Contract a summary for the given chapter in your words: (Basic elements of controlling)

The Nature of Control

Control is the regulation of organizational activities so that some targeted element of performance remains within acceptable limits. Without this regulation, organizations have no indication of how well they are performing in relation to their goals. At any point in time, it compares where the organization is in terms of performance to where it is supposed to be. percent of its packages on time. If on-time deliveries fall to 99.6 percent, control systems will signal the problem to managers, so that they can make necessary adjustments in operations to regain the target level of performance.2 An organization without effective control procedures is not likely to reach its goals.

The Purpose of Control control provides an organization with ways to adapt to environmental change, to limit the accumulation of error, to cope with organizational complexity, and to minimize costs. These four functions of control are worth a closer look. Control helps the organization

Adapt to environmental change

Limit the accumulation of error

Cope with organizational complexity

Minimize costs

Adapting to Environmental Change: In today's complex and turbulent business environment, all organizations must contend with change.3 If managers could establish goals and achieve them instantaneously, control would not be needed. But between the time a goal is established and the time it is reached, many things can happen in the organization and its environment to disrupt movement toward the goalor even to change the goal itself. A properly designed control system can help managers anticipate, monitor, and respond to changing circumstances.4 In contrast, an improperly designed system can result in organizational performance that falls far below acceptable levels.

Limiting the Accumulation of Error: Small mistakes and errors do not often seriously damage the financial health of an organization. Over time, however, small errors may accumulate and become very serious.

Coping with Organizational Complexity: When a firm purchases only one raw material,produces one product,has a simple organization design,and enjoys constant demand for its product,its managers can maintain control with a very basic and simple system.When large firms merge,the short-term results are often disappointing.

Minimizing Costs: When it is practiced effectively, control can also help reduce costs and boost output. , effective control systems can eliminate waste, lower labor costs, and improve output per unit of input.

Types of Control The examples of control given thus far have illustrated the regulation of several organizational activities, from producing quality products to coordinating complex organizations. Organizations practice control in a number of different areas and at different levels, and the responsibility for managing control is widespread.

Areas of Control: Control can focus on any area of an organization. Control of human resources includes selection and placement, training and development, performance appraisal, and compensation. In many ways, the control of financial resources is the most important area, because financial resources are related to the control of all the other resources in an organization.

Levels of Control

Operations control focuses on the processes the organization uses to transform resources into products or services.Financial control is concerned with the organization's financial resources.Monitoring receivables to make sure customers are paying their bills on time is an example of financial control.Structural control is concerned with how the elements of the organization's structure are serving their intended purpose.

Responsibilities of Control : Traditionally,managers have been responsible for overseeing the wide array of control systems and concerns in organizations.They decide which types of control the organization will use,and they implement control systems and take actions based on the information provided by control systems.The job of controller is especially important in organizations where control systems are complex.In addition,many organizations are also beginning to use operating employees to help maintain effective control.

operations control: Focuses on the processes the organization uses to transform resources into products or services.

preliminary control: Attempts to monitor the quality or quantity of financial, physical, human, and information resources before they actually become part of the system.

Financial control: Financial control is the control of financial resources as they flow into the organization,are held by the organization,and flow out of the organization.23 A complete discussion of financial management is beyond the scope of this book,but we will examine the control provided by budgets and other financial control tools.

Budgetary Control

A budget is a plan expressed in numerical terms.The usual time period for a budget is one year,although breakdowns of budgets by the quarter or month are also common.When Disney launches the production of a new animated cartoon feature,it creates a budget for how much the movie should cost.Several years ago,when movies like The Lion King were raking in hundreds of millions of dollars,Disney executives were fairly flexible about budget overruns.

Structural Control

Organizations can create designs for themselves that result in very different approaches to control. Two major forms of structural control, bureaucratic control and decentralized control.

Bureaucratic control: A form of organizational control characterized by formal and mechanistic structural arrangements.

Decentralized control: An approach to organizational control based on informal and organic structural arrangements. Organizations that use a decentralized control system require foreign branches to report less frequently and in less detail. For example, each unit may submit summary performance statements on a quarterly basis and provide full statements only once a year. Similarly, visits from the home office are less frequent and less concerned with monitoring and assessing performance. IBM, Ford, and Shell all use this approach. Because Ford practices decentralized control of its design function, European designers have developed several innovative automobile design features. Managers believe that if they had been more centralized, designers would not have had the freedom to develop their new ideas.

Strategic Control

Given the obvious importance of an organization's strategy, it is also important that the organization assess how effective that strategy is in helping the organization meet its goals.3To add this requires that the organization integrate its strategy and control systems. This is especially true for the global organization.

Integrating Strategy and Control: Strategic control generally focuses on five aspects of organizationsstructure, leadership, technology, human resources, and information and operational control systems. strategic control Control aimed at ensuring that the organization is maintaining an effective alignment with its environment and moving toward achieving its strategic goals.

International Strategic: Control Because of both their relatively large size and the increased complexity associated with international business, global organizations must take an especially pronounced strategic view of their control systems. One very basic question that has to be addressed is whether to manage control from a centralized or a decentralized perspective.

Characteristics of Effective Control

Control systems tend to be most effective when they are integrated with planning and when they are flexible, accurate, timely, and objective.

