Managing Control in

Organisations
BS105 Business Administration
Department of Business Studies, Faculty of Commerce
University of Zimbabwe
Additional core references
Hellriegel, D., Slocum, J., Jackson, S.E., Louw, L., Staude, G., Amos, T.,
Klopper, H.B., Louw, M., Oosthuizen, T., Perks, S. and Zindiye, S. (2012)
Management, Fourth South African Edition, Cape Town: Oxford
University Press Southern Africa.
Robbins, S.P., Coulter, M. and Vohra, N. (2010) Management, 10th
Edition, Essex, England: Pearson Education.

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Introduction
Management is POLC i.e. planning, organising, leading and
controlling.
Thus controlling is an important aspect of management.
In 2014/2015, one of Zimbabwe’s top healthcare companies, Premier
Medical Investments, one of whose subsidiaries, the Premier Service
Medical Aid Society (PSMAS), was and is failing to pay service
providers, was rocked by a salary scandal.
From the stories in the media, it appeared that management control
was the centre of the scandal and challenges facing the group in
general and PSMAS in particular.
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What is control?
“Organisational control refers to the systematic process of regulating
organisational activities to make them consistent with expectations
established in plans, targets, and standards of performance” (Daft &
Marcic, 2011:319).
Robbins, Coulter and Vohra (2010:402) define controlling as “the
process of monitoring, comparing, and correcting work performance”.
Control can be described as the process of establishing performance
standards that will allow for the achievement of organisational goals
(see Hellriegel, Slocum, Jackson, Louw, Staude, Amos, Klopper, Louw,
Oosthuizen, Perks & Zindiye, 2012)

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Why is control important?
Given the crisis that rocked Premier Medical investment and its
subsidiary, PSMAS, it is clear that lack of or poor control can damage
an organisation’s wellbeing, reputation and threaten its survival.
While planning, organising and leading are important, they are
incomplete even if they are pursued to perfection in the absence of
the control aspect.
Control is fundamental to organisations because it enables managers
to know if goals are being attained, and if they are not being fulfilled,
to know where the problems are, and why those problems exist.

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Why is control important?
Thus control enables managers to think about the kind of corrective
action they can take in order to arrest an otherwise unfavourable and
damaging internal situation in an organisation.
Control empowers employees in that once a control system has been
designed and adopted, employees then operate within that
framework knowing how performance will be measured and damage
minimised.
Control is also important in that it protects the organisation and its
assets—tangible and intangible.

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 Link between planning and controlling
Planning
Goals
Objectives
Strategies
Controlling Plans Organising
Standards Structure
Measurements Human Resources
Comparison Management
[Corrective] Actions Leading
Motivation
Communication
Individual & Group
Behaviour

Source: Robbins, Coulter and Vohra (2010:403)

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The Control Process: The Feedback Control Model
Measuring Actual
Step 1 Performance
Sources of information for
Measuring Performance
Personal observations Goals and Objectives
Statistical Reports Network Comparing Actual
Oral Reports Organisational Performance to Step 2
Written Reports Divisional Standards
Departmental
Individual

Taking Corrective
Step 3
Action or Doing
nothing

Source: Adapted from Robbins, Coulter and Vohra (2010:403)

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 Types of control
There are three broad types of control: feedforward, concurrent and feedback (as
explained in summary in the figure below).
The feedback model was explained in the previous slide and note that, designs of
this model may vary with authors (see Daft & Marcic’s version of this model in
their text book).
Input Processes Output

Feedforward Control Concurrent Feedback Control

Control Corrects problems after they
Anticipates problems Corrects problems as they happen. A few years ago Toyota had
and finds solutions e.g. occur e.g. through to recall a number of its models in
you train employees to management by walking North America because they had
do a job correctly around (MBWA) defaults

Source: Adapted from Robbins, Coulter and Vohra (2010:410)

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Key areas of performance in organisations
If one were to review the key focus areas of control or performance
management in contemporary organisations, one may find that many
organisations focus on financial performance such as sales, revenue, and
profit.
Until fairly recently, organisations tended to focus control or performance
evaluation on their finances yet performance is a far wider concept.
A focus on financial performance and controls may result in a sales or
finance orientation and short-termism; these orientations do not regard
customers and other stakeholders as important in the control system of the
organisation.
Norton and Kaplan designed the balanced scorecard model to
demonstrate that organisational performance extends beyond financial
performance.

