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1. Control in Organizations Control in Organizations An organization needs to track how well it is performing relative to its goals. If its performance drifts outside certain parameters, managers can take corrective action to get back on track. The control function of management allows the organization to know how well its doing, whether there are warning signs that performance needs to improve, and whether the organization has reached its goals. Purposes of Control Types of Control The Control Process Control is the regulation of organizational activities so that targeted elements of performance remain within acceptable limits. Control provides an organization with ways to: - Adapt to environmental change: Between the time managers set a goal and when it is, or is not, achieved, a great deal can change. Control systems allow managers to anticipate, monitor, and respond to change. In 2020, for example, Amazon realized that it needed to hire thousands of workers and figure out how to allocate limited warehouse space due to increased online shopping during the COVID-19 pandemic. 0 Limit the accumulation of error: Small errors can compound over time. Workers in a customer service center might not be informed of 1 percent of product changes each month, and disruption to customer service would be minimal for a while. After a year or two, however, the workers would not know how to address a significant portion of customers' questions and problems. Control systems would detect the problem when it was still small, allowing managers to improve the information flow. 0 Cope with organizational complexity: The more complicated the organization's supply chain, products and markets, customer base, competitive landscape, and organization design, the more robust its control system needs to be. 0 Minimize costs: Effective control systems detect waste and analyze opportunities to reduce waste. Control allows managers to know when it is worthwhile to invest in cost-saving measures and when a new process or technology would cost more than it is worth. 1. Control in Organizations Control in Organizations An organization needs to track how well it is performing relative to its goals. If its performance drifts outside certain parameters, managers can take corrective action to get back on track. The control function of management allows the organization to know how well its doing, whether there are warning signs that performance needs to improve, and whether the organization has reached its goals. Purposes of Control Types of Control The Control Process Organizations exercise control in different areas and at different levels. Control is often described in terms of the types of resources involved: physical, human, information, or financial. Financial control tends to be a part of all aspects of control, since ultimately poor control results in COStS. Levels of control include the following: . Operations control involves the processes the organization uses to transform resources into products or services. - Financial control is concerned with the organization's financial resources. 0 Structural control relates to how well the elements of the organization's structure serve their intended purpose. . Strategic control focuses on how well the organization's strategies are helping the organization meet its goals. Managers throughout the organization are responsible for control in various areas and at various levels. The job of controller is a specialized management position responsible for helping line managers with their control activities, for coordinating the organization's overall control system, and for gathering and assimilating relevant information. An organization might have several controllers, one at the corporate level and one for each division. In addition, it can be highly effective to invite operating employees to participate in control. 1. Control in Organizations Control in Organizations An organization needs to track how well it is performing relative to its goals. If its performance drifts outside certain parameters, managers can take corrective action to get back on track. The control function of management allows the organization to know how well its doing, whether there are warning signs that performance needs to improve, and whether the organization has reached its goals. Purposes of Control Types of Control The Control Process There are four steps in the control process, as shown in the figure. Establish Measure Compare performance Determine need standards performance against standards for corrective action Maintain the Correct the Change status quo deviation standards . In step 1, a control standard is a target to which subsequent performance will be compared. It should be expressed in measurable terms. . In step 4, corrective action may involve doing nothing, correcting a deviation from performance standards that's been detected, or changing the standards if they now seem too high or too low.Select the words or phrases that best complete the following sentences. In step 1 of the control process, managers establish V , a target expressed in measurable terms to which later performance will be compared. The level of control concerned with resources such as cash, accounts receivable, and loans is V control. Select the correct responses to the following question. Which of the following are purposes of the control function of management? Check all that apply. C] It limits the accumulation of small errors over time. C] It helps the organization adapt to environmental change. C] It simplifies the organization's structure and its relationships with stakeholders. C] It minimizes waste and other unnecessary costs. Select the words or phrases that best complete the following sentences. In step 1 of the control process, managers establish V , a target expressed in measurable terms to which later performance will be compared. a control standard The level of control concerned with resources such a a ratio able, and loans is V control. a deviation Select the correct responses to the following questio an error Which of the following are purposes of the control function of management? Check all that apply. C] It limits the accumulation of small errors over time. C] It helps the organization adapt to environmental change. C] It simplifies the organization's structure and its relationships with stakeholders. C] It minimizes waste and other unnecessary costs. Select the words or phrases that best complete the following sentences. In step 1 of the control process, managers establish V , a target expressed in measurable terms to which later performance will be compared. The level of control concerned with resources such as cash, accounts receivable, and loans is V control. operations Select the correct responses to the following question. strategic Which of the following