1. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 1 Chapter 15 Foundations of Control

2. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 2 LEARNING OUTLINE Follow this Learning Outline as you read and study this chapter. What Is Control? –Define control. –Contrast the three approaches to designing control systems. –Discuss the reasons why control is important. –Explain the planning-controlling link.

3. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 3 LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. The Control Process –Describe the three steps in the control process. –Explain the three courses of action managers can take in controlling. –Explain why what is measured is more critical than how it’s measured. Controlling for Organizational Performance –Define organizational performance. –Describe the most frequently used measures of organizational performance.

4. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 4 LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. Tools for Organizational Performance –Contrast feedforward, concurrent, and feedback controls. –Explain the types of financial and information controls managers can use. –Describe how balanced scorecards and benchmarking are used in controlling.

5. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 5 LEARNING OUTLINE (cont’d) Follow this Learning Outline as you read and study this chapter. Contemporary Issues in Control –Describe how managers may have to adjust controls for cross-cultural differences. –Discuss the types of workplace concerns managers face and how they can address those concerns. –Explain why control is important to customer interactions. –Discuss what corporate governance is and how it’s changing.

6. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 6 What Is Control? Control –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

7. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 7 Designing Control Systems Market Control –Emphasizes the use of external market mechanisms to establish the standards used in the control system Bureaucratic Control –Emphasizes organizational authority and relies on rules, regulations, procedures, and policies Clan Control –Regulates behaviour by shared values, norms, traditions, rituals, and beliefs of the firm’s culture

8. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 8 Qualities of an Effective Control System Understandability Flexibility Strategic Placemen t Strategic Placemen t Reasonabl e Criteria Reasonabl e Criteria Effective Control System Effective Control System Timelines s Multiple Criteria Multiple Criteria Correctiv e Action Correctiv e Action Accuracy Economy Emphasis on Exception s Emphasis on Exception s

9. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 9 Contingency Factors in the Design of Control Systems

10. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 10 Why Is Control Important? 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

11. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 11 Exhibit 15.2 The Planning– Controlling Link Leading Motivation Leadership Communication Individualand Group Behaviour Planning Goals Objectives Strategies Plans Organizing Structure HumanResource Management Controlling Standards Measurements Comparison Actions

12. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 12 The Control Process The Process of Control 1.Measuring actual performance 2.Comparing actual performance against a standard 3.Taking action to correct deviations or inadequate standards

13. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 13 Exhibit 15.3 The Control Process GOALS Organizational Divisional Departmental Individual Measuring Actual Performance Comparing Actual Performance Against Standard Taking Managerial Action Step 1 Step 3 Step 2

14. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 14 How and What We Measure How: Sources of Information –Personal observations –Statistical reports –Oral reports –Written reports What: Control Criteria –Employees Satisfaction Turnover Absenteeism –Budgets Costs Output Sales

15. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 15 Exhibit 15.4 Common Sources of Information for Measuring Performance

16. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 16 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

17. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 17 Exhibit 15.5 Defining the Acceptable Range of Variation

18. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 18 Exhibit15.6 Sales Performance Figures for July, Beer Unlimited

19. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 19 Taking Managerial Action Courses of Action –“Doing nothing” Only if deviation is insignificant –Correcting actual (current) performance Immediate or basic corrective action –Revising the standard Determine whether the standard is realistic, fair, and achievable

20. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 20 Exhibit 15.7 Managerial Decisions in the Control Process

21. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 21 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

22. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 22 Organizational Performance Measures Organizational Productivity –The overall output of goods and/or services divided by the inputs needed to generate that output –Ultimately, a measure of how efficiently employees do their work

23. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 23 Organizational Performance Measures Organizational Effectiveness (cont’d) –Measuring how appropriate organizational goals are and how well the organization is achieving its goals Systems resource model: Is organization efficient in acquiring scarce and valued resources? The process model: Is organization efficient in converting inputs to outputs? The multiple constituencies model: Is organization effective in meeting each constituencies’ needs?

24. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 24 Organizational Performance Measures (cont’d) Industry Rankings –Many different lists exist to rank organizations. Some examples: Report on Business Magazine’s Top 1000; Canada’s Power Book Report on Business Magazine’s 50 Best Companies To Work For in Canada Profit’s 100: Canada’s Fastest Growing Companies

25. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 25 Tools for Controlling Organizational Performance Feedforward Control –Prevents anticipated problems before they occur Building in quality through design Requiring suppliers conform to ISO 9002 Concurrent Control –Monitoring while activity is in progress Direct supervision: management by walking around

26. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 26 Tools for Controlling Organizational Performance (cont’d) Feedback Control –Takes place after an activity is done Corrective action is after-the-fact, when the problem has already occurred –Advantages Feedback provides managers with information on the effectiveness of their planning efforts Feedback enhances employee motivation by providing them with information on how well they are doing

27. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 27 Exhibit 15.8 Types of Control InputOutput Feedforward Control Concurrent Control Feedback Control Processes Anticipates problems Corrects problems as they happen Corrects problems after they occur

28. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 28 Tools for Controlling Organizational Performance: Financial Controls Traditional Controls –Ratio analysis Liquidity Leverage Activity Profitability –Budget analysis Quantitative standards Deviations Other Measures –Economic value added (EVA) –Market value added (MVA)

29. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 29 Exhibit 15.9 Popular Financial Ratios

30. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 30 Exhibit 15.9 Popular Financial Ratios (cont’d)

31. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 31 Tools for Controlling Organizational Performance: Financial Controls (cont’d) Other Measures –Economic value added (EVA) How much value is created by what a company does with its assets, less any capital investments in those assets: the rate of return earned over and above the cost of capital

32. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 32 Tools for Controlling Organizational Performance: Financial Controls (cont’d) Other Measures (cont’d) –Market value added (MVA) The value that the stock market places on a firm’s past and expected capital investment projects If the firm’s market value (its stock and debt) exceeds the value of its invest capital (its equity and retained earnings), then managers have created wealth

33. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 33 Controlling Organizational Performance Balanced Scorecard –A measurement tool that uses goals set by managers in four areas to measure a company’s performance: Financial Customer Internal processes People/innovation/growth assets

34. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 34 Information Controls 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

35. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 35 Benchmarking of Best Practices Benchmarking –The search for the best practices among competitors or noncompetitors that lead to their superior performance –A control tool for identifying and measuring specific performance gaps and areas for improvement

36. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 36 Exhibit 15.10 Steps to Implementing a Best Practices Program Connect best practices to strategies and goals Identify best practices throughout the organization Develop best practices reward and recognition systems Communicate best practices throughout the organization Create best practices knowledge sharing system Nurture best practices on an ongoing basis

37. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 37 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

38. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 38 Contemporary Issues in Control (cont’d) Workplace Concerns –Privacy versus monitoring: E-mail, telephone, computer, and Internet usage can all be monitored –Employee theft The unauthorized taking of company property by employees for their personal use –Violence Anger, rage, and violence in the workplace is affecting employee productivity

39. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 39 Exhibit 15.11 Types of Workplace Monitoring by Employers Internet use 54.7% Telephone use 44.0% E-mail messages 38.1% Computer files 30.8% Job performance using video cameras 14.6% Phone conversations 11.5% Voice-mail messages 6.8% Source: Based on S. McElvoy, “E-Mail and Internet Monitoring and the Workplace: Do Employees Have a Right to Privacy?” Communications and the Law, June 2002, p. 69.

40. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 40 Exhibit 15.12 Control Measures for Employee Theft or Fraud

41. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 41 Exhibit 15.13 Workplace Violence 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.

42. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 42 Exhibit 15.14 Control Measures for Deterring or Reducing Workplace Violence

43. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 43 Contemporary Issues in Control (cont’d) Customer Interactions –Service profit chain The service sequence from employees to customers to profit Service capability  service value  customer satisfaction  customer loyalty  repeat business (profit)

44. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 44 Exhibit 15.15 The Service Profit Chain Employees Loyalty Operating strategy and service delivery system Service conceptTarget market Service quality Service capability Productivity and output quality Satisfaction Service valueSatisfaction Customers Loyalty Outcomes Revenue growth Organization Profitability

45. Chapter 15, Stephen P. Robbins, Mary Coulter, and Nancy Langton, Management, Eighth Canadian Edition. Copyright © 2005 Pearson Education Canada Inc. 45 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