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Chapter 16: Control
Pedagogy Map
This chapter begins with the learning outcome summaries and terms covered in the chapter,
followed by a set of lesson plans for you to use to deliver the content in Chapter 16.
• Lesson Plan for Lecture (for large sections)
• Lesson Plan for Group Work (for smaller classes)
• Assignments with Teaching Tips and Solutions
What Would You Do Case Assignment – Caterpillar
Self-Assessment – Too Much Information?
Management Decision – Managing or Spying?
Highlighted Assignments
Key Points
What Would You Do?
What steps can Caterpillar take to make sure that it does not
suffer during periods of declining sales?
Management Decision
What steps can a company take to oversee and control the
performance of freelancers?
Management Team Decision
Student groups are asked to formulate a new security policy
for the Department of Homeland Security.
Practice Being a Manager
Students develop a control system tailored to a particular
company and type of work.
Develop Your Career Potential
Students build a model for a systematic approach to learning
from mistakes and failures.
team around during half-time to talk about what success
Supplemental Resources
Where to Find Them
Course Pre-Assessment
IRCD
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Course Post-Assessment
IRCD
Learning Outcomes
1 Describe the basic control process.
The control process begins by setting standards, measuring performance, and then comparing
performance to the standards. The better a company’s information and measurement systems, the easier it
is to make these comparisons. The control process continues by identifying and analyzing performance
2 Discuss the various methods that managers can use to maintain control.
There are five methods of control: bureaucratic, objective, normative, concertive, and self-control (self-
management). Bureaucratic and objective controls are top-down, management-based, and measurement-
based. Normative and concertive controls represent shared forms of control because they evolve from
3 Describe the behaviors, processes, and outcomes that today’s managers are choosing to
control in their organizations.
Deciding what to control is just as important as deciding whether to control or how to control. In most
companies, performance is measured using financial measures alone. However, the balanced scorecard
encourages managers to measure and control company performance from four perspectives: financial,
Who Wants to Be a Manager game
IRCD and online
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Terms
balance sheets
balanced scorecard
behavior control
benchmarking
cybernetic feasibility
economic value added (EVA)
feedback control
feedforward control
Lesson Plan for Lecture
Pre-Class Prep for You:
Pre-Class Prep for Students:
• Review the chapter and determine what points to
cover.
• Bring PPT slides.
• Bring book.
Warm Up
Content
Delivery
Topics
PowerPoint Slides
Activities
Basics of Control
1 The Control Process
1.1 Standards
1.2 Comparison to
Standards
1: Control
2: What Would You Do?
3: Basics of Control
4: The Control Process
5: Setting Standards
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Possible
How and What to
Control
2 Control Methods
2.1 Bureaucratic
12: Control Methods
13: Control Methods
14: Bureaucratic Control
15: Objective Control
19: Self-Control
3 What to Control?
3.1 The Balanced
Scorecard
3.2 Financial
Perspective
20: What to Control?
21: The Balanced
Scorecard
22: Advantages of the
Balanced Scorecard
26: Parts of a Basic
Balance Sheet
27: Basic Income
Statement
28: Common Financial
Ratios
33: Common Kinds of
Budgets
34: Economic Value
Added (EVA)
35: Economic Value
Added (EVA)
41: Controlling Waste
and Pollution
42: Biz Flix – Friday
Special
Items
Conclusion
and
Preview
Lesson Plan for Group Work
Pre-Class Prep for You:
Pre-Class Prep for
Students:
• Review material to cover and modify lesson plan to meet your
needs.
• Provide enough annual reports so that each small group in the class
• Bring book.
Warm Up
Begin Chapter 16 by asking students the following questions:
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Content
Delivery
Introduce the chapter and present The Control Process (Section 1).
After presenting the control process, break for the following activity:
“Set the Standard”
Divide the class into groups of 3-4 students each and give them 2 minutes to decide
on a company to use as the basis for the activity. Tell students to determine a set of 2-
3 standards that company could use as the foundation for its control process. Then
Present Control Methods (Section 2).
Lecture on What to Control (Section 3).
concrete and personalized example for those who are having difficulty visualizing
“Personal Scorecard”
Divide your class into groups of 3-4 students each and have each group act as a
discussion group in which students can build a personal balanced scorecard. Even
though students are producing an individual scorecard, they can consult group
members for feedback and advice.
As an alternate to “Personal Scorecard”, do the following activity:
“Business Scorecard”
Divide your class into groups of 3-4 students each and give each group an annual report of
a well-known company. Have each group build a balanced scorecard for their company,
using the annual report as a reference when needed. Since Southwest Airlines was used as
Special
The Develop Your Career Potential exercise at the end of this chapter offers student the
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Items
opportunity to examine their failures in light of the concepts presented in the chapter.
Conclusion
and
Assignments:
1. Depending on how much you want to emphasize the balanced scorecard, assign
read the next chapter on your syllabus.
Remind students about any upcoming events.
Assignment with Teaching Tips and Solutions
Case Assignment – What Would You Do?
