Management control system

Adaptive Controls and Individual Actions

How can a systems designer identify various control system actions and related sub-systems? The question is pertinent to the control systems designer who wants to observe and evaluate a control system design. Each action in the formal and informal control system can be identified by using "control action tables". Such tables were presented previously in Figures 2-3 and 2-4. Each action in these tables refers to an activity in one of the two control systems. By observing the actions taken in an organization and categorizing them according to the definitions in the table, the designer can determine if the control system is predominately formal or informal and then can begin to suggest an appropriate strategy for redesign if necessary. A large-scale demonstration of the successful use of these action tables in the evaluation of formal and informal control systems appears in Kirby (1992).

Summary

This chapter has described the overall

approach we will take to the design of control systems in this book. We have studied the domain and purpose of control systems and the organizational context within which they must operate to be effective. We then described the overall elements of a comprehensive control system for an entire organization. These two mutually supportive system models and related actions comprise the basic overall framework for the development of adaptive controls. They include provision for formal and informal communications, selecting and rewarding people, formulating purpose and objectives, allocating resources, measuring performance, and providing feedback. These systems when appropriately implemented support management in aggressively seizing market opportunities and improving current operations on one hand while concurrently maintaining optimum controls over current operations on the other. We are now in a position to study the subsystems and components in much more detail.–CHAPTER 3 CONTROL

ALTERNATIVES

One common and important category of controls is action controls, which involve ensuring that employees perform (or do not perform) certain actions known to be beneficial (or harmful) to the organization. Action controls are the most direct form of control because they involve taking steps to make certain that employees act in the organization's best interest. With action controls, the actions themselves are the focus of the controls. Although they are commonly used in business organizations, action controls are not effective in every situation. They are usable and effective only when:

1. Managers know what actions are desirable
2. Managers have the ability to make sure that the desirable actions occur

Type of action control:

• Behavioral constraints: Negative form of action control and they use it as avoidance of misbehave. The constraints can be applied either physically or administratively. When we talk about physical constraints, we take into consideration variables such as

costlu effects of the personal limitations, because a good reviwer can addexpertise if it is needed. The reviews can prevent mistakes or other harmful actions fromhappening. Action accountability controls can also address all of the control prob- lems.The prescriptions of desired actions can help provide direction and alleviate the types ofpersonal limitations due to inadequate skills or expe- rience. The rewards or punishmentshelp provide motivation. Redundancy is the most limited of these controls in itsapplication. It can be effective in helping to accomplish a particular task if there is somedoubt as to whether the person assigned to the task is both motivated to perform itsatisfactorily and capable of doing so.

PREVENTION VERSUS DETECTION Action controlscan also be usefully classified according to whether they serve to prevent or to detectundesirable behaviors. This distinction is important because controls that prevent theundesired errors and irregularities from occurring are,

When they are effective, the most powerful form of control because none of the costs of the undesirable behaviors will be incurred. Detection-type action controls differ from prevention-type controls in that they are applied after the occurrence of the behavior. Still, they can be effective if the detection is made in a timely manner and if it results in a cessation of the behavior and a correction of the effects of the harmful actions.

Knowledge of Desired Actions: Lack of knowledge as to what actions are desirable is the constraint that most limits the use of action controls. This knowledge is often difficult to obtain. Although it may be easy to define relatively completely the actions required of employees on a production line, the definitions of preferred actions in highly complex and uncertain task environments, such as those of research engineers or top-level managers, cannot be as complete or as precise.

Lack of knowledge or desirable actions definitely limits the application of

Action controls. A small manufacturing firm that was considering a change in the controls over its sales function faced this knowledge-limitation problem. A consulting firm hired to evaluate the effectiveness of the sales controls recommended implementing an elaborate set of reports to track how the salespeople were allocating their time among types of customers and between direct sales and general market development for action control purposes. The company's managers resisted collecting this information, however, primarily because they did not know how to use it.

RESULTS CONTROLS:

• Results control involves rewarding individuals (and sometimes groups of individuals) for generating good results or punishing them for poor results. The rewards linked to results go far beyond monetary compensation, and include, among others, job security, promotions, autonomy, and recognition.
• Results controls influence actions because they cause employees to be concerned about the consequences of the actions.

RESULTS CONTROLS AND THE CONTROL PROBLEMS

that will maximize the employees’ own personal rewards.

Results controls also inform employees of what is expected of them. Employees know they should do what they can to produce the desired results. In this way, the results controls alleviate the potential problem of lack of direction.

Results controls do not directly address the personal limitation problems. Results controls inform employees of what results are valued, but not how the valued results can be produced. However, results controls can have powerful indirect effects on the personal limitation problems. Results controls can encourage employees to address their limitations and to develop their talents to position themselves to earn the results-dependent rewards. The performance measures which are a part of the results controls also provide some non-motivational, detection-type control benefits of a cybernetic (feedback) nature. The results measures help managers answer questions about how various strategies, organizational entities,

Achievements:

Extrinsic (money back) – Intrinsic (recognition)