罗宾斯《管理学原理》

CHAPTER 13 - FOUNDATIONS OF CONTROL

LEARNING OUTCOMES 
After reading this chapter students should be able to:

1. Define control.

2. Describe three approaches to control.

3. Explain why control is important.

4. Describe the control process.

5. Distinguish among the three types of control.

6. Describe the qualities of an effective control system.

7. Identify the contingency factors in the control process.

8. Explain how controls can become dysfunctional.

9. Describe how national differences influence the control process.

10. Identify the ethical dilemmas in employee monitoring.

11. Describe how an entrepreneur controls for growth.

Opening Vignette
SUMMARY
If you were to walk into a convenience store in Central Valley, CA and purchase a six-pack of Budweiser beer, would you be surprised to learn that not more than a minute after you made your purchase someone at Anheuser-Busch in St. Louis, Missouri, knew exactly what you bought?  Anheuser-Busch’s BudNet technology is dramatically changing how the beer industry operates, and how employees dot heir jobs.  Consider, for example, how Dereck Gurden, a sales representative from Sierra Beverage, one of 700 national distributors for Anheuser-Busch, spends his day.  Shortly after arriving at a store in his 800 square mile territory, Gurden quickly leaps into action with his sales tools--a hand-held computer and a cell phone--two vital parts of the BudNet technology.  As he enters the store, his hand-held receives all pertinent information about the store, its inventory, previous 4-week sales, and its account receivables.  He inputs a variety of data, including how the products were displayed, how much of a competitor’s product is available, and how it’s displayed.  Checking sales with inventory, he quickly determines the correct amount of product to order, using custom software; and uploads his information back to Anheuser-Busch.   Interestingly,  the emphasis is more on competitive analysis than on inventory control. BudNet has been coupled with census data, community information, and other demographic information and linked to the computer networks of each store  
For example, when you purchase beer at one of these stores, Anheuser-Busch now knows what product you bought and what you paid for it, when the beer was brewed, whether the beer was warm or chilled; and whether it was available close-by for a cheaper price.  By having this information, as well as the competitive picture that each sales representative is recording during his or her visit, Anheuser-Busch is better able to make near real-time marketing strategy.  They are also better able to determine the right promotion for any given locationBbased on the demographics of the area.  It has allowed Anheuser-Busch to know, for instance, that beer sold in cans sells better in blue-collar neighborhoods; while bottles sell better in white-collar neighborhoods. During the past 20 quarters, Anheuser-Busch has had double-digit profitability, while none of its competitors have posted more than 4 straight quarters of such growth.  And for the employees, they are enjoying the benefits such corporate gains allow!

Teaching notes
Ask students what they think of when they hear the word “control”?

Ask students how they think the word “control” applies to organizations?  Is it important?  Why or why not?

Certainly in the United States we have a tradition of valuing independence and freedom.  But in organizations, controls are intended to serve as the foundation for assuring the operation of an effective and efficient organization.  To what extent do you agree or disagree with this concept?  Why?

In what ways could the information BudNet gathers affect how you might explain to employees the need for and strict implementation of internal and external control systems?

What other controls are necessary in organizations? 

I. WHAT IS CONTROL? (PPT 13-2)

A. Introduction

1. Control is the management function involving the process of monitoring activities to ensure that they are being accomplished as planned and correcting any significant deviations.

a) An effective control system ensures that activities are completed in ways that lead to the attainment of the organization’s goals.
b) The effectiveness of a control system is determined by how well it facilitates goal achievement.

2. There are generally three different approaches to designing control systems—market, bureaucratic, and clan controls.  (See Exhibit 13-1.)

3. Market control—an approach to control that emphasizes the use of external market mechanisms.

a) Controls are built around such criteria as price competition or market share.

b) Organizations using a market control approach usually have clearly specified and distinct products and services as well as considerable competition.

4. Bureaucratic control—a control approach that emphasizes authority and relies on administrative rules, regulations, procedures, and policies.

a) Control is based on strict hierarchical mechanisms.

b) This type of control depends on standardization of activities, well-defined job descriptions to direct employee work behavior, and other administrative mechanisms—such as budgets—to ensure that organizational members exhibit appropriate work behaviors and meet established performance standards.
 
5. Clan control—an approach to designing control systems in which employee behaviors are regulated by the shared values, norms, traditions, rituals, beliefs, and other aspects of the organization’s culture.

a) It depends on the individual and the group (the clan) to identify appropriate and expected work-related behaviors and performance measures.

b) It is found in organizations in which teams are widely used and technologies change often.

6. The organization is guided and controlled by the clan’s culture rather than prescribed administrative controls.

7. An organization typically chooses to emphasize either bureaucratic or clan control and then add some market control measures.

8. The key in any of the approaches is to design an appropriate control system that helps the organization effectively and efficiently reach its goals.

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II. THE IMPORTANCE OF CONTROL

A. Introduction

1. There is no assurance that activities are going as planned and that the goals managers are seeking are, in fact, being attained.

