Chapter 10 Foundations of Control NNA. What Is Control?  Controlling  The process of monitoring activities to ensure that they are being accomplished.

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Presentation transcript:

Chapter 10 Foundations of Control NNA

What Is Control?  Controlling  The process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations.  The Purpose of Control  To ensure that activities are completed in ways that lead to accomplishment of organizational goals. 17–2

Importance of Control  As the final link in management functions:  Planning  Controls let managers know whether their goals and plans are on target and what future actions to take.  Empowering employees  Control systems provide managers with information and feedback on employee performance.  Protecting the workplace  Controls enhance physical security and help minimize workplace disruptions. 17–3

Exhibit 17–1The Planning–Controlling Link 17–4

The Process of Control 1.Measuring actual performance. 2.Comparing actual performance against a standard. 3.Taking action to correct deviations or inadequate standards. 17–5

Exhibit 17–2 The Control Process 17–6

Step 1: Measuring  Sources of Information (How we measure)  Personal observation  Statistical reports  Oral reports  Written reports  Control Criteria (What we measure)  Employees  Satisfaction  Turnover  Absenteeism  Budgets  Costs  Output  Sales 17–7

Common Sources of Information for Measuring Performance 17–8

Step 2: Comparing  Determining the degree of variation between actual performance and the standard.  Significance of variation is determined by:  The acceptable range of variation from the standard (forecast or budget).  The size (large or small) and direction (over or under) of the variation from the standard (forecast or budget). 17–9

Defining the Acceptable Range of Variation 17–10

Step 3: Taking Managerial Action  Courses of Action 1.“Doing nothing”  Only if deviation is judged to be insignificant. 2.Correcting actual (current) performance  Immediate corrective action to correct the problem at once.  Basic corrective action to locate and to correct the source of the deviation.  Corrective Actions  Change strategy, structure, compensation scheme, or training programs; redesign jobs; or fire employees 17–11

Taking Managerial Action  Courses of Action (cont’d) 3.Revising the standard  Examining the standard to ascertain whether or not the standard is realistic, fair, and achievable.  Upholding the validity of the standard.  Resetting goals that were initially set too low or too high. 17–12

Exhibit 17–6 Managerial Decisions in the Control Process 17–13

Controlling for Organizational Performance  What Is Performance?  The end result of an activity  What Is Organizational Performance?  The accumulated end results of all of the organization’s work processes and activities  Designing strategies, work processes, and work activities.  Coordinating the work of employees. 17–14

Organizational Performance Measures  Organizational Productivity  Productivity: the overall output of goods and/or services divided by the inputs needed to generate that output.  Output: sales revenues  Inputs: costs of resources (materials, labor expense, and facilities)  Ultimately, productivity is a measure of how efficiently employees do their work. 17–15

Organizational Performance Measures (cont’d)  Organizational Effectiveness  Measuring how appropriate organizational goals are and how well the organization is achieving its goals. 17–16

Tools for Measuring Organizational Performance  Feed forward Control  A control that prevents anticipated problems before actual occurrences of the problem.  Concurrent Control  A control that takes place while a work activity is in progress.  Direct supervision: management by walking around. 17–17

Tools for Measuring Organizational Performance  Feedback Control  A control that takes place after an activity is done.  Corrective action is after-the-fact, when the problem has already occurred.  Advantages of feedback controls:  Provide managers with information on the effectiveness of their planning efforts.  Enhance employee motivation by providing them with information on how well they are doing.

Types of Control 17–19

Financial Controls  Traditional Controls  Ratio analysis  Liquidity  Leverage  Activity  Profitability  Budget Analysis  Quantitative standards  Deviations 17–20

Exhibit 17–9 Popular Financial Ratios 17–21 ObjectiveRatioCalculationMeaning

Exhibit 17–9 Popular Financial Ratios (cont’d) 17–22 ObjectiveRatioCalculationMeaning

Financial Controls  Managing Earnings  “Timing” income and expenses to enhance current financial results, which gives an unrealistic picture of the organization’s financial performance.  New laws and regulations require companies to clarify their financial information. 17–23

Information Controls  Purposes of Information Controls  As a tool to help managers control other organizational activities.  Managers need the right information at the right time and in the right amount.  As an organizational area that managers need to control.  Managers must have comprehensive and secure controls in place to protect the organization’s important information. 17–24

Information Controls (cont’d)  Management Information Systems (MIS)  A system used to provide management with needed information on a regular basis.  Data: an unorganized collection of raw, unanalyzed facts (e.g., unsorted list of customer names).  Information: data that has been analyzed and organized such that it has value and relevance to managers. 17–25

Benchmarking of Best Practices  Benchmark  The standard of excellence against which to measure and compare.  Benchmarking  Is the search for the best practices among competitors or noncompetitors that lead to their superior performance.  Is a control tool for identifying and measuring specific performance gaps and areas for improvement. 17–26

Contemporary Issues in Control  Cross-Cultural Issues  The use of technology to increase direct corporate control of local operations  Legal constraints on corrective actions in foreign countries  Difficulty with the comparability of data collected from operations in different countries 17–27

Contemporary Issues in Control (cont’d)  Workplace Concerns  Workplace privacy versus workplace monitoring:  , telephone, computer, and Internet usage  Productivity, harassment, security, confidentiality, intellectual property protection  Employee theft  The unauthorized taking of company property by employees for their personal use.  Workplace violence  Anger, rage, and violence in the workplace is affecting employee productivity. 17–28

Top Internet Video Sites Viewed at Work T op 10 Internet video brands viewed in the U.S. while at work for January 2008, in millions of streams YouTube674.2 Yahoo156.5 Fox Interactive Media92.8 MSN/Windows Live74.2 ESPN68.3 CNN Digital41.6 Turner Entertainment41.4 NBC Universal30.5 Disney Online27.2 Nickelodeon –29 Source: Bobby White, “The New Workplace Rules: No Video Watching, ” Wall Street Journal, March 4, 2008, p. B3.

Controlling Employee Theft

Workplace Violence 17–31 Witnessed yelling or other verbal abuse42% Yelled at co-workers themselves29% Cried over work-related issues23% Seen someone purposely damage machines or furniture14% Seen physical violence in the workplace10% Struck a co-worker2% Source: Integra Realty Resources, October-November Survey of Adults 18 and Over, in “Desk Rage.” BusinessWeek, November 20, 2000, p. 12.

Controlling Workplace Violence

Contemporary Issues in Control (cont’d)  Customer Interactions  Service profit chain  Is the service sequence from employees to customers to profit.  Service capability affects service value which impacts on customer satisfaction that, in turn, leads to customer loyalty in the form of repeat business (profit). 17–33

Contemporary Issues in Control (cont’d)  Corporate Governance  The system used to govern a corporation so that the interests of the corporate owners are protected.  Changes in the role of boards of directors  Increased scrutiny of financial reporting (Sarbanes- Oxley Act of 2002)  More disclosure and transparency of corporate financial information  Certification of financial results by senior management 17–34