Types of control feedforward concurrent feedback

The Controlling Function

Learning Objectives

After completing this chapter, you should be able to:

• Complete the steps involved in the organization’s constant and periodic control systems. • Prescribe specific corrections for problems identified at the functional/departmental level. • Use accounting and financial controls to improve company-wide performance. • Finalize all other aspects of the control process.

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Introduction Chapter 7

7.1 Introduction The modern organization operates in a complex, ever-changing environment. In fact, the exter- nal environment continues to be highly competitive thanks to the ever-increasing expectancies of customers, clients, and key stakeholders. Competitors also constantly vie for market share. Control systems and methods assist managers by providing information about the state of the organization’s production expectancies, financial condition, employee demands, operating sys- tems, marketing activities, governmental influences, and other factors as they arise. Such infor- mation is essential to drive manager course correction decisions (Etzioni, 1964; Merchant, 1982).

Successful organizations use effective and appropriate control systems to obtain organizational goals and objectives. In this chapter, we explore control systems and their importance to overall organizational success. The first section describes the natures of constant and periodic controls. Next, we consider specific departmental and functional area control systems. In the following section, we examine the role played by financial and accounting standards in an organization’s control process. Finally, we look at other forms of control .

M A N A G E M E N T I N P R A C T I C E

At McDonald’s, Organizational Controls Move Fast Food into the New Millennium

McDonald’s has long been known as the industry leader in fast food, specifically in the area of hamburgers, fries, and a soft drink. Numerous business textbooks describe how the company’s stra- tegic model has led to growth domestically and internationally. Everything from the company’s take on where to place stores (location, location, location) to its mantra of quality, service, cleanliness, and value (McDonalds.com, 2013) to the company’s famous Hamburger University management training program suggests that numerous organizational activities and practices have set the stan- dards for success in a crowded marketplace.

The McDonald’s organization has shown the ability to adapt to international circumstances. In India, for example, where consuming beef would violate religious norms, the company created a beefless menu complete with veg- etarian burgers and even vegetarian “cheese.” While critics point out that the children’s menu burger is not exactly a healthy choice (Petrun, 2007), it does appeal to a wide audience within that country.

About a decade ago, however, the tide of public opinion began to turn against the company in some ways. Movies such as Supersize Me began a period in which McDonald’s and many other food companies experienced criticism regarding the health properties present in their menus. McDonald’s first corpo- rate reaction was to change from using

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Larry French/AP Images for McDonald’s

▲▲ McDonald’s has shown the capacity to adapt to changing circumstances, especially in the area of health-conscious menus.

http://www.mcdonalds.com/us/en/home.html
Introduction Chapter 7

Controlling is the process of evaluating performance against established goals and creating methods appropriate to take corrective action to maintain or improve performance in any area of the organization. Control systems allow managers to analyze the state of the organization and its various constituent parts to determine if the plan and structural system are achieving expected results.

The first distinction to be made involves the differences between what may be described as con- stant controls and periodic controls. Constant controls regulate organizational activities on a continual basis. Any time a standard is not met, the management team should immediately react with corrective action. Periodic controls assess organizational activities on a regularly scheduled basis. Then managers are able to undertake corrective action as needed. This section examines these two control processes.

Constant Controls

A great deal of organizational activity is guided by ongoing, continual standards. Such standards regulate the behaviors of individual employees, groups and departments, and the overall organi- zation. Without this form of guidance, companies can quickly drift away from the actions, activi- ties, and behaviors that allow them to succeed.

Individual Constant Controls Each employee in any type of organization will be expected to follow certain standards and behavioral guidelines. The principles constitute the basic necessity of maintaining membership in the company. Two primary forms of individual constant controls include work procedures and the organization’s rule/discipline system.

cooking oil based on beef tallow to a vegetable version. Over time it became clear that, if the com- pany were to succeed in a new era and environment, things would need to change.

The corporate control system led the way. The company’s evolving sense of mission and vision cre- ated new standards for members of the entire organization to follow, from the CEO to individual employees (Git, 2013). Many stores now post the caloric content of each food offering. In 2013 McDonald’s announced plans to sell a greater variety of healthy foods in addition to its traditional menu. In response to concerns about increasing obesity rates among U.S. children, many of these foods were directed at younger consumers.

In this instance, a corporation’s control system began to address two major goals. The first was to continue the organization’s success by maintaining customer patronage. The second, and perhaps loftier outcome, would be to sell more products that enable individuals to enjoy a quick meal out that may help them live longer with fewer health issues. In the future, you can expect McDonald’s and other corporations to continue using control systems as a tool for adapting to a changing world.

Discussion Questions