2. Control is the final link in the functional chain of management.

3. The value of control lies predominantly in its relation to planning and delegating activities.

a) Objectives give specific direction to managers.

b) The effective manager needs to follow up.
B. The Control Process

1. Three separate and distinct steps: (1) measuring actual performance, (2) comparing actual performance against a standard, and (3) taking managerial action to correct deviations or inadequate standards.  (See Exhibit 13-2.) (PPT 13-3)

2. The control process assumes that standards of performance are created in the planning function.

a) Then objectives are set—tangible, verifiable, and measurable.

b) Objectives then are the standards against which progress is measured and compared.

c) Planning must precede control.

C. What Is Measuring? (PPT 13-3)

1. The first step in control.

2. How do managers measure?

a) Four common sources of information frequently used by managers to measure actual performance are personal observation, statistical reports, oral reports, and written reports.

b) Personal observation provides firsthand, intimate knowledge of the actual activity.

1) It is not filtered by others.

2) It permits intensive coverage.

3) It provides opportunities for the manager to “read between the lines.”

4) Management by walking around (MBWA)—used to describe when a manager is out in the work area, interacting directly with employees, and exchanging information about what’s going on.

5) Personal observation is often considered an inferior information source.

(a) It is subject to perceptual biases.

(b) Personal observation also consumes a good deal of time.

(c)  It suffers from obtrusiveness.

c) Statistical reports (computer outputs, graphs, bar charts, etc.) provide managers
information about actual performance.

1) It is easy to visualize and effective for showing relationships.

2) It provides limited information about an activity and generally only reports on a few key areas.

d) Information can also be acquired through oral reports—that is, through conferences, meetings, one-on-one conversations, or telephone calls.

1) The advantages and disadvantages are similar to those of personal observation.

2) The information is filtered.

3) It is fast and allows for feedback.

4) It permits expression and tone of voice, as well as words themselves to convey meaning.

5) One of the major drawbacks of oral reports has been the problem of documenting information for later references—technological capabilities to efficiently tape and provide permanent record overcomes this drawback.

e) Actual performance may also be measured by written reports.

1) They are slower yet more formal.

2) Formality gives them greater comprehensiveness and conciseness.

3) Written reports are usually easy to catalog and reference.

f) Comprehensive control efforts by managers should use all four measurement techniques.

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3. What do managers measure?

a) What is measured is more critical to the control process than how it is measured.

b) The selection of the wrong criteria can result in serious dysfunctional consequences.

c) What is measured determines what people in the organization will attempt to excel at.

d) Some control criteria are applicable to any management situation.

1) Criteria such as employee satisfaction or turnover and absenteeism rates can be measured.

2) Most managers have budgets for their area of responsibility set in monetary units and keeping costs within budget can be measured.

e) Any comprehensive control system needs to recognize the diversity of activities among managers.

f) Some activities are more difficult to measure in quantifiable terms.

1) But most activities can be broken down into objective segments that allow for measurement.

2) The manager needs to determine what value a person, department, or unit contributes to the organization and then convert the contribution into standards.

g) Most jobs and activities can be expressed in tangible and measurable terms.

h) When a performance indicator cannot be stated in quantifiable terms, managers should look for and use subjective measures.

i) Certainly, subjective measures have significant limitations.

j) Any analysis or decisions made on the basis of subjective criteria should recognize the limitations of the data.

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4. How do managers compare actual performance to planned goals?  (PPT 13-4)

a) The comparing step determines the degree of discrepancy between actual performance and the standard.

b) It is critical to determine the acceptable range of variation.  (See Exhibit 13-3.) (PPT 13-4)

1) In the comparison stage, managers are particularly concerned with the size and direction of the variation.

c) Becky Simmons is the sales manager for South Atlantic Distributors, example.

d) Exhibit 13-4 presents the standard and actual sales figures for July.

e) Both over-variance and under-variance require managerial attention.

D. What Managerial Action Can Be Taken?  (PPT 13-5)

1. The third and final step in the control process is taking managerial action.

2. Managers can choose among three courses of action: they can do nothing; they can correct the actual performance; or they can revise the standard.

a) Doing nothing is fairly self-explanatory.

3. Correct actual performance.

a) If the source of the variation has been deficient performance, the manager will want to take corrective action.

1) Make another decision; take immediate or basic corrective action?

2) Immediate corrective action corrects problems at once and gets performance back on track.

3) Basic corrective action asks how and why performance has deviated and then proceeds to correct the source of deviation.

4) It is not unusual for managers to rationalize that they do not have the time to take basic corrective action and therefore must be content to perpetually put out fires with immediate corrective action.

5) Effective managers analyze deviations, and when the benefits justify it, take the time to permanently correct significant variances between standard and actual performance.

4. Revise the standard.

a) It is also possible that the variance was a result of an unrealistic standard—that is, the goal may have been too high or too low.

1) The standard needs corrective attention, not the performance.

2) The more troublesome problem is the revising of a performance standard downward.

3) It may be true that standards are too high.

4) But keep in mind that if employees or managers don’t meet the standard, the first thing they are likely to do is to attack the standard itself.

b) If you believe that the standard is realistic, hold your ground.

1) Explain your position, reaffirm to the employee or manager that you expect future performance to improve, and then take the necessary corrective action to turn that expectation into reality.

