- Managers must monitor whether goals that were established as part of the planning process are being accomplished

ed efficiently
and effectively as planned.
- Appropriate controls can help managers look for specific performance gaps and areas for improvement.

I. What is Controlling and Why is it Important?:

- Controlling is the process of monitoring, comparing, and correcting work performance. Effective controls ensure that activities
are completed in ways that lead to the attainment of goals.
- All managers should control even if their units are performing as planned because they can’t really know unless they’ve evaluated
what activities have been done and compared actual performance against the desired standard.
- Control is important because it’s the only way that managers know whether organizational goals are being met and, if not, the
reasons why.
- The value of the control function can be seen in three specific areas:
+ Planning: Controls lets managers know whether their goals and plans are on target and what future actions to take.
+ Empowering employees: Control systems provide managers with information and feedback on employee performance
and minimize the chance of potential problems.
+ Protecting the workplace: Controls enhance physical security and help minimize workplace disruptions.

II. The Control Process:

- The process control is a three-step process of measuring actual performance, comparing actual performance against a
standard, and taking managerial action to correct deviations or to address inadequate standards.
- The control process assumes that performance standards already exist, and they do. They’re the specific goals created during the
planning process.
 1. Step 1: Measuring Actual Performance:
a) How We Measure: Four approaches used by managers to measure and report actual performance are personal
observations, statistical reports, oral reports, and written reports. Most managers use a combination of these approaches.
Benefits Drawbacks

- Get first hand knowledge. - Subject to personal biases.

Personal Observations - Information isn’t filtered. - Time-consuming.
- Intensive coverage of work activities. - Obtrusive.

- Easy to visualize. - Provide limited information.

Statistical Reports
- Effective for showing relationships. - Ignore subjective factors.

- Fast way to get information. - Information is filtered.

Oral Reports
- Allow for verbal and non-verbal feedback. - Information can’t be documented.

- Comprehensive.
Written Reports - Formal. - Take more time to prepare.
- Easy to file and retrieve.

b) What We Measure: is probably more critical to the control process than how we measure. Because selecting the wrong
criteria can create serious problems.
- Criteria such as employee satisfaction or turnover and absenteeism can be measured.
- Keeping costs within budget is also a fairly common control measure.
- Other control criteria should recognize the different activities that managers supervise.
 - Most work activities can be expressed in quantifiable terms. However, managers should use subjective measures
when necessary.
2. Step 2: Comparing Actual Performance Against the Standard:
- The comparing step determines the variation between actual performance and the standard. Although some variation in
performance can be expected in all activities, it’s critical to determine an acceptable range of variation - the acceptable
parameters of variance between actual performance and the standard.
- The significance of variation is determined by:
+ The acceptable range of variation from the standard (forecast or budget).
+ The size (large or small) and direction (over or under) of the variation from the standard (forecast or budget).

3. Step 3: Taking Managerial Action:

● Managers can choose among three possible courses of action: do nothing, correct the actual performance, or revise the
standards.
a) Do Nothing: Only if deviation is judged to be insignificant.
b) Correct Actual Performance:
- Corrective action: change strategy, structure, compensation schemes, or training programs, redesign jobs, or fire
employees.
- Depending on what the problem is, a manager could take different corrective actions:
+ Immediate corrective action: corrects problems at once to get performance back on track.
+ Basic corrective action: looks at how and why performance deviated before correcting the source of
deviation.
 - It’s not unusual for managers to rationalize that they don’t have time to find the source of a problem (basic
corrective action) and continue to perpetually “put out fires” with immediate corrective action. Effective
managers analyze deviations and, if the benefits justify it, take the time to pinpoint and correct the sources of
variance.
c) Revise the Standard:
- Examine the standard to ascertain whether or not the standard is realistic, fair, and achievable.
- Uphold the validity of the standard.
- Reset goals that were initially set too low or too high.
4. Managerial Decisions in Controlling:

