Management Control
What is management control?
It is the process by which management:
- ensures that people in the organization carry out organizational objectives and strategies
- encourages, enables, or sometimes "forces" employees to act in the organization's best interest
Objectives are necessary for what reasons?
They are necessary to assess whether the employees' actions are purposive and to make claims about an organization's success.
What is lack of direction?
* Communication + Reinforcement
What are the three elements of a management control system?
1. Detector -- measures performance
2. Assessor -- compares with pre-set standard
3. Effector -- takes corrective action
Management control includes...?
All the devices/mechanisms managers use to ensure that the behavior of employees is consistent with the organization's objectives and strategies
Objectives can be what?
- Financial or non-financial
- Quantified, explicit, or implicit
- Economic, social, environmental, or societal
What is lack of motivation?
When employees 'choose' not to perform as their organization would have them perform
1. Lack of goal congruence
2. Self-interested behavior
Do all controls always focus on measured performance? And are the controls proactive or reactive?
No, many control's don't. For example, some will focus on direct supervision, employee hiring standards, and codes of conduct.
Many controls are proactive rather than reactive, where they are designed to prevent control problems before the organization suffers any adverse effects on performance.
What is the purpose and function of management control?
1. To get done what management wants
2. To influence behavior in desirable ways
What do strategies help a company to achieve?
Strategies define how organizations should use their resources to meet their objectives.
Strategies put constraints on employees to focus activities on what the organization does best or areas where it has an advantage over competitors.
What is lack of goal congruence?
When individual goals do not coincide with organizational goals
What are the different control alternatives?
- Control Problem Avoidance
- Management Control Systems
1. Action Controls: the actions being taken
2. Results Controls: the results being produced
3. People Controls: the types of people employed and their shared values and norms
What is the benefit of management control?
To increase the probability that the organization's objectives will be achieved
What is the basic control problem within management controls?
Management control is about encouraging people to take desirable actions. It guards against the possibilities that employees will do something the organization does not want them to do, or, fail to do something they should do.
Management control has a behavioral orientation.
* If everyone did what they are supposed to do, there would be no need for a management control system.
What is self-interested behavior?
When individuals are prone to being "lazy", for example, they take long lunches or use sick leave when they're not actually sick. More extreme cases would be employee crime, such as fraud or theft.
What are the three types of control problem avoidance? Define them.
1. Activity Elimination: For example, subcontracts, licensing agreements, divestment (eliminate the activities that cause problems).
2. Automation: Computer/robots eliminate the human problems of inaccuracy, inconsistency, and lack of motivation. Only applicable for "programmable" decision situations.
3. Centralization: Superiors reserve the most critical decisions for themselves.
What are the main components of management?
1. Objective Setting
2. Strategy Formulation
3. Management Control
What are the three basic control issues of management control?
1. Lack of direction
2. Lack of motivation
3. Personal limitations
What are personal limitations?
Sometimes people are "unable" to do a good job because of certain personal limitations they have
Examples:
1. Lack of requisite knowledge, training, experience
2. Employees are promoted above their level of competence
3. Some jobs are not designed properly, etc.
Training, Job Assignment / Promotion, Job Design
What does it mean to risk share and why do company's do it?
Company can avoid some control problems by risk sharing. For example, buying insurance to protect against certain types of potentially large losses the organization might not be able to afford.
In short, you are sharing your "risk" with someone else.