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Learning Objectives

LO 1 Explain why companies develop control systems for employees.

LO 2 Summarize how to design a basic bureaucratic control system.

LO 3 Describe the purposes for using budgets as a control device.

LO 4 Define basic types of financial statements and financial ratios used as controls.

LO 5 List procedures for implementing effective control systems.

LO 6 Identify ways in which organizations use market control mechanisms.

Managerial Control

 Control
-Any process that directs the activities of individuals toward the achievement of organizational goals

The Control Process

1. Setting performance standards
2. Measure actual performance
3. Compare performance against standard and determine deviations
4. Reinforce success or take corrective action

Management Control – Step 1

Setting performance objectives and standards

Output standards: 

Measure performance results in terms of quantity, quality, cost, or time.

Input standards :

Measure effort in terms of amount of work expended in task performance.

Management Control – Step 2

Management Control – Step 3

Comparing performance against standard and determine deviations

Comparison methods: 

 Historical comparison
Relative comparison
 Engineering comparison

Management Control – Step 4

Reinforce success or taking corrective action

Management by exception :

Giving attention to situations showing the greatest need for action.

Types of exceptions :

Problem situation
 Opportunity situation

Strategies for Achieving Control

The Role of Control in Organisations

Organization Control – Feedforward

Employed before a work activity begins.
Focuses on quality of resources.

Ensures that:

Objectives are clear.
 Proper directions are established.
Right resources are available.

Organization Control – Concurrent

Organization Control – Feedback

Common Organizational Controls

Compensation and Benefits Discipline
Information and Financial
Operations Management (Purchasing, Inventory, statistics)
Management By Objective

Common Organizational Controls – MBO

Management Audits

 Management audit
-An evaluation of the effectiveness and efficiency of various systems within an organization

Management Audits

Designing Effective Control Systems

1. Establish valid performance standards.
2. Provide adequate information to employees.
3. Ensure acceptability to employees.
4. Maintain open communication.

Tutorial: Group Discussion Questions

 McDonald’s discovered a drop in quality of their
burgers. Explain how it can use the undermentioned THREE (3) approaches of bureaucratic control to improve the quality of the burgers.

a. Feedforward control – Explain 2 measures.
b. Concurrent control – Explain 2 measures.
c. Feedback control – Explain 2 measures.

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