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* Control systems are important to an organization because

Imagine an airplane without a pilot. Not only that plane gets lost but also the
passengers' security is threatened. Similarly, every business that wants to grow,
succeed, and survive for a long time cannot ignore control systems. Control is one of
the fundamental forces that keep the organization together and heading in the right
direction. If all personnel always did what was best for the organization, control and
even management would not be needed. But, obviously, individuals are sometimes
unable or unwilling to act in the organization's best interest, and a set of controls must
be implemented to guard against undesirable behavior and to encourage desirable
actions.

a. Gain Organizational Goals

Control is defined as any process that directs the activities of individuals toward the
achievement of organizational goals. (page 311 in the textbook). Good control systems
will ensure that the overall directions of individuals and groups are consistent with short
and long strategic plans. Either in the challenging economic times or in the prosperous
periods, if managers fail to control the business, irreparable damages can occur.
Inadequate control may result in poor performance, high risk, and bankruptcy. Those
failures can root from Lax top management, absences of policies, lack of agreed-upon
standards, "shoot the messenger" management, lack of periodic reviews, bad
information systems, lack of ethics in the culture (page 311).

A lot of managers just focus on building a good business plan and getting enormous
capital investments. However, after the plans being set and the responsibilities being
delegated, it is not necessarily assured that the objectives may be achieved in a way as
planned or wanted. Control systems must be paralleled with planning. Controlling is of
great value and importance in a business to ensure that the actual state of a business is
along the lines of what is expected to be. One of the most obvious benefits of control
systems is that it provides the accurate information for the effective decision-making as
well as maintaining an effective business operation. Thanks to control systems,
managers are well informed with continuous feedback so that they can take timely
corrective actions in case the plans are not carried out properly. Hence, effective
planning facilitates control and control facilitates planning. Planning lays out a
framework for the future and provides a blueprint for control. Control systems, in turn,
regulate the allocation and use of resources and facilitate the next phases of planning.

b. Maintain accuracy of standards and prevent lawsuits

To accomplish the organizational goals such as profitability, innovation, satisfaction of


customers, companies try to set up several standards to compare with the actual work
performance and financial performance (Bureaucratic control, Budgetary control,
financial control) In those control systems, various standards are established,
measured, compared, and adjusted or corrected accordingly. The accuracy of standards
is therefore maintained because the managers will try to find out whether the laid down
standards are not more or less than the general standards. In case of need, they are
redefined.

The threat of lawsuits or workplace rule violations is a serious concern for employers,
and organizational policies and procedures that address employee behavior can
decrease missteps. Workplaces free from harassment, discrimination, bullying and
gossip foster better morale and team spirit, and reduce problems that can lead to
decreased productivity, efficiency and overall performance. The same holds true when
companies institute safety and security controls, and provide employee training. In case
the employees fail to meet important standards, the company can apply progressive
discipline to signal the employees that the manager is interested in improving their
performance, not in punishing them. And if the employees cannot make any
improvement even after the progressive discipline, the company still let them go
without fearing of being sued.

c. Use resources efficiently

By applying appropriate control systems, companies can use human and physical
resources efficiently. Under controlling, it is ensured that no employee deliberately
delays his or her work performance. The company with control systems has sufficient
standards to measure each employees performance so it is very easy to recognize
either the lazy individuals or the hardworking ones. In the same way, wastage in all the
physical resources is checked. The budget control and the financial control provide
managers with a broad picture of finance operations, enabling them to make timely
decisions on which products/activities should be enhanced or which products/ activities
should be eliminated. As a result, companies can gain enormous profits.

d. Motive employees

Employees tend to be motivated by specific, measurable performance standards that


are challenging and aim for improvement over past performance (page 314). Moreover,
because all of the work performance will be tracked and measured, the hardworking
employees will be likely to get rewards and promotion, in comparison with the lazy one.
Control systems create the fair environment in the companies so that all employees will
devote themselves to the success of the company. Moreover, they all get feedbacks on
their performance so they will try to improve their expertise.

