University of Phoenix
22 February 2010
Business control systems, although sometimes complex in practice, are quite straightforward in concept. Control systems are designed and implemented as a means to control resources and to ensure that employees act in a manner that is beneficial to their organization. Effective managers can use control systems as a tool to make sure activities are carrying on as planned. Our restaurant for this topic is Yard House, a small restaurant chain known for its excellent food and large selection of draft beers. The Yard House implements control functions like budgetary, financial, market, and clan.
Budgetary control is a common control and in general, can be implemented into any organization including the Yard House. “Budgetary control is the process of finding out what’s being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences. Budgetary control commonly is called budgeting(Thomas S. Bateman, 2009).” It is important for a small business like a restaurant to establish a budget in order to track progress and measure financial health. A sales expense budget sheet provides expected sales, estimated expenses, and a profit estimate. This is a common document associated with budgetary control. Financial controls are similar to budget controls in that both controls help an organization assess financial heath and track progress. The Yard House uses financial control balance sheets as well as profit and loss statements to measure organizational performance.
The previous two control elements are examples of Bureaucratic control mechanisms that guide an organization via a mechanical viewpoint. “Although formal bureaucratic control systems are perhaps the most pervasive in organizations (and the most talked about in management textbooks), they are not always the most effective. Market controls and clan controls may both represent more flexible, though no less potent, approaches to regulating performance (Thomas S. Bateman, 2009).”
“Market controls involve the use of economic forces—and the pricing mechanisms that accompany them—to regulate performance. The system works like this: in cases where output from an individual, department, or business unit has value to other people, a price can be negotiated for its exchange (Thomas S. Bateman, 2009).” In short, when the Yard House utilized market control they looked at the price of a good, employee compensation, and company performance, all measured by the analysis of the economy.
Clan control affects an organization positively when employees are empowered, and a culture that upholds high standards and established integrity. “Clan control involves creating relationships built on mutual respect and encouraging each individual to take responsibility for his or her actions. Employees work within a guiding framework of values, and they are expected to use good judgment (Thomas S. Bateman, 2009).”
Budgetary and Financial controls have positive effectiveness on the every day running of The Yard House. Before the doors were open, before the first employee was hired, the budget gave them the opportunity to open the business realistically. The budget helped set goals and evaluate the effectiveness of how they can run their business. The visible signs of a problem will show up when the analyzing the budget. If there is a problem that goes unnoticed, it could compromise the financial stability of continuing the restaurant.
The budget forecasting, the expected income, expenses and profits, will lay out the years expected performance expectations. The Yard House can use these expectations and look back at any time during the year to gauge how the restaurant is doing and if more controls need to be set in the budget.
The effectiveness of market control determines such things as wage/salary for managers and employees. Yard House’ owners can use the market controls, like profitability to determine the performance of the restaurant. Market controls are effective in determining the cost of food supplies and in turn relates to what they can charge. In addition, the market can determine what the average wages are for their employees.
The yard House uses clan control in the restaurant to regulate their employee’s behavior and facilitate reaching their organizational goals. They have a trust within their organization; therefore, their employees require minimal direction and standards. Their employees perform well and they participate in setting the standards of the company.
Yard House uses market control for price competition to evaluate the output of the restaurant. The managers compare the profits and prices to determine the efficiency of the restaurant. Using market control, it allows the restaurant to have a reasonable level of competition in the services that they provide.
The Yard House organization uses budget control to think about future planning and to set detail plans for the business. This also helps to promote coordination and communication within the restaurant. Using a budget it allows management to measure performance against budget performance. If there are differences in the budget they can investigate, and the reasons for the differences are put into the controllable and the non-controllable factors.
The restaurant’s financial control is determined by the financial reports. Yard House uses a balance sheet to show their financial position in time. Their financial statement shows the total assets and total liabilities. The income profit and loss statement shows the restaurant revenue minus the costs of goods sold, minus operating expenses, and the net income loss before taxes. Their cash flow statement shows the details of the cash received and cash expended for each month of the year. As projected the cash flow statement helps determine if the company has a positive cash flow.
Yard House has four important control mechanisms: budgeting, financial, market, and clan. All four controls affect how management plans, organizes, leads, and controls the business. Creating a budget involves establishing the resources needed. It is nearly impossible to stay within budget if there is no planning process. Management needs to organize, lead, and control the planned budget out for the organization.
For this restaurant business, each location is given a budget based on the size of the restaurant. The business has the opportunity to save money if management has prepared properly the budget. Management can identify areas to alleviate or cut costs.
Keeping the financial statements and ratios organized will help identify profits and losses. Once these statements are analyzed, a plan can be created to increase profit and keep the loss ratio down. Management can use this information in the goal planning process.
The market control helps identify the wage rates given to each individual restaurant employee. The market control mechanism also creates a metric when evaluating active managers. In a perfect world, each location of the Yard House is profitable.
The planning process will establish the goals for each Yard House location. Because locations can be different in size, each location is given specific resource amounts. The clan control makes the decision-making a little easier. Yard House management leads by positive example and makes sure there is a team environment.
Management earns the respect from associates and in return, the associates do his or her best to meet goals established. When the restaurant associates work as a team, there is a good flow and customers are satisfied. Management is able to control the team with incentives and encouragement.
The Yard House is a small restaurant chain that is known for the largest selections of draft beer and great classic rock. Growing to be a successful business took a large amount of managerial wisdom. As the planning, organizing, leading and controlling aspects are taken into account, the last one can be the most tasking. Using some controlling mechanisms like budget, financial, market, and clan controls the Yard House managed to become a reasonably successful chain of restaurants. Planning and organizing are important functions of management. The controlling function can be the longest and one function that must be thought thoroughly through.
Retrieved February 21, 2010. Retrieved from http://www-uwc.9c29
Thomas S. Bateman, S. A. (2009). Management: Leading &
Collaborating in a CompetitiveWorld, Eighth Edition.
McGraw-Hill, a business unit of the McGraw-Hill