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 The balanced scorecard model
Financial Perspective

Corrections
Outcomes
Measures
Do actions contribute

Targets
to improving financial
performance. Internal business Process Perspective

Corrections
Outcomes
Measures
Do internal activities

Targets
Customer Perspective and processes add
Mission and value for customers

Corrections
Goals and shareholders?
Outcomes
Measures
How well are we
Targets

serving our
customers? Learning & Innovation Perspective

Corrections
Outcomes
Measures
Are we learning,

Targets
changing and
Source: Daft and Marcic improving?
(2011:322)
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Modifying the balanced scorecard model: Adding Leadership
Customers

M
O
C
T
Internal Business
Leadership Perspective

M
O
C
T

Corrections
Outcomes
Measures
Mission and How effective is our

Targets
Goals leadership?
Learning & Innovation
M
O
C
T

Financial

M
O
C
T
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The Changing Philosophy of Control
There are many changes taking place in the business environment
such as employee participation and management.
Consequently, many organisations are adopting concepts like
decentralised controls as opposed to hierarchical, or centralised,
control systems, open book management, total quality management,
international quality standards (see Daft & Marcic, 2011:328-338),
benchmarking and workplace concerns (Robbins, Coulter & Vohra,
2010:414-419).

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Hierarchical vis-à-vis decentralised control
Hierarchical control involves monitoring and influencing employee
behaviour through extensive use of rules, policies, hierarchy of
authority, written documentation, extrinsic reward systems, and
other formal mechanisms (see Daft & Marcic, 2011:328-9).

Decentralised control is based on values and assumptions that are

almost opposite to those of hierarchical control (ibid).

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A comparison of Hierarchical and Decentralised Control (Daft & Marcic, 2011:329)
Hierarchical Control
Basic  People are incapable of self-discipline
assumptions and cannot be trusted.
 They need to be monitored and
controlled closely.
Actions  Use detailed rules and procedures,
formal control systems.
 Uses top-down authority, formal
hierarchy, position power, quality
control inspectors, task-related job
descriptions; emphasises extrinsic
rewards (pay, benefits, status); rigid
control culture, norms and culture
seen as inadequate forms of control.
Consequences  Employees follow instructions and do
as told; employees feel a sense of
indifference towards work; employee
absenteeism and turnover high
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Decentralised Control
People work best when they are fully committed
to the organisation.
 The psychological contract becomes more
important than the formal contract
 Limited use of rules, relies on values, group
and self-control, selection and socialisation
 Relies on flexible authority, flat structure,
expert power, everyone monitors quality.
 Relies on result-based job descriptions,
intrinsic and extrinsic rewards.
 Culture is adaptive and is recognised as
uniting individual, team and organisational
goals for overall control.
 Employees take initiative and seek
responsibility; are actively engaged and
committed to their work; employee turnover
is low.
15
Open book management
Open-book management entails sharing financial information and results
with all employees in the organisation (Daft & Marcic, 2011:331).
This is important because it promotes responsible decision-making across
the hierarchy and helps in motivating employees; it develops employees to
think like the business owners.
In my opinion, employees will not abuse financial information they are
given access to; rather managers who lack accountability and transparency
fear that their decisions will be questioned by informed employees.
Open book management is associated with organisations, countries
included, that are associated with decentralised management control
systems.

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Open book management (Cont’d)
Open-book management is not just useful at the organisational level
but also even at individual and nation levels.
Picture a situation where a breadwinner in a family shares financial
information with the spouse and dependants.
The Opacity Index measures the extent to which countries are open
regarding their economic matters.
The higher the opacity score, the secretive the national economy.
Managers in opaque countries do not share financial information with
employees (find out if Zimbabwe is included in the Opacity Index).

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Total Quality Management (TQM)
TQM is one of the concepts associated with decentralised
organisational control systems.
TQM is an organisation-wide commitment to infusing quality into
every activity through continuous improvement.
“TQM philosophy focuses on teamwork, increasing customer
satisfaction, and lowering costs” (Daft & Marcic, 2011:334).
Organisations implementing TQM encourage managers and
employees to collaborate across functions or departments, as well as
with customers and suppliers, to identify areas of improvement, even
if the improvements to be undertaken are small.
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TQM Techniques
According Daft and Marcic (2011:334-336) there are five TQM
techniques which are discussed in the next few slides—quality circles,
benchmarking, Six Sigma, Reduced Cycle Time, and continuous
improvement.

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Quality Circles
A quality circle is a group of six to 12 volunteer employees who meet
regularly to discuss and solve quality problems that affect the quality
of their work (Daft & Marcic, 2011:334).

The volunteers meet at specified times or intervals during a week to

discuss and solve challenges impacting the quality of their work.

They may even collect data through whatever means possible

including conducting surveys.

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Benchmarking
Benchmarking is a continuous assessment of an organisation’s
products or services, practices, processes against those of leading
competitors and organisations in unrelated industries, which are seen
as doing well.
Benchmarking as a technique was pioneered by Xerox in 1979 and
has since become a fundamental principle of management.
The objective of benchmarking is to identify various benchmarks,
which are standards of excellence against which to measure and
compare an organisation’s performance (Robbins, Coulter & Vohra,
2010:414).

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Benchmarking indices (just for your information)

Indices such Opacity Index, World Economic Forum’s Global

Competitiveness Index, World Bank’s Doing Business, Foundation for
Peace’s Fragile States Index, Corruption Perception Index, Anholt-GfK
Roper’s Nation Brand Index, FutureBrand’s Country Brand Index,
Transparency International’s Corruption Perception Index, UNDP’s Human
Development Index, etc. are bases on which countries can benchmark
themselves.