What Really Happened? – Solution
CATERPILLAR
In the opening case, you learned that while Caterpillar is the dominant manufacturer and servicer of
construction and earth moving equipment worldwide, it has not yet mastered the cyclical nature of its
industry, which experiences sudden, extreme upswings and downswings in sales. While it offsets this
You’ve just been named Cat’s next CEO, and you’ve got six months before you take over from the current
CEO. You’ve decided to use this time to pick your 16 top managers and work with them to analyze the
company. Cat has entered a lot of businesses in the last two decades and every part is, good, bad, and
ugly, is on the table for review. The critical issue is how to better manage the cyclical nature of your
industry, particularly downturns. While you can see them coming, you can’t predict their severity. So,
what can Cat do to better prepare itself and its customers, suppliers, and dealers for the next severe
downturn? Also, what are your goals for company performance for the next downswing?
Control begins by setting standards, measuring performance, and then comparing performance to the
standards. If the performance deviates from the standards, then managers and employees analyze the
While almost all companies cut expenses, pay, and jobs during severe economic downturns, few
companies suffer the severe upturns and downturns that Caterpillar exists in its business. In a very broad
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During Caterpillar’s last major upswing in business when, as Oberhelman says, “Everything was just
blowing and going,” Oberhelman and Owens forced the managers in each business unit to put together a
plan that would get them through the worst year in their history. Says Oberhelman, “Let’s say you’re
Caterpillar’s “trough teams” used a 13-point list of priorities to maintain focus, such as cash flows,
Guiding everyone in the company were three key goals. First, maintain cash flows and earn a profit,
even if Caterpillar was a smaller company than before. Second, maintain Caterpillar’s credit rating. This
How well did the “trough teams” execute the “trough plans,” and how well did those plans work? In
2010, Caterpillar’s stock outperformed the other 29 companies in the Dow Jones Industrial Average.
End-of-year earnings quadrupled from a year earlier, and Caterpillar’s stock performance for the year
exceed Apple’s. CFO Rapp says, “I’m absolutely convinced that down the road, we’ll look back on 2009
Second, severe upswings, though preferable, are disruptive and difficult to manage, particularly when it
comes to hiring thousands of workers at one time, restarting mothballed production facilities, procuring
the necessary parts from suppliers, and suddenly finding the cash to pay for it all. So, given that there’s
little warning, in other words, almost no feedback to warn you this is coming, what can be done to make
sudden increases in production more manageable for you and your suppliers?
Control is achieved when behavior and work procedures conform to standards and goals are
accomplished. By contrast, control loss occurs when behavior and work procedures do not conform to
standards. Maintaining control is important because control loss prevents organizations from achieving
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For example, the difficulty that Caterpillar has with sudden upswings (and downswings) in its
business is that while it can see them coming, it can’t accurately predict how big those upswings will be.
In others words, Cat lacks feedback to track and control these sudden upswings in its business,
Without cybernetic feasibility, what can Cat do? When you have unpredictable events and processes,
rather than focusing on what you can’t predict and control, focus on what you can. So Caterpillar held
number of core issues and problems were identified.
For example, every time that Caterpillar’s business surges, it knows that its suppliers are going to
have difficulty getting or generating the cash they need for sudden expansion. After all, these surges
Cat and its suppliers also determined that Caterpillar’s tendency to change already made orders,
which can be handled during normal business periods, can’t be handled by already stressed managers,
A related approach is Caterpillar’s “lane strategy” in which Caterpillar tells customers that there are
four “lanes” of products they can order. “First lane” products contain the most common and popular
options and packages (similar to buying a car), whereas “Fourth lane” products are highly specialized and
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Finally, Cat required each of it’s suppliers to develop detailed, written plans for each part they make
that Cat buys. Those plans explain what steps the supplier will take to meet a suddenly large order for
Finally, sudden upswings and downswings produce opportunities for your competitors to steal customers
by undercutting price, delivering products faster, or designing better products. What can Cat and its
Dealers, who sell and service your products, do to decrease customer losses and defections? What can
top management do to make sure it keeps a stronger focus on customers?
Most companies measure performance using standard financial and accounting measures such as
return on capital, return on assets, return on investments, cash flow, net income, and net margins. The
The second aspect of organizational performance that the balanced scorecard helps managers monitor
is customers. It does so by forcing managers to address the question, “How do customers see us?”
Caterpillar really has two kinds of customers, the Dealers that buy its products and then sell and service,
and then the businesses that buy Caterpillar’s products from Dealers. So, what can Caterpillar’s top
management do to make sure it keeps a stronger focus on customers? What can Cat and its Dealers, who
sell and service your products, do to decrease customer losses and defections?
