CHAPTER 14
Basic Elements of Control
The final section of the book, Part V, “Controlling,” covers the fourth basic managerial function, the controlling process. It consists of two chapters. Chapter 14 introduces the controlling process, while Chapter 15 focuses on three specific topics in controlling: operations, quality, and productivity.
CHAPTER SUMMARY
Chapter 14 introduces and covers the basic elements of control in organizations. It first characterizes the nature of control. Subsequent sections discuss operations, financial, structural, and strategic control. The chapter concludes with a description of how the control process can be more effectively managed.
OBJECTIVES
After studying this chapter, students should be able to:
1 Explain the purpose of control, identify different types of control, and describe the steps in the control process.
2 Identify and explain the three forms of operations control.
3 Describe budgets and other tools for financial control.
4 Identify and distinguish between two opposing forms of structural control.
5 Discuss the relationship between strategy and control, including international strategic control.
6 Identify characteristics of effective control, why people resist control, and how managers can overcome this resistance.
The numbers at McDonald’s are staggering. The company serves 50 million meals daily in 118 countries. More than 27 million of these meals are served at drive-through windows. Such an immense scale of operations requires an extraordinarily tight control system. McDonald’s’ focus on store expansion took management’s attention away from operational control and the company saw poor financial results. Now the company’s “Plan to Win” strategy shifts focus back to running current restaurants more efficiently.
Management Update: McDonald’s continues to do well financially by growing both U.S. and international sales. It reported revenues of $21.6 billion and net income of $4.4 billion in 2006. It sold Chipotle Mexican Grill to focus more on its core business.
OUTLINE
The Nature of Control
Control is the regulation of organizational activities in such a way as to facilitate goal attainment. Without control, organizations have no indication of how well or poorly they are performing. Control indicates the need for intervention if some targeted element of performance falls outside of acceptable limits.
A good analogy to use to describe control is that of a space flight to Mars. After a rocket is launched, NASA scientists continually monitor its progress toward its target, or goal. During the flight, they may have to make periodic corrections to nudge it back on course. Some corrections may be large, others small; some will be in one direction, others in a different direction; and there will be some periods when no corrections are needed. This process of monitoring progress toward the goal and then making required corrections is control.
A The Purpose of Control
Control has a number of functions in organizations. Four functions in particular are important.
1 A properly designed control system can help managers anticipate, monitor, and respond to a changing environment.
2 Over time, small mistakes may accumulate and become serious. An adequate control system will help to limit the accumulation of error.
Extra Example: Another example of error accumulation would be a manufacturer with a small error in its production system that gets carried through hundreds or thousands of products before it is discovered.
3 As organizations expand and create a variety of products, control helps them to cope with organizational complexity.
Though control is important to any organization, it is especially important in large, complex organizations. Problems and weaknesses in these kinds of settings can go undetected and become ever more serious if control systems do not identify them on a timely basis.
Global Connection: To carry the preceding idea further, international firms
