Chapter 18
Monitoring and Controlling
Managers must monitor whether goals that were established as part of the planning
process are being accomplished efficiently and effectively. That’s what they do when
they control. Appropriate controls can help managers look for specific performance gaps
and areas for improvement. Focus on the following learning objectives as you read and
study this chapter.
LEARNING OBJECTIVES
2. Describe the three steps in the control process.
4. Describe tools used to measure organizational performance.
5. Discuss contemporary issues in control.
It’s Your Career
How to Be a Pro at Giving Feedback
Everyone needs feedback! If you want people to do their best, they need to know what
they’re doing well and what they can do better. That’s why providing feedback is such an
important skill to have. But being effective at giving feedback is tricky! That’s why we often
see managers either (a) not wanting to give feedback, or (b) giving feedback in such a way
that it doesn’t result in anything positive. You can feel more comfortable with and be more
effective at providing feedback if you use the following specific suggestions:
2. Be realistic. Focus your feedback on what can be changed.
4. Know when to give feedback—make it well timed. Feedback is most
5. Ensure understanding. Make sure your feedback is concise and complete so
6. Watch your body language, tone of voice, and facial expressions. Think
about what you want to communicate and make sure your body language
supports that message.
CHAPTER OUTLINE
INTRODUCTION
Even when managers carefully and thoroughly plan, a program or decision may
be poorly or improperly implemented if an effective control system has not been
established.
18.1 WHAT IS CONTROLLING, AND WHY IS IT IMPORTANT?
Control is the process of monitoring, comparing, and correcting work
performance. Control is important for three main reasons:
A. Control serves as the final link in the functional chain of management.
18.2 THE CONTROL PROCESS
The control process is a three-step process including measuring actual
performance, comparing actual performance against a standard, and taking
managerial action (see Exhibit 18-2).
A. Measuring is the first step in the control process.
1. Measurement is frequently achieved through four common
sources of information:
2. What we measure is probably more critical than how we measure.
What is measured often determines the area(s) in which
employees will attempt to excel.
B. Comparing is the next step in the control process.
1. Comparing determines the degree of variation between actual
performance and the standard.
2. Of critical importance to the control process is determining the
3. An example of comparing actual performance to standards is
presented in Exhibit 18-5.
C. Taking managerial action is the final step in the control process.
Although the manager might decide to “do nothing,” two additional
alternatives may be taken.
1. Correct actual performance. Once the manager has decided to
correct actual performance, he/she must make another decision:
a. To take immediate corrective action, which is corrective
2. Revise the standard. If the standard was set too high or too low, a
manager may decide to revise the standard.
D. Summary of Managerial Decisions
18.3 CONTROLLING FOR ORGANIZATIONAL PERFORMANCE
A. What Is Organizational Performance?
Performance is the end result of an activity. Managers are concerned
with organizational performance—the accumulated end results of all
the organization’s work activities.
B. Measures of Organizational Performance
Employees need to recognize the connection between what they do and
the outcomes. The most frequently used organizational performance
measures include organizational productivity, organizational
effectiveness, and industry rankings.
1. Productivity is the overall output of goods or services produced
2. Organizational effectiveness is a measure of how appropriate
3. Industry and company rankings are often used as a measure to
18.4 TOOLS FOR CONTROLLING ORGANIZATIONAL PERFORMANCE
Three basic types of controls are used to control organizational performance:
feedforward controls, concurrent controls, and feedback controls. (See Exhibit
18-9.)
A. Feedforward, Concurrent, and Feedback Control. Feedforward
control is a type of control that takes place before a work activity is done.
Concurrent control is a type of control that takes place while a work
activity is in progress. Feedback control is a type of control that takes
place after a work activity is done.
B. Financial Controls
1. Traditional Financial Control Measures (See Exhibit 18–10)
a. Financial ratios are calculated by taking numbers from the
organization’s primary financial statements—the income
2. Leverage ratios examine the organization’s use of
3. Activity ratios assess how efficiently the firm is
using its assets.
4. Profitability ratios measure how efficiently and
profits.
b. Budgets are discussed in Appendix B as a planning tool.
Budgets also function as control tools; budgets provide
C. The Balanced Scorecard
The Balanced Scorecard is a performance measurement tool that looks
at four areas—financial, customer, internal processes, and
people/innovation/growth assets—that contribute to a company’s
performance.