are purposes of the control function of management? Check all that a structural C] It limits the accumulation of small errors over time. nancial C] It helps the organization adapt to environmental change. C] It simplifies the organization's structure and its relationships with stakeholders. C] It minimizes waste and other unnecessary costs. Operations Control Operations control, which is concerned with the processes the organization uses to transform resources into products or services, occurs at three stages: inputs, transformation process, and outputs. Forms of Operations Control Many organizations exercise control at multiple points in the operations process. The figure shows the three forms of operations control and the flow of feedback among them. Feedback Inputs Transformation Outputs Preliminary Screening control Postaction control control Focus is on how Focus is on outputs Focus is on inputs to inputs are being from the organizational the organizational transformed into system. system. outputs. . Preliminary control Attempts to monitor the quality or quantity of financial, physical, human, and information resources before they become part of the system. . Screening control focuses on meeting standards for product or service quality or quantity during the transformation process. . Postaction control monitors the outputs or results after the transformation process is complete.The table gives descriptions of control at different stages in the creation of products or services. For each row, select the corresponding form of control. Description Form of Control The focus is on the transformation of inputs into products or services. V The focus is on inputs. V The focus is on the outputs of the transformation process. V Select the correct response for the following question. At which stage in the operations management process does the manager use preliminary control? 0 Transformation 0 Feedback 0 Inputs 0 Outputs The table gives descriptions of control at different stages in the creation of products or services. For each row, select the corresponding form of control. Description Form of Control The focus is on the transformation of inputs into products or services. 4 The focus is on inputs. Postaction control The focus is on the outputs of the transformation process. Preliminary control Select the correct response for the following question. Screening COHtI'OI At which stage in the operations management process does the manager use preliminary control? 0 Transformation 0 Feedback 0 Inputs 0 Outputs Financial Control Businesses need revenues to exceed costs so that profit is earned; nonprofit organizations must cover expenses to continue to exist and fulfill their mission. Therefore, it's critical that managers exercise control to manage the financial resources of the organization. One tool that managers use for financial control is the budget. Budgets The Development of Budgets Advantages and Disadvantages of Budgets 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. A budget is a plan expressed in numerical terms. Budgets are established for the whole organization or any part of the organization. Budgets serve four primary purposes: - Help managers coordinate resources and projects. 0 Help define the established standards for control. . Provide guidelines about the organization's resources and expectations. . Enable the organization to evaluate the performance of managers and organizational units. Following are three commonly used budgets: o A financial budget describes where the organization will get cash for the upcoming period and how it plans to use the money. . An operating budget describes what quantities of products or services the organization intends to create and what resources will be used to make them. . A nonmonetary budget, usually used at lower levels of the organization, is expressed in terms such as units of output, hours of direct labor, machine hours, or squarefoot allocations. In general terms, what is a budget? O A plan that is expressed in numerical terms 0 A document produced by an audit C) An expression of the rate of return on an asset Select the correct responses to each of the following questions. Which of the following are common reasons managers use budgets? Check all that apply. C] To be able to evaluate individual and departmental performance [3 To provide guidance about resources and expectations C] To minimize the need for coordination among managers C] To define standards for control Which of the following are advantages of using budgets for financial control? Check all that apply. C] Budgets are records of organizational performance. C] Budgets are highly stable, even when the environment changes. C] Budgets facilitate coordination among departments. C] Budgets assign dollar values to operational activities. Structural Control Organization design greatly influences control systems. Managers need to be aware of how the structure of their organization favors different purposes and means of control. Bureaucratic Control vs. Decentralized Control Structural control exists on a continuum anchored on each end by bureaucratic control and decentralized control. Most organizations tend toward one of the forms but may have elements of the other. As shown in the figure, these two approaches have different aims and methods. Bureaucratic Control Dimension Decentralized Control Goal of control approach Employee compliance Employee commitment Strict rules, formal Degree of formality Group norms, culture, controls, rigid hierarchy self-control Directed toward minimum levels of acceptable Performance expectations Directed toward enhanced performance above and performance beyond the minimum Tall structure, Organization design Flat structure, top-down influence shared influence Directed at individual Reward system Directed at group performance performance Limited and formal Participation Extended and informal . Bureaucratic control uses an organization design that is characterized by formal and mechanistic structural arrangements; it follows the bureaucratic model. . Decentralized control is characterized by informal and organic structural arrangements.Select the term that best completes the following sentence about control and organization design. An organization design characterized by informal and organic structural arrangements is consistent with Select the correct responses to the following question. Which of the following are characteristics of the bureaucratic approach to control? Check all that apply. [3 Informal participation in decision making across levels and groups C] Emphasis on meeting minimum acceptable levels of performance C] A reliance on a rigid hierarchy C] Emphasis on individual performance C] Concern for employee compliance with rules C] Flat organization structure Select the term that best completes the following sentence about control and