Control Methods 1

Traditional Control Methods

Chenista Rae Straubel

MGT 330

Beverley Harris

April 6, 2004
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Abstract

“While the classification is somewhat arbitrary, there are three

types of traditional control methods“

Control is a process used to direct activities within an organization by providing

focus on goals, the company mission and vision, and individual objectives. Ineffective

control mechanisms lead to problems that often escalate resulting in a loss of resources be

it in human capital or financial losses.

When used properly control facilitates planning by allocating and utilizing

resources efficiently and by simplifying complex processes into procedural elements that

can be measured.

Four steps define the generic control cycle: 1) defining performance standards, 2)

measuring performance, 3) comparison to industry standards, and 4) corrective action.

When developing or designing any control system, it is necessary to consider the

dual responsibilities of control systems – they must be flexible and efficient. In efficient,

control systems must accurately measure and report results in a responsible way. The

information is only useful if it can be interpreted and used during the planning processes.

Strategic control systems aid managers by helping them to effectively evaluate

organizational progress as it applies to its strategy and then taking correction action.

Three categories of control methods include: 1) diagnostic control systems which

include budgetary and performance, 2) boundary control systems include bureaucratically

identifying and defining specific actions and behaviors that are acceptable (corporate

culture), and 3) interactive control systems include feedback mechanisms.

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Traditional Control Methods

Three strategies for acquiring organizational control include: bureaucratic control,

market control, and clan control.

As the term implies, bureaucratic control engages formal rules and standards

while defining specific hierarchies and systems of authority. This form of control

strategy works best where there is a high degree of certainty and workers are

independent. Feedforward, concurrent, and feedback are three approaches to

bureaucratic control. Feedforward includes policies, procedures and rules that must be

followed. Concurrent approaches take place simultaneously while plans are carried out.

Finally feedback focuses on results and is often used to correct deviations from standards.

Market control focuses on marketing issues such as prices, competition, profit

centers and exchange relationships. This control strategy is most effective when a market

has been established for the output.

Corporate culture control is achieved by clan control. When there is “no one best

way” to do something and employees are empowered at the decision-making level, clan

control can help organizations manage the corporate culture by establishing a system of

shared values and beliefs and clearly defining expectations and establishing mutual trust.

Management audits evaluate the efficiency of organizational systems.

External audits evaluate the conduct of an organization to discover possible

merger or acquisition opportunities, determine the soundness of a company, or to unravel

the strengths and weaknesses to exploit a competitive advantage.

Internal audits assess a company’s own planning, organizing, leading and control

processes. During the internal audit, companies discover what the company has done for
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itself and what it has done for its customers. Evaluations address a number of factors:

employee development, financial growth, public relations and social responsibilities, as

well as overall effectiveness.

Budgetary control ties feedforward, concurrent, and feedback controls together.

Budgeting is the process of comparing budgetary data to verify accomplishments or

resolves differences. During the process, investigations provide current and historical

data that is compared not only to the company data, but also to industry standards. A

company can use the comparison data to evaluate its own budget and discover new

methods that can be used during the planning process to increase efficiency and the

company bottom line. Budgetary control includes accounting audits that verify the

accuracy of accounting reports and statements.

Financial controls include review and interpretation of various financial

statements that help to determine the overall performance of an organization.

Conclusion

Effective control system design considers the following: 1) valid performance

standards, 2) communication of the standards, 3) acceptance of the standards, 4)

alternatives, and 5) establishes a balance between empowerment and control.

When evaluating control systems, managers must consider: 1) does it provide

relevant and useable data, 2) does the control system provide the right information

applicable to the organization, and 3) is the information complete and accurate?

Dysfunctional control systems erupt into chaos and provide no useful measure of

information for the planning process. Therefore, control systems are a main ingredient to

successful planning.