III. Controlling for Organizational and Employee Performance:

1. What Is Organizational Performance?:
- Performance is the end result of an activity.
- Managers are concerned with organizational performance - the accumulated results of all the organization’s work
activities. Managers want their organizations, work units or work groups to achieve high levels of performance.
2. Measures of Organizational Performance:
a) Organizational Productivity:
 - Productivity is the amount of goods and services produced divided by the inputs needed to generate that output.
Organizations and individual work units want to be productive - produce the most goods and services using the
least amount of inputs:
+ Output is measured by the sales revenue an organization receives when goods are sold (selling price x
number sold).
+ Input is measured by the costs of acquiring and transforming resources into output.
- It’s management’s job to increase this ratio:
+ The easiest way is to raise prices of the outputs.
+ The only other option, then, is to decrease the input sides. By being more efficient in performing work and
thus decreasing the organization’s expenses.
- Ultimately, productivity is a measure of how efficiently employees do their work.
b) Organizational Effectiveness:
- Organizational effectiveness is a measure of how appropriate organizational goals are and how well those goals are
met. That’s the bottom line for managers, and it’s what guides managerial decisions in designing strategies and
work activities and in coordinating the work of employees.
- Organizational effectiveness is evaluated by:
+ Systems resource model: The ability of the organization to exploit its environment in acquiring scarce and
valued resources.
+ The process model: The efficiency of an organization’s transformation process in converting inputs to
outputs.
+ The multiple constituencies model: The effectiveness of the organization in meeting each constituencies’
needs.
c) Industry and Company Rankings:
- Fortune’s Best Companies to Work For are chosen by answers given by thousands of randomly selected employees on
a questionnaire called “The Great Place to Work Trust Index” and on materials filed out by thousands of company
managers, including a corporate culture audit created by the Great Place to Work Institute.
- Rankings are determined by specific performance measures, which are different for each list. These rankings give
managers (and others) an indicator of how well their company performs in comparison of others.
3. Controlling for Employee Performance:
- Since managers manage employees, they also have to be concerned about controlling for employee performance; that is,
making sure employees’ work efforts are of the quantity and quality needed to accomplish organizational goals.
 - It’s particularly important for managers to deliver effective performance feedback and to be prepared, if needed, to use
disciplinary actions - actions taken by a manager to enforce the organization’s work standards and regulations.
a) Delivering Effective Performance Feedback:
- Managers need to provide their employees with feedback so that employees know where they stand in terms of their
work.
- When giving performance feedback, both parties need to feel heard, understood, and respected. And if done that
way, positive outcomes can result.
- In a productive performance discussion, organizations have the opportunity to reinforce company values,
strengthen workplace culture, and achieve strategic goals.
b) Using Disciplinary Actions:
- It’s important for a manager to know what the organization’s policies are on discipline:
+ Is there a process for dealing with unsatisfactory job performance?
+ Do warnings need to be given when performance is inadequate?
+ What happens it, after the warnings, performance, or the troublesome behavior doesn’t improve?
- Progressive disciplinary action is an approach to ensure that the minimum penalty appropriate to the offense is
imposed. A typical progressive disciplinary action begins with a verbal warning and proceeds through a written
warning, suspension, and, only in the most serious cases, dismissal.
Problem Type Examples of each

Attendance Absenteeism, tardiness, abuse of sick leave.

On-the-Job Behaviors Insubordination, failure to use safety devices, alcohol or drug abuse.

Dishonesty Theft, lying to supervisors, falsifying information on employment application or on other organization forms

Criminal activities, unauthored strike activities, working for a competing organization (if no-compete clause
Outside Activities
is part of employment)