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III. TYPES OF CONTROL (PPT 13-6)

A. See Exhibit 13-5. 

B. What Is Feedforward Control?

1. The most desirable type of control—feedforward control—prevents anticipated problems.

a) It takes place in advance of the actual activity.

b) It’s future-directed.

c) The key to feedforward control is taking managerial action before a problem occurs.

2. Feedforward controls allow management to prevent problems rather than having to cure them.

a) These controls require timely and accurate information that is often difficult to develop.

C. When Is Concurrent Control Used?

1. It takes place while an activity is in progress.

2. Management can correct problems before they become too costly.

3. The best-known form of concurrent control is direct supervision.

a) Technical equipment can be designed to include concurrent controls.

D. Why Is Feedback Control So Popular?

1. The most popular type of control relies on feedback.

a) The control takes place after the action.

2. The major drawback of this type of control is that by the time the manager has the information, the damage has already been done.

a) It’s analogous to locking the barn door after the horse has been stolen.

3. Feedback has two advantages over feedforward and concurrent control.

1) First, feedback provides managers with meaningful information on how effective their planning efforts were.

2) Second, feedback control can enhance employee motivation.

     4.  See Developing Your Performance Feedback Skill

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Developing Your Performance Feedback Skill

Providing Performance Feedback

About the Skill
In this chapter, we introduced several suggestions for providing feedback.  One of the more critical feedback sessions will occur when you, as a manager, are using feedback control to address performance issues.

Steps in Practicing the Skill
1) Schedule the feedback session in advance and be prepared.
2) Put the employee at ease.
3) Make sure the employee knows the purpose of this feedback session.
4) Focus on specific rather than general work behaviors.
5) Keep comments impersonal and job-related.
6) Support feedback with hard data.
7) Direct the negative feedback toward work-related behavior that the employee controls.
8) Let the employee speak.
9) Ensure that the employee has a clear and full understanding of the feedback.
10) Detail a future plan of action.

Practicing the Skill

Think of a skill you would like to acquire or improve, or a habit you would like to break. For the purpose of this exercise, assume you have three months to start and all the necessary funds. Draft a plan of action that outlines what you need to do and when you need to do it, and how you will know that you have successfully completed each step of your plan.  Be realistic, but don’t set your sights too low either.
Review your plan.  What outside help or resources will you require?  How will you get them?  Add these to your plan.
Could someone else follow the steps you’ve outlined to achieve the goal you set?  What modifications would you have to make, if any?

Teaching notes
Use the instructions above (for “Practicing the Skill”) as standards for the exercise. Share that they (the students) should
---Be realistic.
---Set goals that will stretch them.
---Review the plan weekly.
---Think about resources and how they will acquire them.

Encourage students to write out a real plan of action by telling them you will call on volunteers in the next class to share their plans.

Students should keep the plan created in this exercise to less than one page in length.

Encourage students to incorporate feedback into the goal setting/planning process.  How will they get feedback?  How can they help the feedback to be delivered in an effective fashion?

IV. CONTROL IMPLICATIONS FOR MANAGERS

A. Introduction.

1. Controlling plays an important role in results and is an important function of managing.

2. Without controls, managers would have insufficient information to resolve problems, make decisions, or take appropriate actions.

B.  What are the Qualities of an Effective Control System? (PPT 13-7)

1. Effective control systems tend to have certain qualities in common.

a) Accuracy—An accurate control system is reliable and produces valid data.

b) Timeliness—The best information has little value if it is dated.

c) Economy—To minimize costs, management should try to impose the least amount of control necessary to produce the desired results.

d) Flexibility—Controls must be flexible enough to adjust to problems or to take advantage of new opportunities.

e) Understandability—A control system that is difficult to understand can cause unnecessary mistakes, frustrate employees, and eventually be ignored.

f) Reasonable criteria—Controls should, therefore, enforce standards that challenge and stretch people to reach higher performance levels without being demotivating or encouraging deception.

g) Strategic placement—Managers should place controls on those factors that are strategic to the organization’s performance.

h) Emphasis on the exception—An exception system ensures that a manager is not overwhelmed by information on variations from standard.

i) Multiple criteria—Multiple measures of performance are more difficult to manipulate than a single measure, they can discourage efforts to merely look good. In addition, because performance can rarely be objectively evaluated from a single indicator, multiple criteria make possible more accurate assessments of performance.

j) Corrective action—An effective control system suggests what action should be taken to correct the deviation. It ought to both point out the problem and specify the solution.

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C. What Factors Affect Control?  (PPT 13-8)

1.   The validity of effective control systems is influenced by situational factors.

2. Control systems should vary according to the size of the organization, one’s position in the organization’s hierarchy, degree of centralization, organizational culture, and importance of an activity.  (See Exhibit 13-6.) 

3. Organization size.
 
a) A small business relies on informal and more personal control devices.

b) Concurrent control through direct supervision is probably most cost effective.

c) Very large organizations will typically have highly formalized and impersonal feedforward and feedback controls.

4. Position and level.

a) The higher one moves in the organization’s hierarchy, the greater the need for a multiple set of control criteria, tailored to the unit’s goals.

b) This reflects the increased ambiguity in measuring performance as a person moves up the hierarchy.