Integration with Planning Control: should be linked with planning. The more explicit and precise this linkage, the more effective the control system is. The best way to integrate planning and control is to account for control as plans develop. In other words, as goals are set during the planning process, attention should be paid to developing standards that will reflect how well the plan is realized.

Flexibility: The control system itself must be flexible enough to accommodate change.

Consider,for example,an organization whose diverse product line requires 75 different raw materials.When a change in product line changes the number of raw materials needed,or when the required quantities of the existing materials change,the control system should be flexible enough to handle the revised requirements.The firm had to adjust this system when one of its biggest customers decided not to stock the full line of Champion products.

Accuracy: Managers make a surprisingly large number of decisions based on inaccurate information.Production managers may hide costs to meet their targets.Human resource managers may overestimate their minority recruiting prospects to meet affirmative action goals.In each case,the information that other managers receive is inaccurate,and the results of inaccurate information may be quite dramatic.

Objectivity: The control system should provide information that is as objective as possible. To appreciate this, imagine the task of a manager responsible for control of his organization's human resources. He asks two plant managers to submit reports. One manager notes that morale at his plant is "okay," that grievances are "about where they should be," and that turnover is "under control." The other reports that absenteeism at her plant is running at 4 percent, that 16 grievances have been filed this year (compared with 24 last year), and that turnover is 12 percent. The second report will almost always be more useful than the first. Of course, managers also need to look beyond the numbers when assessing performance. For example, a plant manager may be boosting productivity and profit margins by putting too much pressure on workers and using poor-quality materials. As a result, impressive short-run gains may be overshadowed by longer-run increases in employee turnover and customer complaints.

Resistance to Control

Managers sometimes make the mistake of assuming that the value of an effective control system is self-evident to employees. This is not always so, however. Many employees resist control, especially if they feel overcontrolled, if they think control is inappropriately focused or rewards inefficiency, or if they are uncomfortable with accountability.

Overcontrol: Occasionally, organizations try to control too many things. This becomes especially problematic when the control directly affects employee behavior. An organization that instructs its employees when to come to work, where to park, when to have morning coffee, and when to leave for the day exerts considerable control over people's daily activities. Yet many organizations attempt to control not only these but other aspects of work behavior as well. Of particular relevance in recent years is some companies' efforts to control their employees' access to private e-mail and the Internet during work hours. Some companies have no policies governing these activities, some attempt to limit it, and some attempt to forbid it altogether.

Inappropriate Focus: The control system may be too narrow, or it may focus too much on quantifiable variables and leave no room for analysis or interpretation. A sales standard that encourages high-pressure tactics to maximize short-run sales may do so at the expense of goodwill from long-term customers. Such a standard is too narrow. A university reward system that encourages faculty members to publish large numbers of articles but fails to consider the quality of the work is also inappropriately focused. Employees resist the intent of the control system by focusing their efforts only on the performance indicators being used.

Rewards for Inefficiency Imagine two operating departments that are approaching the end of their fiscal years. Department 1 expects to have $25,000 of its budget left over; department 2 is already $10,000 in the red. As a result, department 1 is likely to have its budget cut for the next year ("They had money left, so they obviously got too much to begin with"), and department 2 is likely to get a budget increase ("They obviously haven't.been getting enough money"). Thus department 1 is punished for being efficient, and department 2 is rewarded for being inefficient. (No wonder departments commonly hasten to deplete their budgets as the end of the year approaches!) As with inappropriate focus, people resist the intent of this control and behave in ways that run counter to the organization's intent.

Too Much Accountability: Effective controls allow managers to determine whether employees successfully discharge their responsibilities. If standards are properly set and performance accurately measured, managers know when problems arise and which departments and individuals are responsible. People who do not want to be answerable for their mistakes or who do not want to work as hard as their boss might like therefore resist control. For example, American Express has a system that provides daily information on how many calls each of its customer service representatives handles. If one representative has typically worked at a slower pace and handled fewer calls than other representatives, that individual's deficient performance can now more easily be pinpointed.

Overcoming Resistance to Control

Perhaps the best way to overcome resistance to control is to create effective control to begin with. If control systems are properly integrated with organizational planning and if the controls are flexible, accurate, timely, and objective, the organization will be less likely to overcontrol, to focus on inappropriate standards, or to reward inefficiency. Two other ways to overcome resistance are encouraging employee participation and developing verification procedures.

Encourage Employee Participation: participation can help overcome resistance to change. By the same token, when employees are involved with planning and implementing the control system, they are less likely to resist it. For instance, employee participation in planning, decision making, and quality control at the Chevrolet Gear and Axle plant in Detroit resulted in increased employee concern for quality and a greater commitment to meeting standards.

Develop Verification Procedures: Multiple standards and information systems provide checks and balances in control and allow the organization to verify the accuracy of performance indicators. Suppose a production manager argues that she failed to meet a certain cost standard because of increased prices of raw materials. A properly designed inventory control system will either support or contradict her explanation. Suppose that an employee who was fired for excessive absences argues that he was not absent "for a long time." An effective human resource control system should have records that support the termination. Resistance to control declines because these verification procedures protect both employees and management. If the production manager's claim about the rising cost of raw materials is supported by the inventory control records, she will not be held solely accountable for failing to meet the cost standard, and some action probably will be taken to lower the cost of raw materials.

NOTE: summary should cover all the contents in the chapter,

and be specific to the point.

this chapter is taken from the book"Management" by Ricky w. Griffin, 3^rd Edition.