IV. Tools for Measuring Organizational Performance:

1. Feedforward/Concurrent/Feedback Controls:
● Managers can implement controls before an activity begins, during the time the activity is
going on, and after the activity has been completed.
 a) Feedforward Control:
- The most desirable type of control - feedforward control - prevents problems because it takes place before the
actual activity.
- The key to feedforward control is taking managerial action before a problem occurs. That way, problems can be
prevented rather than having to correct them after any damage has already been done.
- However, these controls require timely and accurate information that isn’t always easy to get.
b) Concurrent Control:
- Concurrent control takes place while a work activity is in progress.
- The best-known form of concurrent control is direct supervision. Another term for it is management by walking
around, which is when a manager is in the work area interacting directly with employees.
- All managers can benefit from using concurrent control, but especially first-line managers, because they can
correct problems before they become too costly.
c) Feedback Control:
- The most popular type of control relies on feedback control. In feedback control, the control takes place after the
activity is done.
- By the time a manager has the information, the problem have already occurred, leading to waste or damage.
- Feedback control have two advantages:
+ First, feedback gives managers meaningful information
on how effective their planning efforts were. Feedback
that shows little variance between standard and actual
performance indicates that the planning was generally on
target. If the deviation is significant, a manager can use
that information to formulate new plans.
+ Second, feedback can enhance motivation. People want
to know how well they’re doing and feedback provides
that information.
2. Financial Controls:
- To earn a profit, managers need financial controls. For instance, they
might analyze quarterly income statements for excessive expenses.
They might also calculate financial ratios to ensure that sufficient
cash is available to pay ongoing expenses, that debt levels haven’t
become too high, or that assets are used productively.
 - Managers might use traditional financial methods such as ratio analysis, and budget analysis:
+ Liquidity ratios measure an organization’s ability to meet its current debt obligations.
+ Leverage ratios examine the organization’s use of debt to finance its assets and whether it’s able to meet the interest
payments on the debt.
+ Activity ratios assess how efficiently a company uses its assets.
+ Profitability ratios measure how efficiently and effectively the company uses it assets to generate profits.
→ These ratios are calculated using selected information from the organization’s two primary financial statements (the
balance sheet and the income statement), which are then expressed as a percentage or ratio.
- When a budget is formulated, it’s a planning tool because it indicates which work activities are important and what and
how much resources should be allocated to those activities.
- But budgets are also used for controlling, because they provide managers with quantitative standards against which to
measure and compare resource consumption.
- “Timing” income and expenses to enhance current financial results, which gives an unrealistic picture of the
organization’s financial performance.
- New laws and regulations require companies to clarify their financial information.
3. Information Controls:
● Managers deal with information controls in two ways: (1) as a tool to help them control other organizational activities
and (2) as an organizational area they need to control.
a) How is Information Used in Controlling?: Managers need the right information at the right time and in the right amount
to monitor and measure organizational activities and performance.
- In measuring actual performance, managers need information about what is happening within their area of
responsibility and about the standards in order to be able to compare actual performance with the standards.
- They also rely on information to help them determine if deviations are acceptable.
- Finally, they rely on information to help them develop appropriate courses of action.
- A management information system (MIS) is a system used to provide managers with needed information on a
regular basis. In theory, this system can be manual or computer based.
- An MIS provides managers with information (processed and analyzed data), not merely data (raw, unanalyzed
facts). It collects data and turns them into relevant information for managers to use.
b) Controlling Information:
- Because information is critically important to everything an organization does, managers must have
comprehensive and secure controls in place to protect that information. Such controls can range from data
encryption to system firewalls to data back-ups, and other techniques as well.
 - Problems can lurk in places that an organization might not have considered, like blogs, search engines, and Twitter
accounts. Sensitive, defamatory, confidential, or embarrassing organization information has found its way into
search engine results.
4. Balanced Scorecard:
- The balanced scorecard approach is a way to evaluate organizational performance from in 4 areas that contribute to a
company’s performance: financial, customer, internal processes, and people/innovation/growth assets.
- According to this approach, managers should develop goals in each of the 4 areas and then measure whether the goals are
being met.
- Although a balance scorecard makes sense, managers will tend to focus on areas that drive their organization’s success
and use scorecards that reflect those strategies.
- You can’t focus on measuring only one performance area because others are affected as well. However, the other areas
support the central strategy.
5. Benchmarking of Best Practices:
- Benchmarks are the standards of excellence against which to measure and compare.
- Benchmarking is the search for the best practices among competitors or noncompetitors that lead to their superior
performance.
- At its most basic, benchmarking means learning from others. As a tool for monitoring and measuring organizational
performance, benchmarking can be used to identify specific performance gaps and potential areas of improvement.
- But best practices aren’t just found externally. Sometimes those best practices can be found inside the organization and
just need to be shared. Best practices frequently exists within an organization but usually go unidentified and unnoticed.
- One fertile area for finding good performance improvement ideas is an employee suggestion box.
- Some suggestions for internal benchmarking:
+ Connect best practices to strategies and goals: The organization’s strategies and goals should dictate what types of
best practices might be most valuable to others in the organization.
+ Identify best practices throughout the organization: Organizations must have a way to find out what practices have
been successful in different work areas and units.
+ Develop best practices reward and recognition systems: Individuals must be given an incentive to share their
knowledge. The reward system should be built into the organization’s culture.
+ Communicate best practices throughout the organization: Once best practices have been identified, that
information needs to be shared with others in the organization.
+ Create a best practices knowledge-sharing system: There needs to be a formal mechanism for organizational
members to continue sharing their ideas and best practices.
 + Nurture best practices on an ongoing basis: Create an organizational culture that reinforces a “we can learn from
everyone” attitude and emphasizes sharing information.

