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• Key Benefits
o Cost and productivity control—ensures that the firm functions
effectively and efficiently.
o 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).
o 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.
o 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.
o Decentralized decision making—allows the organization to be more
responsive by moving decision making to those closest to customers and areas of
uncertainty.
First, good controls help the organization to be efficient and effective by
helping managers to control costs and productivity levels. Cost can be controlled
using budgets, where managers compare actual expenses to forecasted ones.
Similarly, productivity can be controlled by comparing how much each person can
produce, in terms of service or products. For instance, you can imagine that the
productivity of a fast-food restaurant like McDonald’s depends on the speed of its
order takers and meal preparers. McDonald’s can look across all its restaurants to
identify the target speed for taking an order or wrapping a burger, then measure each
store’s performance on these dimensions.
Quality control is a second benefit of controls. Increasingly, quality can be
quantified in terms of response time (i.e., How long did it take you to get that
burger?) or accuracy (Did the burger weigh one-quarter pound?). Similarly, Toyota
tracks the quality of its cars according to hundreds of quantified dimensions,
including the number of defects per car. Some measures of quality are qualitative,
however. For instance, Toyota also tries to gauge how “delighted” each customer is
with its vehicles and dealer service. You also may be familiar with quality control
through the Malcolm Baldrige National Quality Program Award. The Baldrige award
is given by the president of the United States to businesses—manufacturing and
service, small and large—and to education, health care, and nonprofit organizations
that apply and are judged to be outstanding in seven areas: leadership; strategic
planning; customer and market focus; measurement, analysis, and knowledge
management; human resource focus; process management; and
[8]
results. Controlling—how well the organization measures and analyzes its
processes—is a key criterion for winning the award. The Baldrige award is given to
organizations in a wide range of categories and industries, from education to ethics to
manufacturing.
The third area by which organizations can benefit from controls is opportunity
recognition. Opportunities can come from outside of the organization and typically
are the result of a surprise. For instance, when Nestlé purchased the Carnation
Company for its ice cream business, it had also planned to sell off Carnation’s pet

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