At organisational level, companies can devise indices to measure customer

satisfaction , Customer-Based Brand Equity, Stakeholder-Based Brand
Equity, Company- or Finance-Based Brand Equity, Resource-Based View of
Brand Equity, and Customer- and Company-Based Brand Equity.

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Six Sigma
Six Sigma as a quality principle was introduced by Motorola in the 1980s
and was popularised by USA-based corporation, General Electric during the
tenure of one of its very successful CEOs—Jack Welch.
Sigma is a Greek word that statisticians use to measure how something
deviates from perfection.
Six Sigma is a highly ambitious quality control standard that specifies a
goal of no more than 3.4 defects per million parts, which essentially means
being defect-free 99.99 percent of the time (Daft & Marcic, 2011:334)
Consequently organisations guided by this principle have high quality
standards.

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Reduced Cycle Time
Cycle time refers to the steps [and time] it takes to complete a process
such as processing an airline ticket, processing an online order (Daft &
Marcic, 2011:334) or completing a student registration process in a
university, for example.
Thus I regard cycle time as lead or turnaround time.
A higher or long turnaround time destroys value in a business.
Organisations can improve their cycle or lead time through business
process reengineering—a process in which they redesign their processes
by cutting out unnecessary and/or value destroying steps.
Examples include what is now being done at the Registrar’s Office in terms of
passport applications and processing, and birth and national registration process
(e.g. single national number of identity for both documents).
The American Army destroyed value during the Vietnam War by requiring 14 to 18
signatures to approve servicemen’s leave even in the case of an emergency.

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Continuous improvement
Continuous improvement or kaizen (Japanese) is the implementation of a
large number of small, incremental improvements in all areas of the
organisation on an on-going basis.
In the topic of managerial decision making, one of the key theories of
decision making is logical incrementalism, which is explained generally in
the same way as kaizen.
Japanese companies thrive on this technique of TQM.
One writer in the domain of intellectual property says that Japan rapidly
developed by developing and registering industrial designs i.e. inferior
patents, which are minor improvements on existing technologies (industrial
designs are registered for 5 years or so whereas patents are registered for
10 to 15 years).
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International quality standards: ISO 9000
The motivation for TQM as a basis for international competitiveness has seen an
increase in the number of companies that are adopting international quality
standards.
One such standard is ISO 9000 standards that represent an international
consensus for what constitutes effective quality management as defined by the
International Organisation for Standardization (Daft & Marcic, 2011:338).
ISO certification is not, in itself, a certificate of quality but of commitment to
quality (as a result some organisations demand to see a supplier’s evidence of
ISO certification before they do business with a company).
Locally, we have the Standards Association of Zimbabwe (SAZ) which certifies
the quality of products and services manufactured in Zimbabwe (foreign products
imported into the country can also be SAZ certified).

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Workplace concerns
Because of advances in technology [and other contemporary
challenges], today’s workplaces place a host of control challenges for
managers (Robbins, Coulter & Vohra, 2010:416-419).
The key issues here are
Workplace privacy – employers read your emails (even those marked
confidential), and monitor and record your telephone conversations.
Employee theft – many employees steal from their workplaces.
Workplace violence – employees may fight at work, employees may gang up
to beat managers or vice versa. You know about the Marikkana Disaster in
South Africa where South African Police killed over 30 people during an
industrial strike a few years ago.

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Corporate Governance
Both Robbins, Coulter and Vohra (2010:421-422) and Hellriegel et al.
(2012:568-569) agree that corporate governance is an important
control tool for organisations.
The salary scandal at Premier Medical Investments is in itself is a
typical failure in corporate governance as a control tool in the
governance of firms.
Just like in international case studies of corporate governance failure
such as at now defunct USA-based firm, Enron, the then board of
directors at Premier did not exercise its power to influence executive
pay including its own allowances.

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Corporate governance (Cont’d)
“Corporate governance is the pattern of relations and controls
between the stockholders, the board of directors and the top
management of a company” (Hellriegel et al., 2012:568).
It is the system used to govern a corporation so that the interests of
corporate owners are protected (Robbins, Coulter & Vohra,
2010:421).
As such, corporate governance is indeed an important tool for
control.

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Corporate governance (Cont’d)
According to Hellriegel et al. (2012:569) the functions of corporate
governance, which demonstrate its links with organisational control,
include:
Strategic and business planning
Risk management associated with major capital investments and the
purchase of another organisation, or sale of company or division
Performance assessment of the top executive and the organisation as a
whole (emphasis added)
Compensation and benefits paid to executive and higher-level managers.

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Conclusion
One of the roles of management is to control organisational
operations.
Controlling is the process of monitoring, comparing, and correcting
work performance.
Poor management control and poor corporate governance can
damage an organisation’s wellbeing, reputation and threaten its
survival.
Thus organisation should invest time and other resources to design
effective control mechanisms.

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