1. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. The Importance of Control Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

2. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Organizational Control The systematic process of regulating organizational activities. Control can focus on events before, during, or after a process. Three types of control. 1Feed forward Sometimes called preliminary or preventive control. 2Concurrent Assesses current work activities, relies on performance standards. Includes rules and regulations for guiding employee tasks and behaviors. Intent is to ensure that work activities produce the correct results. 3Feedback Focuses on the organization’s outputs; also called post-action or output control.

3. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Qualities of Effective Control Systems 1. Linkage to Strategy. 2. Understandable Measures. 3. Acceptance by Employees. 4. Balance of Objective and Subjective Data. 5. Accuracy. 6. Flexibility. 7. Timelessness. 8. Support of Action.

4. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Organizational Control Focus Feedforward Control Anticipates Problems Examples Pre-employment drug testingInspect raw materialsHire only college graduates Focus is on Inputs Concurrent Control Solve Problems as They Happen Examples Adaptive cultureTotal quality management Employee self-control Focus is on Ongoing Processes Feedback Control Solves Problems After They Occur ExamplesAnalyze sales per employeeFinal quality inspection Survey customers Focus is on Outputs Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

5. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Feedback Control Model If Inadequate If Adequate Adjust StandardsAdjust Performance Feedback Establish Strategic Goals 1. Establish standards of performance. 2. Measure actual performance. 3. Compare performance to standards. 4. Take corrective action. 4. Do nothing or provide reinforcement. Feedback Use of feedback to determine if performance meets established standards. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved.

6. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Budgetary Controls Expense Budget Outlines the anticipated and actual expenses. Cash Budget Estimates and reports cash flow on a daily or weekly basis to ensure that the company has sufficient cash. Capital Budget Lists planned investments in major assets. Not only have a large impact on future expenses, they are investments designed to enhance profits. Revenue Budget Lists forecasted and actual revenues.

7. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Changing Philosophy of Control Decentralized rather than bureaucratic Relying on cultural values, traditions,shared beliefs and trust

8. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Managing Productivity Two approaches for measuring productivity:  Total factor productivity: represents the best measure of how the organization is doing. Productivity is the organization’s output of goods and services divided by its inputs. Total factor productivity= Output Labor + Capital + Materials + Energy Labor productivity= Output Labor dollars  Partial productivity: considers productivity with respect to certain inputs.

9. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. Total Quality Management (TQM) Commitment to infusing quality into every activity. Focuses on teamwork, increasing customer satisfaction, and lowering costs. Means a shift from a bureaucratic to a decentralized approach to control. Has a target of zero defects.

10. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. TQM Techniques Most companies that have adopted TQM have incorporated.  Quality circles.  Benchmarking.  Six sigma principles.  Standard for reduced cycle time.  Continuous improvement.

11. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. The Quality Circle Process Team Creates Quality Circle and Collects Information Team Selects Problems to Be Solved Team Gathers Data and Analyzes Problems Team Recommends Solutions Decision by Top Management Feedback from Mangers to Quality Circles

12. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. International Quality Standards ISO 9000 International standards for quality management. Established in 1987, revised in 2000. End of 1999 more than 340,000 organizations in 150 countries were certified. Greatest number of new certifications in recent years has been in the U.S. Process of application and certification for ISO 9000 is expensive and time-consuming. Certification is an important indicator of world-class quality.

13. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. New Financial Control Systems Economic Value Added System. Market Value Added System. Activity-Based Costing. 1. 2. 3.

14. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. New Workplace Controls Open-Book Management –sharing of financial information with employees. –the goal, getting every employee thinking and acting like a business owner rather than a hired hand.

15. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. New Workplace Controls The Balanced Scorecard –balances traditional financial measures with measures of customer service, internal business processes and capacity for learning and growth. –the goal, help managers focus on key performance measures and communicate them throughout.

16. Developed by Cool Pictures & MultiMedia PresentationsCopyright © 2004 by South-Western, a division of Thomson Learning. All rights reserved. The Balanced Scorecard SOURCES: Based on Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January-February 1996), 75-85; and Chee W. Chow, Kamal M. Haddad, and James E. Williamson, “Applying the Balanced Scorecard to Small Companies,” Management Accounting 79, no. 2 (August 1997), 21-27.