Organizational Control

… a core concept in Governance and Institutions and Atlas100

Concept description

The Business Dictionary (reference below) defines organizational control as the process of establishing and maintaining authority over and throughout an enterprise.

It notes that “the organizational control process within a larger business typically requires the use of systems that assist a manager in analyzing considerable amounts of data about how the business and its employees are functioning in order to make appropriate administrative decisions.”

According to the University of Minnesota Libraries (reference below), organizational control typically involves four steps:

  1. Establish standards
  2. Measure performance
  3. Compare performance to standards
  4. Take corrective action as needed

It notes that organizational controls have both costs and benefits and summarizes as follows:

Key Costs

  • Financial costs – direct (i.e., paying for an accountant for an audit) and indirect (i.e., people such as internal quality control the organization employs whose primary function is related to control).
  • Culture and reputation costs – the intangible costs associated with any form of control. Examples include damaged relationships with employees, or tarnished reputation with investors or government.
  • Responsiveness costs – downtime between a decision and the actions required to implement it due to compliance with controls.
  • Poorly implemented controls – implementation is botched or the implementation of a new control conflicts with other controls.

Key Benefits

  • Cost and productivity control – ensures that the firm functions effectively and efficiently.
  • Quality control – contributes to cost control (i.e., fewer defects, less waste), customer satisfaction (i.e., fewer returns), and greater sales (i.e., repeat customers and new customers).
  • Opportunity recognition – helps managers identify and isolate the source of positive surprises, such as a new growth market. Though opportunities can also be found in internal comparisons of cost control and productivity across units.
  • Manage uncertainty and complexity – keeps the organization focused on its strategy, and helps managers anticipate and detect negative surprises and respond opportunistically to positive surprises.
  • Decentralized decision making – allows the organization to be more responsive by moving decision making to those closest to customers and areas of uncertainty.
Atlas topic, subject, and course

Organizational Design and Behaviour (core topic) in Governance and Institutions and Atlas100 Governance and Institutions.

Source

BusinessDictionary.com, organizational control, at http://www.businessdictionary.com/definition/organizational-control.html, accessed 19 January 2017.

University of Minnesota Libraries, Principles of Management, Organizational Control, at https://open.lib.umn.edu/principlesmanagement/chapter/15-3-organizational-control/, accessed 19 January 2017.

Page created by: Steven Tavone, last modified by Ian Clark on 19 January 2017.

Image: Scielo.org, Innovar, at http://www.scielo.org.co/scielo.php?script=sci_arttext&pid=S0121-50512015000200002, accessed 19 January 2017.