Marketing Manager Course - Chapter 16

McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
16
Chapter
Management Control
Management Control
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
After reading this chapter, you should be able to:
z
Understand the importance of control systems.
z
Distinguish between system- and person-based
control systems.
z
Distinguish between process- and outcome-based
control systems.
z
Evaluate various control approaches.
z
Understand why measurement is necessary for
control.
z
Develop measures that support effective control
systems.
z
Develop and implement a balanced scorecard.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Importance of Control
z
Control is the process of comparing performance to
standards and taking corrective action.

z
It ensures that:
¾
standards are met
¾
errors are limited
¾
quality is acceptable
¾
products are safe
¾
the company is performing at the highest possible level
z
Control is closely associated with planning.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Categorization of
Control Approaches
Control approaches can be categorized
according to two factors - type and focus:
z
Type - divided into formal and informal approaches
¾
Formal control systems consist of written rules
¾
Informal control systems rely on unwritten expectations
z
Focus – directed at the outcome or the process
¾
Outcome approach focuses on the results of a business process
¾

Process approach focuses on how the work is performed
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Control Approaches Model
Subjective Control
Clan Control
Marketing Control
Financial Controls
Operations Management
Bureaucratic Control
Balanced Scorecard
Outcomes
Focus
Process
Formal
Informal
Type
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Informal and Outcome-Focused Control
z
Characterized by subjective control -an informal
approach based on global assessment of outcomes
z
Subjective control:
¾
does not typically utilize explicit standards
¾
does not specify how deviations from an acceptable level
should be handled
¾
is common in smaller businesses and service settings

¾
is the “no news is good news” approach
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
Formal and Process-Focused Control:
Bureaucratic Control
z
Bureaucratic control is a formal control approach
that operates in a cycle and is characterized by
written guidelines and controls.
z
Involves:
¾
the application of standards to assess performance
¾
the application of corrective actions to regulate performance
and bring it back to the level of the standards.
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Bureaucratic Control Process
1. Establishing
Standards
2. Performance
Measurement
3. Identifying
Gaps
4. Corrective
Action
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.
The Bureaucratic Control Process
(continued)
z

Establishing Standards
¾
Standards should be participative rather than simply
implemented from the top down so that employees
understand and are committed to them.
¾
Standards come from:
9
goals
9
statistical analysis
9
benchmarking
z
Performance Measurement
¾
Use of objective data, which is free from error or bias
¾
Use of subjective data, which involves human judgement
McGraw-Hill © 2004 The McGraw-Hill Companies, Inc. All rights reserved.