V. Contemporary Issues in Control:

1. Adjusting Controls for Cross-Cultural Differences and Global Turmoil:
- Control techniques can be quite different for different countries. The differences are primarily in the measurement and
corrective action steps of the control process.
- Technology’s impact on control is also seen when comparing technologically advanced nations with less technologically
advanced nations:
+ Managers in countries where technology is more advanced often use indirect control devices such as computer-
generated reports and analyses to ensure that work activities are going as planned.
+ In less technologically advanced countries, managers tend to use more direct supervision and highly centralized
decision making for control.
- Managers in foreign countries also need to be aware of constraints on investigating complaints and corrective actions
they can take. Some countries’ laws prohibit closing facilities, laying off employees, taking money out of the country, or
bringing in a new management team from outside the country.
- Another challenge for global managers in collecting data for measurement and comparison is comparability.
- Finally, global organizations need to have controls in place for protecting their workers and other assets during times of
global turmoil and disasters. The best time to be prepared is before an emergency occurs.
2. Workplace Privacy:
- Managers monitor workplace privacy through:
+ Email, telephone, computer, and Internet usage.
+ Productivity, harassment, security, confidentiality, intellectual property protection.
- Some reasons why managers feel they need to monitor what employees are doing:
+ Employees are hired to work. All the nonwork adds up to significant costs to businesses.
+ They don’t want to risk being sued for creating a hostile workplace environment because of offensive messages or
an inappropriate image displayed on a coworker’s computer screen.
+ They want to ensure that company secrets aren’t being leaked.
3. Employee Theft:
- Employee theft is defined as any unauthorized taking of company property by employees for their personal use. It can
range from embezzlement to fraudulent filing of expense reports to removing equipment, parts, software, or office
supplies from company premises.
 - Although retail businesses have long faced serious potential losses from employee theft, loose financial controls at start-
ups and small companies and the ready availability of information technology have made employee stealing an escalating
problem in all kinds and sizes of organizations.
- The industrial security people propose that people steal because the opportunity presents itself through lax controls and
favorable circumstances.
- Criminologists say it’s because people have financial-based pressures or vice-based pressures. And the clinical
psychologists suggest that people steal because they can rationalize whatever they’re doing as being correct and appropriate
behavior.
- The concept of feedforward, concurrent, and feedback control is useful for identifying measures to deter or reduce
employee theft.
FEEDFORWARD CONCURRENT FEEDBACK

- Use careful prehiring - Treat employees with respect and dignity. - Make sure employees know when theft or fraud
screening. - Openly communicate the costs of stealing. has occurred - not naming names but letting
- Establish specific policies - Let employees know on a regular basis about people know this is not acceptable.
defining theft and fraud and their successes in preventing theft and fraud. - Use the services of professional investigators.
discipline procedures. - Use video surveillance equipment if - Redesign control measures.
- Involve employees in writing conditions warrant. - Evaluate your organization's culture and the
policies. - Install “lock-out” options on computers, relationships of managers and employees.
- Educate and train employees telephones, and emails. - Install “lock-out” options on computers,
about the policies. - Use corporate hotline for reporting telephones, and emails.
- Have a professional review of incidences. - Use corporate hotline for reporting incidences.
your internal security controls. - Set a good example. - Set a good example.

