Marketing Manager Course - Chapter 16

e Distinguish between process- and outcome-based control systems.. Categonzation of Control Approaches Control approaches can be categorized according to two factors - type and focus:

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Chapter

anagement Contre

leaming Objectives Afterreading this chapter, you should be able to:

e Understand the importance of control systems

e Distinguish between system- and person-based

control systems

e Distinguish between process- and outcome-based

control systems

e Evaluate various control approaches

e Understand why measurement Is necessary for

control

e Develop measures that support effective control

Systems

e Develop and implement a balanced scorecard

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The Importance of Contrl

e Control is the process of comparing performance to

standards and taking corrective action

eit ensures that:

> Standards are met

> errors are limited

> quality is acceptable

> products are safe

> the company 1s performing at the highest possible level

e Control is closely associated with planning

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Categonzation of Control Approaches

Control approaches can be categorized

according to two factors - type and focus:

e Type - divided into formal and informal approaches

e Focus — directed at the outcome or the process

> Outcome approach focuses on the results of a business process

Informaland Outcome-Focused Control

e Characterized by subjective control - an informal

approach based on global assessment of outcomes

e Subjective control:

> does not typically utilize explicit standards

> does not specify how deviations from an acceptable level should be handled

> 1S common 1n smaller businesses and service settings

> 1S the “no news 1s good news” approach

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Formaland Process-Focused Control:

Bureaucratic Contr!

e Bureaucratic control is a formal control approach

that operates in a cycle and Is characterized by

written guidelines and controls

e Involves:

> the application of standards to assess performance

> the application of corrective actions to regulate performance and bring it back to the level of the standards

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The Bureaucratic Control Process

1 Establishing

Standards

2 Performance Measurement

The Bureaucratic Control Process

(contmnue d)

e Establishing Standards

> Standards should be participative rather than simply implemented from the top down so that employees understand and are committed to them

> Standards come from:

¥ goals

¥ Statistical analysis

¥ benchmarking

e Performance Measurement

> Use of objective data, which 1s free from error or bias

> Use of subjective data, which involves human judgement

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The Burea | Process

e Identifying Gaps

> Compare standards with performance measures

> Upper and lower control limits establish:

Types of Bu Control (cont)

e Occurs after a process has been completed

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®A balanced scorecard 1s a techmique desiøned to

control and improve:

> customer service

> learning and growth

> finance

> internal business processes

e Links strategy to action

els more broad than bureaucratic control

e Focus on:

> priorities

> the work process

> how things are done

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Formaland Outcome- Focused

Contro!

e The regulation of performance by applying the

standards or guidelines to the outcomes of a

process through:

> Market control - the use of indicators of market values as

standards for regulating performance

lypes of Einanc 1a Ì Con Ìs (con)

eBudgetary control - used to specify amounts

to be expended for various activities or

events

>Can help managers control and predict costs

eFinancial Statements - tools that are used to

assess and control the financial health of an

organization

e Balance sheets

e Profit and loss (Gncome) statements

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lypes of Einanc 1a Ì Con Ìs (con)

e Financial Ratios - provide an overall check of

performance

> Liquidity ratios - an organization’s ability to pay short-term debt

> Leverage ratios - the amount of funds available 1n an organization from shareholders and creditors

¥ receiving and processing sales orders

Y expediting supplies and production

Y distribution

¥ resolving errors and problems

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Informaland Process- Focused

Contro!

e Emphasizes an implicit sense and common

understanding of how things should be done

eDoes not rely on explicit guidelines and

Standards

e Assumes that people have an internal set of

standards that will guide how they perform

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e Clan controls a reliance on corporate culture and

the norms it develops as an informal means for

regulating the work process

e Kmployees control themselves

e Clan control works best if:

> the organization 1s constantly changing

> the organization has a strong culture

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e Should control be directed at people, systems, or

some other aspect of the company?

> Emphasis should be on systems and performance rather than people

> Focusing on people can result 1n resistance and negative reactions

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App a to ns: ManagementIs Everyone ˆs

Busme ss— forthe Manager

e Control over the actions and outcomes in the

workplace Is a central management responsibility

e Measurement ts a key component of effective

control

e Managers go beyond measurement to take

corrective action, which is part and parcel of an

effective control system

e As a manager, It Is Important to understand the

control systems used in an organization as well as

whether your own philosophy regarding control fits

with the organization’s approach

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Applications: Management is Everyone’s

Busme SS—fhorManaging ams

e Teams of workers often employ formal and

process-focused control

e Team roles and contributions to team efforts are

often controlled with the culture and norms

e Understanding how control mechanisms work Is to

the benefit of all of the team members

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Applications: Management is Everyone’s

Busme ss— for hdwiduals

e Understanding control mechanisms can clarify why

they are needed and how they contribute to the

effectiveness of the organization

e Many control techniques discussed in this chapter

can be applied to one’s own work

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