* Describe the two financial statements used to control overall organizational


performance

Two financial statements used to control overall organizational performance are Balance
sheet and the Profit and Loss statement

a. Balance Sheet

This statement shows the financial picture of a company at a given time. Some describe
the balance sheet as a "snapshot" of the company's financial position at a point (a
moment or an instant) in time. For example, a balance sheet dated December 31, 2017
presents instantly all the recorded transactions through December 31. There are three
elements in Balance Sheet: Assets, Liabilities, and Stockholders equity

- Assets: are the values of the various items the corporation owns. They are the
resources of the company that have been acquired through transactions, and
have future economic value that can be measured and expressed in dollars.
Assets also include costs paid in advance that have not yet expired such as
prepaid advertising, prepaid insurance, prepaid legal fees, and prepaid rent.

- Liabilities: are the amounts the corporation owns to various creditors for a past
transaction. Liabilities are obligations of the company. Along with owner's equity,
liabilities can be thought of as a source of the company's assets. They can also
be thought of as a claim against a company's assets.

- Stockholders equity: is the amount accruing to the corporations owners.


Owner's equity is sometimes referred to as the book value of the company,
because owner's equity is equal to the reported asset amounts minus the
reported liability amounts.

The balance sheet has two sides that must be equal or balance each other out. The
logic is: a company must pay for its assets by borrowing money from lenders or
through investors.

For example: If Company A borrow $10,000 cash from the bank, its assets (cash
account) will increase by $10,000 and at the same time, its liabilities amount will also
increase by $10,000

The relationship among three elements of the balance sheet is:

Assets = Liabilities + Owner's Equity

Summarizing balance sheet items over a long period of time uncovers important trends
and gives managers further insight into overall performance and areas in which
adjustments are needed (page 323)

b. Profit and Loss statement (P&L statement)

The Profit and Loss statement (also called income statement) is an itemized financial
statement of the income and expensed of a companys operations (page 323). This
statement is prepared for a period, not for a point of time as Balance Sheet. It provides
information about a company's ability or lack to generate profit by increasing
revenue, reducing costs, or both. A regularly prepared P&L statement either quarterly
or monthly will give owners timely and important information regarding revenues and
expenses and tell them whether adjustments might be necessary to recoup losses or
decrease expenses. The P&L statement also allows outsiders to evaluate the companys
ability to manage and use companys resources.

There are three main sections of a P&L statement; revenues, expenditures, and the
bottom line. Basically, any listed line item on a P&L statement is either a revenue or an
expenditure. Profit and Loss statement normally begins with an entry for revenue,
known as the "top line," and subtracts the costs of operating activities, including cost of
goods sold, operating expenses, tax expense and interest expense. The difference,
known as the bottom line, is net income, also referred to as profit or earnings.

Controlling by profit and loss is most commonly used for the entire enterprise and, in
the case of a diversified corporation, its divisions. However, controlling can be by
departments. As a result, each department has its own profit and loss statement. (Page
325)

* My experience with control systems

In my old company, the management effectively apply several strategies to achieve


organizational control
a. Bureaucratic control

The management try to set appropriate standards for

b. Market Control

Jane, a secretary at a law firm, had a comfortable job with fixed working hours. Suddenly, her boss
informed her that she would have to start working extra hours from the next week. He said that the
firm had received many new clients and so the workload had increased. However, he reassured her
that she would be paid more for the extra work. Taken aback, Jane refused to comply with his
wishes. Which of the following is a reason why she resisted the change?

A. Jane had formed a different assessment of the proposed change.


B. The change was unexpected and took Jane by surprise.

C. Jane did not understand why the change was being implemented.

D. Jane felt that it was a management tactic.


E. Jane felt that the change was not in her best interest.

If a change is sudden, unexpected, or extreme, resistance may be the initial almost reflexive
reaction.

______ technologies have yet to prove their full value but have the potential to alter the rules of
competition by providing significant advantage.

A. Bas e
B. Emergin g
C. Ke y

D. Elevate
d E. Pacin g
Pacing technologies have yet to prove their full value but have the potential to provide a significant
advantage that alters the rules of competition. Managers should develop or invest in pacing
technologies because of the competitive advantages they can provide.

c. Clan control