organization design. An organization design characterized by informal and organic structural arrangements is consistent with decentralized control Select the correct responses to the following question. bureaucratic control which of the following are characteristics of the bureaucratic approach to control? Check all that apply. C] Informal participation in decision making across levels and groups C] Emphasis on meeting minimum acceptable levels of performance C] A reliance on a rigid hierarchy C] Emphasis on individual performance C] Concern for employee compliance with rules C] Flat organization structure Case Study The coronavirus pandemic drastically reduced the number of people flying in the United States. Because of this, every major airline experienced a drop in stock prices from February 2020 to November 2020. But these drops ranged from 57% for American Airlines to 21% for Southwest Airlines. Why such a difference? Investopedia points out that Southwest has extremely efficient operations, lowcost pricing, and innovative logistics solutions. In addition, they incorporate customer experience and forward planning into their strategy. All of these things helped Southwest to weather the pandemic, and they all require that Southwest maintains careful control over its operations. One of the other things that helped Southwest during the pandemic was their superior service desk performance. They achieved this performance, in part, through measuring key factors in customer service, looking at customer service leaders (benchmarking), and making changes to bring their customer service costs and customer satisfaction up to the level of their highest competitors. To start this process, Southwest looked at overview measures for their customer service desk, including the annual operating expense, monthly inbound contact volumes for different media (e.g. voice, email, web portal, chat), monthly outbound contact volume, and personnel headcounts. They also looked at quality measures such as customer satisfaction, technician measures such as schedule adherence, and service level measures such as call abandonment. Next, they contacted numerous companies that they considered to be key competitors or excellent at customer service. They talked to these companies about cost, productivity, service level, quality, technician, and contact handling measures, and found that their cost per inbound contact was higher than other companies, but their customer service ratings were also high. This put Southwest in the middle quartile of a cost vs. quality graph they were effective, but not efficient. Knowing this, Southwest started to measure six key performance metrics: cost per inbound contact, customer satisfaction, technician utilization, net first contact resolution rate, technician job satisfaction, and percent of calls answered in 30 seconds. They found that on these metrics, they were above average, but not at the top of the scale. In particular, their customer satisfaction, productivity metrics and technician metrics were all strong. They were growing in the chat and portal channels, and they scored well on process maturity. But their costs were above average, the average speed of answer rate was low and call abandonment was high. Interviews also pointed out concerns about Southwest's ability to retain new technicians and a perceived lack of opportunities for career advancement. Southwest implemented several key initiatives, including establishing a technician career path, increasing chat volume, implementing technician scorecards, allowing their six key processes (strategy, human resources, process, technology, performance measurement, and communication) to mature, and allowing their metrics to mature. At the end of one year, they saw an increase in customer satisfaction, and more importantly, a decrease in their costs. Sources: Company Profiles. Investopedia, . (2020, May 22). How is Southwest Different from Other Airlines? Retrieved from https://www.investopedia.com/articles/investing/061015/how-southwest-differentother-airlines.asp; HDI 2018 Conference and Expo. Rumburg, J. (2018, April 10). Leveraging Metrics to Take Southwest Airlines to a Higher Plane. Retrieved from https://www.hdiconference.com/files/pdfs/hdiZO18handouts/Session302.pdf When Southwest started to look at technician performance, they were focusing on V control. Customer contacts are inputs in Southwest's customer service process. By monitoring the number of customer contacts from different types of channels, Southwest is engaging in Y control. Southwest implemented several key initiatives, including establishing a technician career path, increasing chat volume, implementing technician scorecards, allowing their six key processes (strategy, human resources, process, technology, performance measurement, and communication) to mature, and allowing their metrics to mature. At the end of one year, they saw an increase in customer satisfaction, and more importantly, a decrease in their costs. Sources: Company Profiles. Investopedia, . (2020, May 22). How is Southwest Different from Other Airlines? Retrieved from https://www.investopedia.com/articles/investing/061015/how-southwest-differentother-airlines.asp,- HDI 2018 Conference and Expo. Rumburg, J. (2018, April 10). Leveraging Metrics to Take Southwest Airlines to A. Retrieved from strategic https://www. hdiconference.com/fi les/pdfs/hdiZO 18handouts/Session302. pdf financial operations When Southwest started to look at technician performance, they were focusing on V control. Customer contacts are inputs in Southwest's customer service process. By monitoring the number of customer contacts from different types of channels, Southwest is engaging in V control. Southwest implemented several key initiatives, including establishing a technician career path, increasing chat volume, implementing technician scorecards, allowing their six key processes (strategy, human resources, process, technology, performance measurement, and communication) to mature, and allowing their metrics to mature. At the end of one year, they saw an increase in customer satisfaction, and more importantly, a decrease in their costs. Sources: Company Profiles. Investopedia, . (2020, May 22). How is Southwest Different from Other Airlines? Retrieved from https://www.investopedia.com/articles/investing/061015/how-southwest-differentother-airlines.asp,- HDI 2018 Conference and Expo. Rumburg, J. (2018, April 10). Leveraging Metrics to Take Southwest Airlines to a Higher Plane. Retrieved from https://www.hdiconference.com/files/pdfs/hdiZO18handouts/Session302.pdf postaction When Southwest started to look at t screening rmance, they were focusing on V control. preliminary Customer contacts are inputs in Sou er service process. By monitoring the number of customer contacts from different types of channels, Southwest is engaging in V control