Types of Control in an Organization

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TYPES OF CONTROL IN AN ORGANIZATION
Learning Objectives
Define organizational control, and describe the four steps of the control process. •Identify the main output controls, and discuss their advantages and disadvantages as means of coordinating and motivating employees. •Identify the main behavior controls, and discuss their advantages and disadvantages as means of coordinating and motivating employees. •Discuss the relationship between organizational control and change, and explain why managing change is a vital management task •Organizational Control

Managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals Managers must monitor and evaluate:

Is the firm efficiently converting inputs into outputs?
Are units of inputs and outputs measured accurately?
Is product quality improving?
Is the firm’s quality competitive with other firms?
Are employees responsive to customers?
Are customers satisfied with the services offered?
Are our managers innovative in outlook?
Does the control system encourage risk-taking?
Control Systems
Formal, target-setting, monitoring, evaluation and feedback systems that provide managers with information about whether the organization’s strategy and structure are working efficiently and effectively. •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.
Discussion Question?
Which is the most important type of control?
A.Feedforward
B.Feedback
C.Concurrent
D.Accounting
Three Types of Control

TYPES OF CONTROL
Feedforward Controls
Used to anticipate problems before they arise so that problems do not occur later during the conversion process –Giving stringent product specifications to suppliers in advance –IT can be used to keep in contact with suppliers and to monitor their progress •Concurrent Controls

Give managers immediate feedback on how efficiently inputs are being transformed into outputs •Allows managers to correct problems as they arise
Feedback Controls
Used to provide information at the output stage about customers’ reactions to goods and services so that corrective action can be taken if necessary Control Process Steps

THE CONTROL PROCESS
1.Establish standards of performance, goals, or targets against which performance is to be evaluated. –Managers at each organizational level need to set their own standards. 2.Measure actual performance

Managers can measure outputs resulting from worker behavior or they can measure the behavior themselves. •The more non-routine the task, the harder it is to measure behavior or outputs

3.Compare actual performance against chosen standards of performance –Managers evaluate whether – and to what extent – performance deviates from the standards of performance chosen in step 1 4.Evaluate result and initiate corrective action if the standard is not being achieved –If managers decide that the level of performance is unacceptable, they must try to change the way work activities are performed to solve the problem Three Organizational Control Systems

Question? Which ratio measures how well managers have protected organizational resources to be able to meet short-term obligations? A.Profit ratios
B.Leverage ratios
C.Liquidity ratios
D.Operating ratios
FINANCIAL MEASURES OF PERFORMANCE
Profit Ratios –
measure how efficiently managers are using the organization’s resources to generate profits •Return on Investment (ROI) –
most commonly used financial performance measure
organization’s net income before taxes divided by its total assets

Operating margin
calculated by dividing a companies operating profit by sales revenue –Provides managers with information about how efficiently an organization is...
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