# Control Systems

Business I · Business Administration · https://tryals.app/learn/business-i/control-systems

## Closing the Loop

Controlling makes planning honest: **measure results, compare against the plan, correct the gap**. Without it, planning is fiction.

**The control cycle** has four beats:

| Beat | Action | Failure mode |
|---|---|---|
| Set standards | Derive targets from the plan | Vanity metrics |
| Measure | Gather actuals at frequency | Late data |
| Compare | Compute variances, filter noise | Chasing wiggles |
| Correct | Fix process or standard | Blaming people |

$$\text{variance} = \text{actual} - \text{standard}$$

**Management by exception** says investigate variances beyond threshold. **Common pitfall:** Investigating only unfavorable variances. A cost 20% under budget can mean skipped maintenance; exception cuts both ways.

## Timings and Scorecards

**Three timings** control operations:

| Timing | When | Example |
|---|---|---|
| **Feedforward** | Before work | Input inspection |
| **Concurrent** | During | Live dashboards |
| **Feedback** | After | Monthly closes |

Feedback is cheapest to build but arrives after errors ship.

**Goodhart's law** warns that when a measure becomes a target, it stops measuring.

**The balanced scorecard** tracks four perspectives: **financial**, **customer**, **internal process**, and **learning & growth**. They form a causal chain where leading indicators warn before money moves.

Control paradox: too little causes drift; too much strangles work.

## Practice questions

8 of this lesson's 13 practice questions, with answers. The full set is in the app.

### 1. A scorecard should stay readable. **Set the slider to the commonly recommended maximum number of KPIs** per scorecard before it stops steering anything.

**Answer:** 20 (within ±5)

**Why:** Kaplan and Norton suggested roughly 20-25 measures across the four perspectives. Beyond that, the scorecard mutates into a reporting swamp: when everything is measured, nothing is watched.

Page: https://tryals.app/practice/business-i/control-systems/a-scorecard-should-stay-readable-set-the-slider-to-the-commonly

### 2. Feedforward, concurrent, or feedback? Sort each control.

**Answer:**

- Feedforward: Inspecting raw materials before production, Certifying suppliers before signing them
- Concurrent: A live dashboard flagging line stoppages
- Feedback: The monthly budget-variance review

**Why:** Before, during, after: the earlier the control, the cheaper the error it prevents, and the harder it is to prove it prevented anything.

Page: https://tryals.app/practice/business-i/control-systems/feedforward-concurrent-or-feedback-sort-each-control

### 3. Match each control concept to its definition.

**Answer:**

- Standard → The target performance derived from the plan
- Variance → Actual result minus the standard
- Management by exception → Investigate only deviations beyond a threshold
- Goodhart’s law → A measure made a target stops measuring

**Why:** The cycle’s working parts, and the law that explains why every KPI eventually needs a bodyguard.

Page: https://tryals.app/practice/business-i/control-systems/match-each-control-concept-to-its-definition

### 4. A support team is bonused on calls-per-hour. Volume soars; resolution rates quietly collapse as agents rush callers off the line. This is…

A. Management by exception
B. Goodhart's law
C. Proof the KPI works as intended
D. A feedforward control failure

**Answer:** B. Goodhart's law

**Why:** Calls-per-hour proxied productivity until it was paid, then agents optimized the number itself, sacrificing the service it once measured. The standard fix is paired metrics (volume *and* resolution) so gaming one trips the other.

Page: https://tryals.app/practice/business-i/control-systems/a-support-team-is-bonused-on-calls-per-hour-volume-soars-resolution

### 5. A support team bonused on calls per hour sees volume soar and resolution collapse. Goodhart's law names the pattern. What is the deeper design failure?

A. The metric was a proxy, and stakes make people optimise proxies
B. The metric was measured inaccurately, so the bonus rewarded the wrong people
C. Agents behaved unethically, which no control system can prevent
D. The bonus was too large, which distorted behaviour

**Answer:** A. The metric was a proxy, and stakes make people optimise proxies

**Why:** Nobody cheated, calls per hour genuinely rose, and that is the point: a measure ceases to be a good measure once it becomes a target. Balanced scorecards and paired metrics exist to make gaming one dimension visible in another, since no single proxy survives being optimised.

Page: https://tryals.app/practice/business-i/control-systems/a-support-team-bonused-on-calls-per-hour-sees-volume-soar-and

### 6. In the balanced scorecard, learning-and-growth metrics are called leading indicators. Why manage by a number that is not the result you care about?

A. Because financial results report a period already closed
B. Because leading indicators are more strongly correlated with profit
C. Because learning metrics are cheaper to collect
D. Because financial metrics are less accurate than operational ones

**Answer:** A. Because financial results report a period already closed

**Why:** Lagging measures verify; leading measures steer. Managing only on financials is steering by the rear-view mirror, which is the criticism the scorecard was built to answer.

Page: https://tryals.app/practice/business-i/control-systems/in-the-balanced-scorecard-learning-and-growth-metrics-are-called

### 7. Complete the control cycle.

**Answer:** Set standards, measure performance, compare to compute the **variance**, and **correct** the gap.

**Why:** Measure, compare, correct, and when reality has permanently changed, the correction may be to the standard itself.

Page: https://tryals.app/practice/business-i/control-systems/complete-the-control-cycle

### 8. Order one pass of the control cycle for a delivery operation.

**Answer:**

1. Set the standard: 95% on-time delivery
2. Measure: this month came in at 88%
3. Compare: 7-point unfavorable variance, beyond threshold
4. Diagnose: route changes doubled depot congestion
5. Correct: restagger dispatch windows and re-measure

**Why:** Standard, measurement, variance, diagnosis, correction, the loop that turns a plan from a document into a system.

Page: https://tryals.app/practice/business-i/control-systems/order-one-pass-of-the-control-cycle-for-a-delivery-operation