5. Degree of decentralization.

a) The greater the degree of decentralization, the more managers will need feedback on the performance of their employees’ decisions.

6. Organizational culture.

a) The organizational culture may be one of trust, autonomy, and openness or one of fear and reprisal.

1) In the former, we can expect to find informal self-control.

2) In the latter, externally imposed and formal control systems.

3) As with leadership styles, motivation techniques, organizational structuring, conflict-management techniques, and the extent to which organizational members participate in decision making, the type and extent of controls should be consistent with the organization’s culture.

7. Importance of an activity.

a) Influences whether, and how, it will be controlled.

1) If control is costly and the repercussions from error small, a simple control system.

2) If an error can be highly damaging to the organization, extensive control systems are likely to be implemented—even if the cost is high.

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D. A Special Case of Control:  Sarbanes-Oxley Act  (PPT 13-9 and 13-10)

1. During the past several years the increase in corporate scandals has resulted in greater controls, and one of them is the Sarbanes-Oxley Act.

2. Signed into law in 2002, it establishes procedures for public companies to handle and report their financial matters, and includes penalties for non-compliance.
3. It requires the following

a) Top managers (CEO and CFO) must personally certify the organization’s financial reports
b) The organization must have procedures and guidelines in place for audit committees.
c) CEOs and CFOs must reimburse the organization for bonuses and stock options when required by restatement of corporate profits
d) Personal loans and lines of credit for executives are now prohibited.

4. Failure to comply with the requirements can result in the CEO being fined $1 million and being imprisoned for up to 10 years. 

5. Moreover, if the executive’s action is willful, both the fine and the jail time can be doubled.

6. Sarbanes-Oxley also outlines items for Human Resource Management.
a) Employees who whistleblow are protected
b) Companies are required to have mechanisms in place where complaints can be received and investigation can take place
c) As a result, organizational ombuds are now in place in many organizations
(1) They offer confidential help for employees and handle potentially unethical behavior in the organization.

7. Managers must also make employees know about corporate ethics policies and train employees and management how to act ethically.

8. Bottom line is that unethical behavior in organizations must be stopped.

E. Do Controls Need to be Adjusted for Cultural Differences? (PPT 13-11)

1. Methods of controlling employee behavior and operations can be quite different in foreign countries.

2. The differences in organizational control systems of global organizations are primarily in the measurement and corrective action steps of the control process.

3. Managers of foreign operations of global corporations tend not to be closely controlled by the home office.

a) Distance keeps managers from being able to observe work directly.

b) The home office of a global company often relies on extensive formal reports for control.

c) The global company may also use the power of information technology to control work activities.

4. Technology’s impact on control is most evident in comparing technologically advanced nations with more primitive countries.

a) Organizations in technologically advanced nations use indirect control devices—particularly computer-related reports and analyses— in addition to standardized rules and direct supervision to ensure that activities are going as planned.

b) In less technologically advanced countries, direct supervision and highly centralized decision making are the basic means of control.

5. Constraints on what corrective action managers can take may affect managers in foreign countries.

a) Laws in some countries do not allow managers the option of closing facilities, laying off employees, or bringing in a new management team from outside the country.

6.    Another challenge for global companies in collecting data is comparability.

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V. THE DYSFUNCTIONAL SIDE OF CONTROL (PPT 13-12)

A. Introduction

1. College registrar’s office example.

2. Chronic Fatigue and Immune Dysfunction Syndrome association example, lack of controls leads to $12+ million misspent.

3. When controls are lacking, people lose sight of the organization’s overall goals.

4. Problems can occur when individuals or organizational units attempt to look good exclusively on control measures.

5. Dysfunctionality is caused by incomplete measures of performance.

6. To avoid being reprimanded, people may engage in behaviors that are designed solely to influence the information system’s data output during a given control period.

a) Rather than actually performing well, employees may manipulate measures to give the appearance that they are performing well.

b) Evidence indicates that the manipulation of control data is not a random phenomenon. It depends on the importance of an activity.

c) When rewards are at stake, individuals tend to manipulate data to appear in a favorable light.

7. Failure to design flexibility into a control system can create problems more severe than those the controls were implemented to prevent.

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Ethical Dilemma in Management
Invasion of Privacy?

Technological advances have made the process of managing an organization much easier.  But technological advancements have brought with them difficult questions regarding what managers have the right to know about employees and how far they can go in controlling employee behaviors, both on and off the job.
What can your employer find out about you and your work?  Consider the following:

 The mayor of Colorado Springs, Colorado, reads the electronic mail messages that city council members send to each other from their homes.

 The U.S. Internal Revenue Service’s internal audit group monitors a computer log that shows employee access to taxpayers’ accounts.

 American Express provides daily reports to supervisors detailing the frequency and length of calls made by employees, as well as how quickly incoming calls are answered.

 Management in several organizations require employees to wear badges at all times while on company premises.  Smart badges can transmit where the employee is at all times!

