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view of their control systems. One very basic question that has to be addressed is whether
to manage control from a centralized or a decentralized perspective.
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Under a centralized
system, each organizational unit around the world is responsible for frequently reporting
the results of its performance to headquarters. Managers from the home office often visit
foreign branches to observe firsthand how the units are functioning.
BP, Unilever, Procter & Gamble, and Sony all use this approach. They believe central-
ized control is effective because it allows the home office to keep better informed of the
performance of foreign units and to maintain more control over how decisions are made.
For example, BP discovered that its Australian subsidiary was not billing its customers
for charges as quickly as were its competitors. By shortening the billing cycle, BP now
receives customer payments five days faster than before. Managers believe that they
discovered this oversight only because of a centralized financial control system.
Organizations that use a decentralized control system require foreign branches to report
less frequently and in less detail. For example, each unit may submit summary performance
statements on a quarterly basis and provide full statements only once a year. Similarly, visits
from the home office are less frequent and less concerned with monitoring and assessing
performance. IBM, Ford, and Shell all use this approach. Because Ford practices decentra-
lized control of its design function, European designers have developed several innovative
automobile design features. Managers believe that if they had been more centralized,
designers would not have had the freedom to develop their new ideas.
MANAGING CONTROL IN ORGANIZATIONS
Effective control, whether at the operations, financial, structural, or strategic level,
successfully regulates and monitors organizational activities. To use the control process,
managers must recognize the characteristics of effective control and understand how to
identify and overcome occasional resistance to control.
27
The “Leading the Way” feature
highlights one example of how to manage control.
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