Chapter 7

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Chapter 7

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1. ©2004 by Nelson, a division of Thomson Canada Limited 1 Chapter 7 Control

2. ©2004 by Nelson, a division of Thomson Canada Limited 2 What Would You Do? Howmet opened a new plant in Laval Aircraft parts market plummeted Layoffs were a possibility How can costs be cut to make up for the sales shortage?

3. ©2004 by Nelson, a division of Thomson Canada Limited 3 Learning Objectives: Basics of Control After reading the next two sections, you should be able to: 1. describe the basic control process 2. answer the question: Is control necessary or possible?

4. ©2004 by Nelson, a division of Thomson Canada Limited 4 The Control Process Establish clear standards Compare actual to standard performance Take corrective action, if needed Control is a continuous, dynamic process Three basic methods

5. ©2004 by Nelson, a division of Thomson Canada Limited 5 Standards Determine what should be benchmarked Identify companies against which to benchmark standards Collect data to determine other companies’ performance standards

6. ©2004 by Nelson, a division of Thomson Canada Limited 6 The Control Process Actual performance Measure performance Compare with standards Identify deviations Analyze deviations Develop program for corrections Implement program for corrections Desired performance

7. ©2004 by Nelson, a division of Thomson Canada Limited 7 Basic Control Methods Feedback control Gather information about performance deficiencies after they occur Concurrent control Gather information about deficiencies as they occur Feedforward control Gather information about performance deficiencies before they occur

8. ©2004 by Nelson, a division of Thomson Canada Limited 8 Guidelines for Feedforward Control Thorough planning and analysis required Careful discrimination of input variables System must be dynamic System model should be developed Data regularly collected Data regularly assessed Requires action

9. ©2004 by Nelson, a division of Thomson Canada Limited 9 Is Control Necessary or Possible? Is more control necessary? Is more control possible? Quasi-Control: When control isn’t possible

10. ©2004 by Nelson, a division of Thomson Canada Limited 10 Is More Control Necessary? Degree of dependence the extent to which a company needs a particular resource to accomplish its goals Resource flows The extent to which a company has easy access to critical resources

11. ©2004 by Nelson, a division of Thomson Canada Limited 11 Is More Control Possible? Cost of control direct costs of control unintended costs Cybernetic feasibility the extent to which it is possible to implement each step in the control process if a step cannot be implemented, then control may not be possible

12. ©2004 by Nelson, a division of Thomson Canada Limited 12 Quasi-Control: When Control Isn’t Possible Reducing independence a choice to abandon or change goals when control over a critical resource is not possible Restructure dependence exchange dependence on one critical resource for dependence on another

13. ©2004 by Nelson, a division of Thomson Canada Limited 13 Learning Objectives: How and What to Control After reading the next two sections, you should be able to: 3. Discuss the various methods that managers can use to maintain control 4. Describe the behaviours, processes, and outcomes tat managers are choosing to control in today’s organizations

14. ©2004 by Nelson, a division of Thomson Canada Limited 14 Control Methods Bureaucratic Objective Normative Concertive Self-Control

15. ©2004 by Nelson, a division of Thomson Canada Limited 15 Bureaucratic Control Top-down control Use rewards and punishments to influence employee behaviour Use policies and rules to control behaviour Bureaucratically controlled companies are resistant to change and slow to respond to customers

16. ©2004 by Nelson, a division of Thomson Canada Limited 16 Objective Control Use of observable methods Behaviour control regulate actions and behaviours of employees Output control measure employee outputs coupled with use of rewards and incentives

17. ©2004 by Nelson, a division of Thomson Canada Limited 17 Normative Control Company values and beliefs guide employee behaviour and decisions. Created by: Careful selection of employees Role-modeling and retelling of stories

18. ©2004 by Nelson, a division of Thomson Canada Limited 18 Concertive Control Employees are guided by beliefs that are shaped and negotiated by work groups. Autonomous work groups operate without managers Members responsible for controlling work group process, outputs, and behaviour

19. ©2004 by Nelson, a division of Thomson Canada Limited 19 Self-Control Employees control their own behaviour Employees make decisions within clear boundaries Managers and employees set goals and monitor their own progress

20. ©2004 by Nelson, a division of Thomson Canada Limited 20 When to Use Different Methods of Control Use bureaucratic control when standard operating procedures needed necessary to establish limits Use behaviour control when easier to measure activities than outputs “cause-effect” relationships are clear good measures of behaviour are available

21. ©2004 by Nelson, a division of Thomson Canada Limited 21 When to Use Different Methods of Control Use output control when easier to measure outputs than behaviours good measures of output are available clear goals and standards are available “cause-effect” relationships are unclear Use normative control when culture is strong difficult to create behaviour measures difficult to create output measures

22. ©2004 by Nelson, a division of Thomson Canada Limited 22 When to Use Different Methods of Control Use concertive control when group responsible for task accomplishment workers take “ownership” of behaviour and outputs strong worker-based control needed Use self-control when workers are intrinsically motivated difficult to create behaviour measures difficult to create output measures workers have self-control and self-leadership

23. ©2004 by Nelson, a division of Thomson Canada Limited 23 What to Control The Balanced Scorecard Customer perspective Internal perspective Innovation and learning perspective Financial perspective

24. ©2004 by Nelson, a division of Thomson Canada Limited 24 Example of a Balanced Scorecard — Financial Perspective Financial perspective Goals Measures Survive Cash flow Succeed Sales growth by division Prosper Increased market share

25. ©2004 by Nelson, a division of Thomson Canada Limited 25 Balanced Scorecard Managers look beyond traditional financial measures Managers set specific goals and measure performance in four areas Helps minimize suboptimization

26. ©2004 by Nelson, a division of Thomson Canada Limited 26 The Financial Perspective: Controlling Economic Value Added The amount by which company profits exceed the cost of capital in a given year. Important because: It shows if a business or profit centre is paying for itself Focuses attention on specific departments Encourage creative ways to improve organizational performance

27. ©2004 by Nelson, a division of Thomson Canada Limited 27 The Customer Perspective: Controlling Customer Defections Which customers are leaving and at what rate Don’t rely completely on customer satisfaction surveys Cost of replacing old customers with new ones is great

28. ©2004 by Nelson, a division of Thomson Canada Limited 28 The Internal Perspective: Controlling Quality Managers focus on quality. Quality is measured as: excellence value conformance to expectations

29. ©2004 by Nelson, a division of Thomson Canada Limited 29 Quality as Excellence Advantages promotes organizational vision motivates and inspires appeals to customers Disadvantages provides little practical guidance what does excellence mean? difficult to measure and control

30. ©2004 by Nelson, a division of Thomson Canada Limited 30 Quality as Value Advantages customers recognize differences in value easy to measure and compare value of different products/services Disadvantages difficult to determine which factors account for value difficult to control balance between excellence and cost

31. ©2004 by Nelson, a division of Thomson Canada Limited 31 Quality as Conformance to Specifications Advantages specifications, if written, are measurable increased efficiency consistent quality Disadvantages difficult to evaluate some products/services increased standardization may make change difficult less appropriate for services

32. ©2004 by Nelson, a division of Thomson Canada Limited 32 The Innovation and Learning Perspective: Controlling Waste and Pollution Four levels of waste minimization Waste prevention and reduction Recycle and reuse Waste treatment Waste disposal

33. ©2004 by Nelson, a division of Thomson Canada Limited 33 What Really Happened? Focused on customer satisfaction Implemented Six Sigma system Quality and on-time delivery improved dramatically Howmet is an industry model

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