Just how much control should a company have over the private lives of its employees?  Does the boss have the right to dictate what you do on your own free time and in your own home?  Employer involvement in employees’ off-work lives has been going on for decades.  Nothing in our legal system prevents employers from engaging in these practices.  The law is based on the premise that “if employees don’t like the rules, they have the option of quitting.”
Managers, too, typically defend their actions in terms of ensuring quality, productivity, and proper employee behavior.  An IRS audit of its southeastern regional offices found that 166 employees took unauthorized looks at the tax returns of friends, neighbors, and celebrities.

Questions

1. When does management’s need for more information about employee performance cross over the line and interfere with a worker’s right to privacy?
2. Is any action by management acceptable as long as employees are notified ahead of time that they will be monitored?

3. Do you believe organizations should be permitted to monitor employee behavior off the job?  Why or why not?

Teaching notes

1. You may need to clarify the differences between ethicality and legality. Something can be legal but unethical.

2. As you lead this discussion, tie it into Linking Concepts to Practice, p. 394, question #5.
       You might also be interested in visiting the Society of Human Resource Management’s Web
       site for HR news, www.shrm.org/hrnews, to research the latest information on privacy issues
       and employee monitoring.

3. Help students take a managerial perspective and try to balance the legitimate control needs of the organization with the legitimate rights of the individual.

VI. CONTEMPORARY ISSUES IN CONTROL  (PPT 13-13)

A. Issues can Arise as Managers Design Efficient and Effective Control Systems.

1. Technological advances have made the process of controlling much easier.

2. But these advances have also brought with them difficult questions regarding what managers have the right to know and how far they can go in controlling employee behavior.  (See Ethical Dilemma in Management.)
3. Two contemporary issues in control—workplace privacy and employee theft.

B. Is My Work Computer Really Mine?

1. Do you think you have a right to privacy at your workplace?

2. Employers can, among other things: read your e-mail (even confidential messages), tap your work telephone, monitor your computer work.

a) Nearly 80 percent of all businesses surveyed by the American Management Association indicate they monitor employees.

3. Managers feel they must monitor what employees are doing because employees are hired to work, not to surf the Web checking stock prices, placing bets at online casinos, or shopping for presents for family or friends.

a) Recreational on-the-job Web surfing has been said to cost a billion dollars in wasted computer resources and billions of dollars in lost work productivity annually.

4. Managers don’t want to risk being sued for creating a hostile workplace environment because of an offensive message or inappropriate images displayed on a co-worker’s computer screen.

a) Federal law views a company’s e-mail no differently than if offensive materials were circulated on a company’s letterhead.

5. Managers want to ensure that company secrets aren’t being leaked.

6. The consequences of inappropriate workplace computer usage can be serious for employees and companies.

a) Examples:  New York Times, Xerox, Salomon Smith Barney, Lockheed Martin.

7. Employees in the United States do have some protection from the Federal Electronic Communications Privacy Act of 1986 (ECPA).

a) The ECPA prohibits unauthorized interception of electronic communication.

b) It doesn’t make workplace electronic monitoring illegal.

1) Employers are allowed to monitor communications for business reasons or when employees have been notified of this practice.

c) The Data Protection Act of 1998 permits much of the same for companies in the United Kingdom.

d) The courts have ruled that since the computer belongs to the company, it has a right to monitor anything on its system.

8. Since September 11, 2001, many government agencies and private organizations have been increasing their computer surveillance in an effort to support “homeland security.”

a) A terrorist attack on U.S. computer systems could prove extremely damaging to the U.S. economy.

b) We can anticipate even more system monitoring and significantly more surveillance of many of the “normal” activities in our daily lives.

C. Is Employee Theft on the Rise? (PPT 13-14)

1. Nearly 85 percent of all organizational theft and fraud is committed by employees—not outsiders.

2. It’s estimated that U.S. companies lose about $29 billion annually from employee theft and fraud.

3. Employee theft is defined as any unauthorized taking of company property by employees for their personal use.

a) It can range from embezzlement to fraudulent filing of expense reports to removing equipment, parts, software, and office supplies from company premises.

4. A recent survey of U.S. businesses indicated that more than 35 percent of employees admitted to stealing from their employers.

5. Why do employees steal?

a) The industrial security people propose that people steal because the opportunity presents itself through lax controls and favorable circumstances.

b) Criminologists say it’s because people have financial-based pressures (such as personal financial problems) or vice-based pressures (such as gambling debts).

c) Clinical psychologists suggest that people steal because they can rationalize whatever they’re doing as being correct and appropriate behavior (“everyone does it,” “they had it coming,” “this company makes enough money and they’ll never miss anything this small,” “I deserve this for all that I put up with,” and so forth).

6. What can managers do?

a) Under certain circumstances as part of a theft investigation in the organization, an employer could require an employee to submit to a polygraph (lie detector test).

b) Look at some suggestions for managing employee theft.  (See Exhibit 13-7.)
  
VII. ENTREPRENEURS AND CONTROL

A. How Must the Entrepreneur Control for Growth? (PPT 13-15)

1. Example, Glory Foods—slow down the process.

2. Successfully pursuing growth typically requires an entrepreneur to manage all the challenges associated with growing—planning, organizing, and controlling for growth.

3. Planning for growth.

a) The best growth strategy is a well-planned one.

b) Rapid growth without planning can be disastrous.

