Control System Tightness

Question 1

To implement tight control, what is required by management?

Answer 1

• That management has a good understanding of how one or more control objects – results, actions and personnel/culture relate and contribute to overall organisational objectives

Question 2

What are tight and loose controls? Why is tight control considered beneficial?

Answer 2

• tight = When specific control mechanisms are detailed and applied frequently and there is limited acceptance of non-compliance
• loose = When specific control mechanisms are less detailed and frequent application and greater acceptance of non-compliance
• Tight control is often seen as beneficial as it increases the likelihood of congruence between organisation (strategic) goals and employee behaviour

Question 3

What is required for tight result controls to be implemented?

Answer 3

• Congruence – managers need to understand the objectives and choose the correct performance dimensions to measure (reasonable assumption) apart from government agencies, new services vs cost reduction? Challenging choice of measure
• Specificity – e.g.$2.99 labour cost per unit of production however some dimensions are harder such as CSR, disaggregate
• Communication and Internalization
• Completeness
• Performance Measurement Adequacy (precise, objective, timely and understandable)
• Incentives –direct (rewards) and definite (no excuses)

Question 4

What is the problem associated with tight results controls?

Answer 4

• There is a fine line between tight results control and too tight restrictive results controls “too controlling”. Tesco – use of armbands to monitor. Good example of tight results controls.

Question 5

What is the purpose of tight results controls and what does organization situations tightness/looseness depend on?

Answer 5

• The purpose of tightening results controls is often to loosen other controls e.g. loosening of action controls by delegating decision rights (decentralisation).
• The tightness / looseness of control is dependent on financial health/performance of the company, in times of prosperity controls may be lose, in times of recession the controls will tighten.

Question 6

Compare Netflix and Super microcomputer

Answer 6

• Behavioural constraints (administrative)
Both examples of tight controls
• Super microcomputer – tight action controls which centralised decision making authority. Mr Liang CEO made every decision, approved everything etc. the company outperformed competitors. The fear is that Mr Liang was detrimental to the business “irreplaceable”
• Netflix – loose action controls allowing Mr Kail to complete both the choice and approval of invoices, resulting in fraud. Classic segregation of duties violation.