Use of goals or output performance standards
that will best measure efficiency, quality,
innovation, and responsiveness to customers
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Output Control:
Financial Measures of Performance
Financial information used to evaluate the
overall organizational performance, e.g.:
Measures of how efficiently managers convert
resources into profits, i.e. return on investment
(ROI).
Measures of how much percentage profit a
company is earning on sales, i.e. operating margin
Measures of how efficiently managers turn
inventory over so that excessive inventory is not
carried, i.e. inventory turnover
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Output Control:
Organizational Goals
Goals should be specific and difficult
Stretch goals
goals that challenge and stretch managers ability
but are not out of reach and do not require an
impossibly high expenditure of managerial time
and energy.
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Output Control:
Organizational Goals
Organization-Wide Goal Setting
Figure 8.4
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Output Control:
Operating Budgets
Operating Budget
A blueprint that states how managers
intend to allocate and use the
resources they control to attain organizational
goals effectively and efficiently
Budget for expenses, revenues and/or profit
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Behaviour Control
Used to keep employees on track and make
organizational structures work
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Behaviour Control:
Direct Supervision
Done by managers who:
Actively monitor and observe the behaviour of
their subordinates
Teach subordinates the behaviours that are
appropriate and inappropriate
Intervene to take corrective action as
needed
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Behaviour Control:
Direct Supervision
Drawbacks:
Expensive
Can demotivate subordinates
More complex a job is, the more difficult it is for
a manager to evaluate how well a subordinate is
performing
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Behaviour Control:
Management by Objectives
A goal-setting process in which managers and
Bureaucratic Control
Control of behaviour by means of a
comprehensive system of rules and standard
operating procedures.
Rules and SOPs guide behaviour and specify
what employees are to do when they confront a
problem that needs a solution
Standardized behaviour leads to standardized
outputs
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Bureaucratic Control
Problems with Bureaucratic Control
Rules easier to make than discarding them,
leading to bureaucratic red tape and slowing
organizational reaction times to problems
Firms become too standardized and lose
flexibility to learn, to create new ideas, and to
solve new problems
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Clan Control
Inert Culture
Culture that leads to
values and norms
that fail to motivate
or inspire employees
Leads to stagnation
and often failure over
time
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Adaptive Culture
Emphasize long-term employment relationship
Develop long-term career paths for employees
Heavily invest in training and development
Inert Culture
Short-term employment
Minimal investment in employees who perform
simple, routine tasks
Employees are not often rewarded based on their
performance
Employees are content to be told what to do
Employees have little incentive or motivation to
perform beyond minimum work requirement
Emphasize close supervision and hierarchical
authority
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Control Systems
A good control system should:
be flexible so managers can respond as needed
provide accurate information about the organization
provide information in a timely manner
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Reference
McGraw-Hill Education (2014). BUS10306
Management customized text, Chapter 10.
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