4. Organizing for growth.

a) The key challenges for an entrepreneur in organizing for growth include finding capital, finding people, and strengthening the organizational culture.

b) Having enough capital is a major challenge facing growing entrepreneurial ventures.

c) Example, the Boston beer company which produces Samuel Adams.

d) A growing entrepreneurial venture needs to address finding people.

1) It’s important to plan, as much as possible, the number and types of employees needed to support the increasing workload as the venture grows.

2) It may be necessary to provide additional training and support to employees to help them handle the increased pressures associated with a growing organization.

e) It’s important to create a positive, growth-oriented culture that enhances the opportunities to achieve success, both organizationally and individually.

1) The values, attitudes, and beliefs that are established and reinforced during these times are critical to the entrepreneurial venture’s continued and future success.

2) Exhibit 13-8 lists some suggestions that entrepreneurs might use to ensure that their venture’s culture is one that embraces and supports a climate in which organizational growth is viewed as desirable and important.

5. Controlling for growth. (PPT 13-15)

a) Maintaining good financial records and financial controls over cash flow, inventory, customer data, sales orders, receivables, payables, and costs should be a priority of every entrepreneur—whether pursuing growth or not.
1) Rapid growth, or even slow growth, does not excuse the need to have effective controls in place.

2)    It’s particularly important to have established procedures, protocols, and
       processes and to use them.

b) Green Gear Cycling, CEO Alan Scholz—a “customer for life” strategy.

B. How Does the Entrepreneur Manage Downturns?

1. What happens when things turn sour—when the growth strategies don’t result in the intended outcomes and, in fact, result in a decline in performance?

2. Recognizing crisis situations.

a) Some signals of potential performance decline include inadequate cash flow, excess number of employees, unnecessary and cumbersome administrative procedures, fear of conflict and taking risks, tolerance of work incompetence, lack of a clear mission or goals, and ineffective or poor communication within the organization.

       b)   The “boiled frog phenomenon” (a classic psychological response experiment).
 In one case, a live frog that’s dropped into a boiling pan of water reacts
instantaneously and jumps out of the pan.  But, in the second case, a living frog
that’s dropped into a pan of mild water that is gradually heated to the boiling
point, fails to react and dies.

1) The entrepreneur may not recognize the “water heating up”—that is, the
subtly declining situation.

2) Entrepreneurs need to be alert to the signals that the venture’s performance
may be worsening.

3. When things turn for the worse.

a) The entrepreneur needs to think about it before it happens, using feedforward control.

b) It’s important to have an up-to-date plan for covering bad times.

1) This plan should focus on providing specific details for controlling the most fundamental and critical aspects of running the business—things like revenues, costs, and debt.

2) Other actions would involve identifying specific strategies for cutting costs and restructuring the venture.

C. How Does the Entrepreneur Exit the Venture? (PPT 13-16)

1. There may come a point when the entrepreneur decides it’s time to move on.

2. That decision may be based on the fact that the entrepreneur hopes to cash out on the investment in the venture—called harvesting—or that the entrepreneur is facing serious organizational performance problems and wants to get out.

3. It may even be the entrepreneur’s desire to focus on other pursuits.

4. Business evaluation method.

a) Valuation techniques generally fall into three categories:  (1) asset valuations; (2) earnings valuations; and (3) cash flow valuations.

b) Setting a value on a business can be a little tricky—it’s important for an entrepreneur who wishes to exit a venture to get a comprehensive business valuation prepared by professionals.

5. Other exiting considerations.

a) Deciding who sells the business.

b) Determining the tax implications of the venture’s sale.

c) Establishing how potential buyers are to be screened.

d) Determining when to tell employees about the sale.

e) If the entrepreneur is selling the venture on a positive note, he or she wants to realize the value built up in the business.

f) If the venture is being exited because of declining performance, the entrepreneur wants to maximize the potential return.
 
Teaching Notes 
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Review, Comprehension, Application
Chapter Summary

1. Control is a management function focusing on the process of monitoring activities, ensuring accomplishment, and correcting any significant deviations that may exist.

2. Three approaches to control are market control, bureaucratic control, and clan control.

3. Control is important because it monitors whether objectives are being accomplished as planned and delegated authority is being abused.

4. In the control process, management must first have standards of performance derived from the objectives it formed in the planning stage.  If a variance exists between standards and performance, management can adjust performance, adjust the standards, or do nothing, according to the situation.

5. The three types of control are feedforward, concurrent, and feedback control.

6. An effective control system is accurate, timely, economical, flexible, and understandable. It uses reasonable criteria, has strategic placement, emphasizes the exception, uses multiple criteria, and suggests corrective action.

7. There are a number of contingency factors in organizations including the size of the organization, the manager’s level in the organization’s hierarchy, the degree of decentralization, the organization’s culture, and the importance of the activity.
8. Controls can be dysfunctional when they redirect behavior away from an organization’s goals due to inflexibility or unreasonable standards.

9. Methods of controlling employee behavior and operations can be quite different when there are geographic or cultural differences.

10. The ethical dilemmas in employee monitoring revolve around the rights of employees versus the rights of employers.

11. Entrepreneurs must maintain good financial records and financial controls over cash flow, inventory, customer data, sales orders, receivables, payables, and costs.

