UNIT 6: Controlling
3
CONTROL AS A
FEEDBACK SYSTEM,
FEEDFORWARD
CONTROL, PREVENTIVE
CONTROL
Feedback Control Model
Adjust Standards Adjust Performance
Establish 1. Establish 2. Measure 3. Compare 4. Take
Strategic standards of actual performance If corrective
Goals performance. performance. to standards. Inadequate action.
If Adequate
4. Do nothing
Feedback or provide
reinforcement.
Control Model
Input Output
Process
Concurrent Feedback
Pre-Control
Control Control
Preventive Corrective
Methods of Control
Organizational Control
Focus
Concurrent Control Feedback Control
Feed forward Control
Solve Problems as Solves Problems
Anticipates Problems
They Happen After They Occur
Examples Examples Examples
• Pre-employment • •
Adaptive culture Analyze sales per
drug testing • employee
• Inspect raw Total •
materials • quality Final quality
Hire only inspection
college graduates management • Survey
Focus is on
Focus is on
Focus is on
• customers
Employee
self-
control
Ongoing
Inputs Outputs
Processes
Tools for Controlling
Organizational Performance
Feedforward Control
A control that prevents anticipated
problems before actual occurrences of
the problem.
Buildingin quality through design.
Requiring suppliers conform to ISO 9002.
Concurrent Control
A control that takes place while the
monitored activity is in progress.
Directsupervision: Management By Walking
Around (MBWA).
Tools for Controlling
Organizational Performance
(cont’d)
Feedback Control
A control that takes place after an
activity is done.
Corrective
action is after-the-fact, when the
problem has already occurred.
Advantages of feedback controls:
Providemanagers with information on the
effectiveness of their planning efforts.
Enhanceemployee motivation by providing
them with information on how well they are
doing.
Organizational
18–8
Performance: Financial
Controls
Traditional Other Measures
Controls Economic Value
Ratio analysis Added (EVA)
Liquidity Market Value
Leverage
Added (MVA)
Activity
Profitability
Budget Analysis
Quantitative
standards
Deviations
Popular Financial Ratios
Popular Financial Ratios (cont’d)
Tools for Controlling Organizational
Performance: Financial Controls (cont’d)
Other Measures
Economic Value Added (EVA)
How much value is created by what a
company does with its assets, less any
capital investments in those assets: the rate
of return earned over and above the cost of
capital.
The choice is to use less capital or invest
in high-return projects.
Tools for Controlling Organizational
Performance: Financial Controls (cont’d)
Other Measures (cont’d)
Market Value Added (MVA)
The value that the stock market places on a
firm’s past and expected capital investment
projects
Ifthe firm’s market value (its stock and debt)
exceeds the value of its invest capital (its
equity and retained earnings), then
managers have created wealth.
The Practice of Managing Earnings
Controlling Organizational
Performance
Balanced Scorecard
Is a measurement tool that uses goals set
by managers in four areas to measure a
company’s performance:
Financial
Customer
Internalprocesses
People/innovation/growth assets
Is intended to emphasize that all of these
areas are important to an organization’s
success and that there should be a balance
among them.
Information Controls
Purposes of Information Controls
As a tool to help managers control other
organizational activities.
Managers need the right information at the
right time and in the right amount.
As an organizational area that managers
need to control.
Managers must have comprehensive and
secure controls in place to protect the
organization’s important information.
Information Controls
Management Information Systems (MIS)
A system used to provide management
with needed information on a regular basis.
Data:an unorganized collection of raw,
unanalyzed facts (e.g., unsorted list of
customer names).
Information: data that has been analyzed and
organized such that it has value and relevance
to managers.
Benchmarking of Best
Practices
Benchmark
The standard 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.
Is a control tool for identifying and
measuring specific performance gaps and
areas for improvement.