D. Information Controls
Information controls can be viewed in two ways: (1) as a tool for
controlling other activities in an organization, and (2) as an area that
managers should control. The use of management information systems is
an important development in the control of information used to monitor
and measure an organization’s activities and performance.
2. Managers need information, not merely data.
analyzed data.
E. Benchmarking of Best Practices
Benchmarking is the search for the best practices among competitors or
noncompetitors that lead to their superior performance.
1. The benchmark is the standard of excellence against which to
measure and compare.
a. Benchmarking can be used to monitor and measure
organizational performance.
LEADER WHO MADE A DIFFERENCE
Bob Iger is CEO of Walt Disney Company, one of the world’s largest entertainment and
media companies. When Mr. Iger became CEO, he had to take control of the perception
others had of Disney. Analysts believed that the Disney brand had become outdated
with too many Disney products in the marketplace lacking the quality people expected.
Iger’s plan was to establish the Disney Difference – “high-quality creative content,
backed up by a clear strategy for maximizing that content’s value across platforms and
markets.”
What can you learn from this leader who made a difference?
18.5 CONTEMPORARY ISSUES IN CONTROL
A. Adjusting Controls for Cross-Cultural Differences
Should global organizations use particular control systems? What should
global managers know about adjusting controls for national differences?
2. Technology has an impact on control, depending on the level of
sophistication of technology in a particular country.
4. Managers face challenges in making comparisons of goods and
services among countries, even when comparing similar products
and services.
B. Workplace Concerns
Chapter 18 explores the following three areas of potential concern for
managers: workplace privacy, employee theft, and workplace security.
1. Workplace privacy. Many employers monitor employees at
work. Employers monitor workers for a number of reasons.
a. Web surfing while at work is thought to cost billions of
2. Employee theft. Employee theft is any unauthorized taking of
company property by employees for their personal use. Exhibit
3. Workplace violence. Anger, rage, and violence in the workplace
adversely affect productivity. Exhibit 18-13 provides actions
managers can take in dealing with workplace violence. A number
of primary contributors to dangerously dysfunctional work
environments have been identified:
j. Faulty equipment or deficient training
k. Hazardous work environments
l. Culture of violence
C. Controlling Customer Interactions
a. The service profit chain is the service sequence from
employees to customers to profit.
D. Corporate governance is the system used to govern a corporation so
that the interests of corporate owners are protected.
a. The role of boards of directors is to have a group,
ANSWERS TO REVIEW AND DISCUSSION
QUESTIONS
18-1. What are the three steps in the control process? Describe in detail.
18-2. What is organizational performance?
Organizational performance is the accumulated results of all the organization’s work
18-3. Contrast feedforward, concurrent, and feedback controls.
Feedforward controls take place before a work activity is done. Concurrent controls take
18-4. Discuss the various types of tools used to monitor and measure organizational
performance.
Financial controls that managers can use include financial ratios (liquidity, leverage,
18-5. What workplace concerns do managers have to deal with? How might those
concerns be controlled?
18-6. Why is control important to customer interactions?
18-7. 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
environment? Discuss.
18-8. “Every individual employee in an organization plays a role in controlling work
activities.” Do you agree with this statement, or do you think control is something that
only managers are responsible for? Explain.
Every individual employee plays a role in controlling the quality of goods and services
PERSONAL INVENTORY ASSESSMENTS
Student answers to these questions will vary.
ETHICS DILEMMA
Student answers to these questions will vary.
This dilemma involves the case of restaurants accidentally serving alcohol to toddlers.
While uncommon, toddlers are sometimes given alcoholic drinks instead of the drink
their parents ordered. Students are asked to consider the ethical and legal ramifications
of these problems. Also, how should managers and organizations control for this type of
behavior. While these cases are obviously accidents, they do bring up the need to
monitor and control employee behavior. For organizations, it’s difficult to keep track of
everything an employee does, so they often use technology to better detect strange or
unusual events. Surveillance cameras are used to record and study both customers and
employees. Students are asked what they think about the practice of employee
surveillance. Is surveillance less invasive when it’s a computer watching instead of a
human? How could organizations make sure they’re monitoring employees’ work
activities ethically?