Companion Website
We invite you to visit the Robbins/DeCenzo Companion Website at www.prenhall.com/robbins for the chapter quiz and student PowerPoints.

 Diversity Perspectives: Communication and Interpersonal Skills, by Carol Harvey and June Allard
1. Going into the meeting, what perceptions could the Directors have of Sheila?
     The board is in an embarrassing position.  Presumably the precarious state of the LCU reflects on their management/oversight.  Their embarrassment could make them grateful for help (positive perception of the CFO) but more likely makes them unreceptive and ready to perceive the CFO negatively.
     The age and gender of the board suggest that they are apt to resent someone so much younger – and a woman to boot – having authority over them, especially the power to close the credit union.
     They are likely to think that she could not possibly be competent to deal with the problems and both resent and resist her “interference”.

2.   What perceptions could Sheila have of the Directors?
     Sheila is likely to view them as the “Old Boys Club” and expect resistance and suspicion on their part.  This is especially likely to be her perceptions if she has dealt with many boards before since their gender and age characteristics are common on such boards.

The Meeting

3. What purpose could the board chair have in asking her to pour the coffee?
     He is “power testing” to see who is going to be in control.  He would like to cast Sheila in a subordinate role, e.g., like the role of a secretary, and thereby control her.  He is also testing her “sharpness” – how smart she is in sizing up (perceiving) the situation.

4. Why must Sheila be careful of her response?  If she pours, what could be the
      Directors’ perception of her?  If she doesn’t pour, what could be their perception?              
     If Sheila does pour the coffee for everyone, she will be taking a subordinate position, one of taking orders from the board and will thereby diminish in status in the eyes of the board.
On the other hand, if she refuses to pour, she may set up an adversarial situation with the board chair and the board itself and thereby forfeit any chance of a collaboration.

5.  How might the board’s initial reaction be different if she had been older?   A male?  A visible
     minority?  Visibly physically-disabled such as using a wheel chair?
Age.  The board might be less resentful if Sheila were older and they had reason to believe that she possessed a lot of experience relevant to their situation.  They would probably still resent her on the grounds of gender, however.
Gender.  There would likely be less resentment and resistance to a male Fiscal Officer, particularly one of similar age as the board – they would likely perceive someone like themselves as “more qualified.”
Minority.  The perception of minority status would be a function of the biases of board member against minorities in general and the particular minority represented in particular.  The combination of minority and age and gender would likely compound the negative perception held by the board of Sheila.
Visibly Physically-disabled.  As with minority status, the perception of physical disability would be a function of the biases and personal experiences of the board members.  Those with family and friends with disabilities or those with serious health problems of their own may be more accepting of the disability than those without such experience.  It is possible too, that the disability could be viewed as a sign of weakness compounding the perceived weakness of her gender.

Reading for Comprehension
1. What is the role of control in management?
Answer – Control is the process of monitoring activities to ensure that they are being accomplished as planned and correcting any significant deviations. An effective control system ensures that activities are completed in ways that lead to the attainment of the organization’s goals. Control is the final link in the functional chain of management. The value of control lies mostly in its relation to planning and delegating activities.

2. Name four methods managers can use to acquire information about actual organizational performance.
Answer – Four common sources of information frequently used by managers to measure actual performance are personal observation, statistical reports, oral reports, and written reports. Personal observation provides firsthand, intimate knowledge of the actual activity. Computers and sophisticated software systems give managers realtime statistical reports for measuring actual performance. Statistical reports can also be presented as graphs, bar charts, or numerical displays of any form that managers can use for assessing performance. Information can also be acquired through oral reports—that is, through conferences, meetings, one-on-one conversations, or telephone calls. Actual performance may also be measured by written reports. Comprehensive control efforts by managers should use all four.

3. Contrast immediate and basic corrective action.
Answer – Immediate corrective action corrects problems at once and gets performance back on track. Basic corrective action asks how and why performance has deviated and then proceeds to correct the source of deviation. It is not unusual for managers to rationalize that they do not have the time to take basic corrective action. Effective managers, however, analyze deviations and, when the benefits justify it, take the time to permanently correct significant variances between standard and actual performance.

4. What are the advantages and disadvantages of feedforward control?
Answer – The most desirable type of control—feedforward control—prevents anticipated problems. It takes place in advance of the actual activity. It's future-directed. The key to feedforward control is taking managerial action before a problem occurs. Feedforward controls allow management to prevent problems rather than having to cure them.

5. What can management do to reduce the dysfunctionality of controls?
Answer – When controls are inflexible or control standards are unreasonable, people lose sight of the organization’s overall goals. Problems can occur when individuals or organizational units attempt to look good exclusively on control measures. Dysfunctionality is caused by incomplete measures of performance. The use of multiple criteria and creating flexibility in control systems will help minimize dysfunctionality of controls.

Linking Concepts to Practice
1. How are planning and control linked? Is the control function linked to the organizing and leading functions of management? Explain.
Answer – The control process assumes that standards of performance already exist. They are created in the planning function. Objectives are the standards against which progress is measured and compared. An effective control system ensures that activities are completed in ways that lead to the attainment of the organization’s goals. So control is linked to all functions of management, not just organizing and leading.