4. Workplace Violence:
- Some dangerously dysfunctional work environments:
+ An uncertain economic environment, job uncertainties, declining value of retirement accounts, long hours,
information overload, other daily interruptions, unrealistic deadlines, and uncaring managers.
+ Employee work driven by TNC (time, numbers, and crises).
+ Rapid and unpredictable change where instability and uncertainty plague employees.
+ Destructive communication style where managers communicate in an excessively aggressive, condescending,
explosive, or passive-aggressive style; excessive workplace teasing or scapegoating.
 + Authoritarian leadership with a rigid, militaristic mindset of managers versus employees; employees aren’t
allowed to challenge ideas, participate in decision-making, or engage in team-building efforts.
+ Defensive attitude where little or no performance feedback is given; only number count; and yelling, intimidation,
or avoidance is the preferred way to handling conflict.
+ Double standards in terms of policies, procedures, and training opportunities for managers and employees.
+ Unresolved grievances because the organization provides no mechanism or only adversarial ones for resolving
them; dysfunctional individuals may be protected or ignored because of long-standing rules, union contract
provisions, or reluctance to take care of problems.
+ Emotionally troubled employees and no attempt by managers to get help for these people.
+ Repetitive, boring work with no chance for doing something else or for new people coming in.
+ Faulty or unsafe equipment or deficient training, which keeps employees from being able to work efficiently or
effectively.
+ Hazardous work environment in terms of temperature, air quality, repetitive motions, overcrowded spaces, noise
levels, excessive overtime, and so forth. To minimize costs, no additional employees are hired when workload
becomes excessive, leading to potentially dangerous work expectations and conditions.
+ Culture of violence that has a history of individual violence or abuse; violent or explosive role models; or tolerance
of on-the-job alcohol or drug abuse.
- The concept of feedforward, concurrent, and feedback control to identify actions that managers can take to deter or
reduce possible workplace violence:
FEEDFORWARD CONCURRENT FEEDBACK

- Use MBWA (managing by walking around) to - Ensure management commitment to functional, not - Communicate
identify potentially problems; observe how dysfunctional, work environments. openly about
employees treat and interact with each other. - Allow employees to work group to “grieve” during incidences and
- Provide employee assistance programs (EAPs) to periods of major organizational change. what’s being done.
help employees with behavioral problems. - Be a good role model in how you treat others. - Investigate
- Enforce organizational policy that any workplace - Use corporate hotline or some other mechanism for incidents and take
rage, aggression, or violence will not be tolerated. reporting and investigating incidents. appropriate action.
- Use careful prehiring screening. - Use quick and decisive intervention. - Review company
- Never ignore threats. - Get expert professional assistance if violence erupts. policies and
- Train employees about how to avoid danger if - Provide necessary equipment or procedures for change, if
situation arises. dealing with violent situations (cell phones, alarm
- Clearly communicate policies to employees. system, code names or phrases, and so forth). necessary.

5. Controlling Customer Interactions:

- A service profit chain is the service sequence from employees to customers to profit. According to this concept, the
company’s strategy and service delivery system influence how employees deal with customers; that is, how productive
they are in providing service and the quality of that service.
- The level of employee service productivity and service quality influences customer perceptions of service value. When
service value is high, it has a positive impact on customer satisfaction, which leads to customer loyalty. And customer
loyalty improves organizational revenue growth and profitability.
- Managers who want to control customer interactions should work to create long-term and mutually beneficial
relationships among the company, employees, and customers.
- By creating a work environment that enables employees to deliver high levels of quality service and which makes them
feel they’re capable of delivering top-quality service.
6. Corporate Governance:
- Corporate governance, the system used to govern a corporation that the interests of corporate owners are protected.
- Two areas where reform has taken place are the role of boards of directors and financial reporting.
a) The Role of Boards of Directors:
- The original purpose of a board of directors was to have a group, independent from management, looking out for the
interests of shareholders who were not involved in the day-to-day management of the organization.
- However, it didn’t always work that way. Board members often enjoyed a cozy relationship with managers in which
each took care of the other.
b) Financial Reporting and the Audit Committee:
- More disclosure and transparency of corporate financial information.
- Certification of companies’ financial results by senior management.
→ Information is more accurate and reflective of a company’s financial condition.