Try to get students to consider both the positive and negatives of this issue. On one
side, people may feel that organizations are only protecting their interest by recording
SKILLS EXERCISE: DEALING WITH DIFFICULT
PEOPLE
Almost all managers will, at one time or another, have to deal with people who are
difficult. Some examples include people being short-tempered, demanding, abusive,
angry, defensive, complaining, intimidating, aggressive, narcissistic, arrogant, and rigid.
Successful managers have learned how to cope with difficult people. In this exercise,
students are given the following suggestions for dealing with difficult people:
• Don’t let your emotions rule
• Attempt to limit contact
WORKING TOGETHER: TEAM EXERCISE
How can organizations keep teen workers safe? In this exercise, students should form
small groups of three to four and come up with some ideas about things an organization
could do to keep its teen workers safe. Ideas should be put in a bulleted list format and
students should be prepared to share those ideas with the class. The Fair Labor
Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and
child labor rules. The rules vary by age and occupation of the worker. For more
MY TURN TO BE A MANAGER
• You have a major class project due in a month. Identify some performance
measures that you could use to help determine whether the project is going as
planned and will be completed efficiently (on time) and effectively (high quality).
• Survey 30 people about whether they have experienced the violent actions listed
in Exhibit 18–13. Compile your findings in a table. Are you surprised at the
• Pretend you’re the manager of a customer call center for timeshare vacations.
What types of control measures would you use to see how efficient and effective
• Disciplining employees is one of the least favorite tasks of managers, but it is
something that all managers have to do. Survey three managers about their
experiences with employee discipline. What types of employee actions have
caused the need for disciplinary action? What disciplinary actions have these
managers used? What do they think is the most difficult thing to do when
• Steve’s and Mary’s recommended readings: Marcus Buckingham, Go Put Your
Strengths to Work (The Free Press, 2007); W. Steven Brown, 13 Fatal Errors
Managers Make and How You Can Avoid Them (Berkley Business, 1987); and
Peter F. Drucker, Management: Tasks, Responsibilities, Practices (Harper
• Find the latest governmental statistics on workplace injuries, illnesses, and
fatalities. Research ways that organizations can control the number of incidents
• In your own words, write down three things you learned in this chapter about
being a good manager. (LO: 1, Explain the nature and importance of control,
AACSB: Analytical thinking) (LO: 2, Describe the three steps in the control
• Self-knowledge can be a powerful learning tool. Go to mymanagementlab and
complete these self-assessment exercises: How Good Am I at Disciplining
Others? How Willing Am I to Delegate? What Time of Day Am I Most Productive?
and How Good Am I at Giving Performance Feedback? Using the results of your
assessments, identify personal strengths and weaknesses. What will you do to
reinforce your strengths and improve your weaknesses? (LO: 1, Explain the
ANSWERS TO CASE APPLICATION 1
QUESTIONS
Student answers to these questions will vary.
Top Secret
18-13. Is Visa being overly cautious? Why or why not? Why is this level of controls
necessary?
18-14. Which controls would be more important to Visa: feedforward, concurrent, or
feedback? Explain.
18-15. What other managerial controls might be useful to the company?
While the case describes a number of security controls, there are other areas of control
that are important. Visa must monitor organizational performance to ensure
18-16. What could other organizations learn from Visa’s approach?
The key take-away from this case is the fact that while Visa’s OCE may seem extreme, it
ANSWERS TO CASE APPLICATION 2
QUESTIONS
Student answers to these questions will vary.
Deepwater in Deep Trouble
18-17. What type(s) of control—feedforward, concurrent, or feedback—do you think
would have been most useful in this situation? Explain your choice(s).
The explanations for the failure of the Deepwater Horizon point to a number of
deficiencies in control systems. Feedforward control could have been used to provide
18–18. Using Exhibit 18-2, explain what BP could have done better.
In this case, the operators could have done a better job of monitoring the pressure in the
well and shut the well down before the explosion. Once the explosion occurred, the size
18–19. Why do you think company employees ignored the red flags? How could such
behavior be changed in the future?
18–20. What could other organizations learn from BP’s mistakes?
Periodically, disasters like the Deepwater Horizon remind companies of the danger that
ADDITIONAL CHAPTER INFORMATION
The following Web sites provide information and resources on the issues of employee
theft and fraud. The sources listed include issues of intellectual property, corporate
espionage, and employee theft.
• Intellectual Property Theft