2. In Chapter 7 we discussed the white water rapids view of change. Do you think it’s possible to establish and maintain effective standards and controls in this type of atmosphere?
Answer – Yes. The control cycle—when measurements are taken, building an acceptable degree of variation due to volatility, etc.–are variations that need to be considered, but controls are vital regardless of industry or market dynamics and volatility. A key quality of effective controls is flexibility. Effective controls must be flexible enough to adjust to adverse change or to take advantage of new opportunities.

3. Why do you believe feedback control is the most popular type of control? Justify your response.
Answer – Students’ responses will vary but might include things like: managers have experience with feedback, it’s natural to want to wait and see what outcomes are before making adjustments, the difficulty in establishing the information systems needed for feedforward control, etc.

4. Why is what is measured in the control process probably more critical to the control process than how it is measured?
Answer – What is measured is more critical to the control process than how it is measured. The selection of the wrong criteria can result in serious dysfunctional consequences. What is measured determines what people in the organization will attempt to excel at. For the most part, controls are directed at one of several areas: information, operations, finances, or people.

5. “Organizations have the right to monitor employees--both on and off the job.” Build an argument supporting this statement and an argument disagreeing with the statement.
Answer – Students’ responses will vary. One example of an affirmative argument might be: of course employees are monitored on the job because that is how performance is enhanced and deviations corrected. In today’s work world, what one does in their private life often effects their work life; if they are too tired from personal activities to do their job properly, if substance abuse is happening off the job, its effects will carry on to the job, etc.

Students’ arguments against this position will focus on not monitoring their personal lives because of their rights to privacy and that their work and personal lives are separate.

Integrative Chapter Skills 

Should we rock the boat?

Purpose: The purpose of this case is to introduce the students to a particularly difficult ethical question in an organization.

Students should read the scenario below.  After reading the case, students should break into groups to debate what to do about this situation and address the Group Task.

You are the top management team of a medium sized Midwest consulting organization. There are around two hundred 5-person consulting teams in the organization. Your organization has been growing substantially over the past 5 years and this has led to a level of disorganization with your Human Resource Department (HR). Originally, you were a moderately priced organization that catered to small to medium sized firms. Your client base warranted about seventy-five teams. Your consultants are paid at around the 70 percentile when judged against other firms. Many prestigious firms on the East coast pay more for consultants graduating from similar schools and with similar qualifications. In fact, among comparable firms you are probably a bit on the low side in pay. Over the past year, you have heard grumblings from many team’s area general managers that the HR department was very nickel and dime in regards to how they handled travel expenses and meals. Many of the perks that consultants heard about in the prestigious firms on the East coast were non-existent in your firm. One general manager put it quite bluntly, “if we want to play with the big boys we have to pay with the big boys.” Realigning the incentive system has been at the top of your agenda.
About 4 years ago you hired a very well regarded consultant from New York, John Davis, who graduated from the top school in the country and had developed many connections with industry for lower than market value because he wanted to live closer to his ailing parents. Over the course of 4 years he has almost single-handedly transformed the company. He was able to bring in enough clients to almost double your base and he recruited many top young consultants to increase the quality of the service. For the most part he formed his own teams with some of the best and most motivated individuals. Employees around the organization called these teams the S.F. division (named after the Special Forces elite units in the Army). The teams under Davis always outworked any other team in the firm and always provided more service than the customers expected. Recently, your team has voted to extend an offer for John to join the top management of the firm as an equal partner.
However, you are now called to an emergency meeting. It has come to your attention that the teams directed by John have been systematically engaging in fraud over the past couple of years. They would routinely allow one individual of the consultant teams to take a “paid” vacation while the other members covered for him/her during a project. They would rotate these breaks among the members. This did not directly lead to fraud against the clients because the normal way in which you conducted contracts in your company is by job not by billable hours. However, the teams would submit falsified expense reports to the HR department claiming everything from meals to travel days. Moreover, the consultants who were on these breaks were still collecting their pay for doing no work. You have investigated this behavior further and found that it is limited to the Davis teams who are both rated higher than other teams by the clients and are bringing in the most business. In fact, you have found out that the entire scheme was designed and encouraged by John himself. In your investigation you are also finding out that other teams are starting to hear about this behavior as the grapevine starts to take effect.

Group task

Your task is to decide how to handle this situation. You must decide not only how to address the specific behavior, but also what to do with John Davis. As a group you must reach a consensus decision. You note that everyone in the company knows that you are about to extend an offer to John to become a full partner. You think that it is only a matter of time before they find out about the vacation scheme.

Teaching Tips
This case will demonstrate the importance of control systems, and raise the question of whether or not it’s ever ok for an individual to usurp the system if s/he believes it is in the company’s best interest (note how Davis had such outstanding performance from his teams).  It also raises the question of when control systems should be revamped---encourage students to consider what a re-design of these systems would be in order to address the root issues of employee motivation, rewards for performance, etc.  Finally, be sure to address whether a zero tolerance standard for company ethics is ever something that can be deviated from---or if ethics must override all other considerations. 

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