When it comes to top management’s focus on customers, CEO Oberhelman spends one full day a
The core of Oberhelman’s strategy is for Caterpillar’s customers to make “more money using our
equipment rather than anybody else’s.” While Caterpillar’s equipment is more expensive than the
And when Cat machines break, or need parts or service, Caterpillar’s Dealer network is there to meet
customers’ needs. CEO Greg Poole, of Gregory Poole Equipment, the Caterpillar dealer in Raleigh,
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Another significant way in which Caterpillar focused on customers and dealers was to significantly
redesign the controls for its heavy equipment, which traditionally had 15 levers, a steering wheel, and
several foot pedals with different functions. Controlling the machines was not only complex, requiring
the hiring of skilled operators, it took a physical toll on the operators, who often used their hands, knees
and elbows to move the 15 levers while steering. So Caterpillar interviewed 500 machine operators and
found out they wanted the machines to be easier to control and more fun to run. After 110,000 hours of
field testing and feedback from 900 customers, Caterpillar replaced the 15 levers and steering wheel with
two joystick controls, similar to those used on video games. The joysticks considerably reduce the
physical wear and tear on machine operators. More experienced operators, who often retired in their late
50s because of the physical toll, can now continue to work. Sixty-three year-old Wayne Wood, who used
September 2006, A10; T. Van Hampton, “Down to Earth,” Engineering News-Record, 21 March 2011, 26–32.
Self-Assessment
TOO MUCH INFORMATION?
This chapter assessment helps students identify how much feedback they like to receive by indicating if
they are motivated more to learn or to demonstrate their current abilities.
In-Class Use
Have students open their books to page 648 of the text and give them 8 to 10 minutes to complete the
inventory. Give students a moment to add their raw score and then go over what the scores mean (see
Scoring
This assessment, which measures your feedback-seeking motives, is actually a combination of 4
individual scales, so students will generate 4 subtotals as follows:
(A) Desire for useful information: Add together your scores for items 1, 5, 9, 13, 17, 21, 25, 29.
(B) Ego Defense: Add together your scores for items 2, 6, 10 14, 18, 22, 26, 30.
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(C) Defensive Impression Management: Add together your scores for items 3, 7, 11, 15, 19, 23, 27, 31
(D) Assertive Impression Management: Add together your scores for items 4, 8, 12, 16, 20, 24, 28, 32.
After students calculate their raw scores, they will want to know what those scores mean. Here is what
you can tell them: How motivated you are to seek feedback when you want useful information is reflected
The questions in Group B relate to ego defense, so a high score here indicates a desire to protect your
ego. This number tends to be higher for performance-demonstrators – people who don’t want anyone to
hear negative feedback about them or their performance—and lower for learning-oriented individuals
who want feedback about how to improve their performance. Those with a learning orientation consider
that feedback will provide information that outweighs any costs to their self-esteem.
The questions in Groups C and D relate to impression management. Group C questions indicate your
level of defensive impression management. That is, the extent to which you worry what others will think
of you if you ask for feedback. High scores for Group C indicate that you are afraid of getting a negative
Management Decision
MANAGING OR SPYING?
Purpose
The purpose of this exercise is to have students think about the costs and benefits of exercising control.
Setting It Up
Ask your students: “If your boss at work kept track of everything you did on a computer, would you
consider good management or spying?”
Questions
1. Should this company use oDesk’s feature to monitor its contractors? Why or why not?
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2. In your opinion, do the benefits of using oDesk’s surveillance feature outweigh the potential
costs?
Management Team Decision
MAKING AIRPORTS MORE SECURE
Purpose
The purpose of this case is to give students a chance to think about how to balance control with
efficiency.
Setting It Up
Asks students what they most enjoy about air travel. Some might talk about being able to go to exotic
locations, while others might talk about not having to drive long distances. Then, ask students what they
Questions
1. In your opinion, is there a way to you can maintain airport security without sacrificing efficiency?
What would such a system look like?
Students’ responses will vary in specific details, but their answers should include the basic elements
involved in establishing control. As described in the text, the basic control process begins with the
2. How could you incorporate feedforward control (gathering information about performance
deficiencies before they occur) into airport security measure?
Feedforward control is a mechanism for gathering information about performance deficiencies before
they occur. In contrast to feedback and concurrent control, which provide feedback on the basis of
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Practice Being a Manager
IN CONTROL, OR CONTROL FREAK?
Exercise Overview and Objective
This exercise focuses on control issues in the context of a specialty sports equipment maker. Razor’s
Edge (RE) makes gear and provides services for a niche market of extreme sports enthusiasts,
Preparation
It is a good idea to ask students to read the scenario in Step 1 before they arrive at the session in which
you will conduct the exercise. You may want to decide on team assignments in advance. Remember that
one team should be assigned the role of Company Leadership. These are the judges for the design
competition. Encourage students to read Step 2 before beginning the design competition. Teams should
carefully consider the elements listed in Step 2:
• Paid vacation
In-Class Use
Each team should complete a one-page handwritten outline of their proposal. You may also use flip
charts. If flip charts are used, ensure that teams keep their chart hidden from the view of other teams until
time for presentation. These outlines may be bullet points, but should provide enough specific
Following the announcement of winner(s), you should move directly to class debriefing/discussion.
The following questions in Step 4 should frame this discussion:
• What tensions confronted you as you worked to design an approach to staffing control for
Razor’s Edge, Inc.?
Students should recognize the tension between the need to preserve the best qualities of the informal,
adventuresome culture that characterizes RE, while establishing some basic controls necessary to manage