Any process that directs the activities of individuals toward the achievement of organizational goals
Control based on the use of pricing mechanisms and economic information to regulate activities within organizations
The Control Cycle
1 - Setting performance standards.
2 - Measuring performance.
3 - Comparing performance against the standards and determining deviations.
4 - Taking action to correct problems and reinforce successes.
Expected performance for a given goal: a target that establishes a desired performance level, motivates performance, and serves as a benchmark against which actual performance is assessed.
Principle of Exception
A managerial principle stating that control is enhanced by concentrating on the exceptions to or significant deviations from the expected result or standard.
Operators of computer-numerical-control (CNC) machines must notify engineering specialists of malfunctions
The control process used before operations begin, including policies, procedures, and rules designed to ensure that planned activities are carried out properly.
The control process used while plans are being carried out, including directing, monitoring, and fine-tuning activities as they are performed.
Control that focuses on the use of information about previous results to correct deviations from the acceptable standard.
The Role of Six Sigma
At a six-sigma level, a process is producing fewer than 3.4 defects per million, which means it is operating at a 99.99966 percent level of accuracy
and Six Sigma companies have not only close to zero product or service defects but also substantially lower production costs and cycle times and much higher levels of customer satisfaction
An evaluation of the effectiveness and efficiency of various systems within an organization
A periodic assessment of a company's own planning, organizing, leading, and controlling processes.
What an external audit does
Investigates other organizations for possible merger or acquisition, determines the soundness of a company that will be used as a major supplier and discovers the strengths and weaknesses of a competitor to maintain or better exploit the competitive advantage of the investigating organization
What an internal audit does
Assesses what the company has done for itself
and what it has done for its customers or other recipients of its goods or services.
The process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences and is also called budgetary controlling.
Activity-based costing (ABC)
A method of cost accounting designed to identify streams of activity and then to allocate costs across particular business processes according to the amount of time employees devote to particular activities
A report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity.
Profit and Loss Statement
An itemized financial statement of the income and expenses of a company's operations
A liquidity ratio that indicates the extent to which short term assets can decline and still be adequate to pay short-term liabilities
A leverage ratio that indicates the company's ability to meet its long-term financial obligations
Focusing on short-term earnings and profits at the expense of longer-term strategic obligations.
The Downside to Bureaucratic Control
- Rigid bureaucratic behavior
- Tactical behavior
- Resistance to control
Designing an Effective Control System
Establish valid performance standards.
Provide adequate information to employees.
Ensure acceptability to employees.
Maintain open communication.