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8

th
edition 8
th
edition
Steven P. Robbins
Mary Coulter
Steven P. Robbins
Mary Coulter
PowerPoint Presentation by CharIie Cook PowerPoint Presentation by CharIie Cook
Copyright 2005 Prentice HaII, Inc. Copyright 2005 Prentice HaII, Inc.
AII rights reserved. AII rights reserved.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-2
L E A R N I N G O U T L I N E
Follow this Learning Outline as you read and study this chapter.
What Is ControI and Why Is It Important?
efine controI.
Contrast the three approaches to designing controI
systems.
iscuss the reasons why controI is important.
ExpIain the pIanning-controIIing Iink.
The ControI Process
escribe the three steps in the controI process.
ExpIain why what is measured is more criticaI than how
it's measured.
ExpIain the three courses of action managers can take in
controIIing.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-3
L E A R N I N G O U T L I N E (cont'd)
Follow this Learning Outline as you read and study this chapter.
ControIIing OrganizationaI Performance
efine organizationaI performance.
escribe the most frequentIy used measures of
organizationaI performance.
TooIs for OrganizationaI Performance
Contrast feedforward, concurrent, and feedback controIs.
ExpIain the types of financiaI and information controIs
managers can use.
escribe how baIanced scorecards and benchmarking are
used in controIIing.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-4
L E A R N I N G O U T L I N E (cont'd)
Follow this Learning Outline as you read and study this chapter.
Contemporary Issues in ControI
escribe how managers may have to adjust controIs for
cross-cuIturaI differences.
iscuss the types of workpIace concerns managers face
and how they can address those concerns.
ExpIain why controI is important to customer interactions.
iscuss what corporate governance is and how it's
changing.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-5
What Is ControI?
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.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-6
esigning ControI Systems
Market Control
mphasizes the use of external market mechanisms
to establish the standards used in the control system.
ExternaI measures: price competition and relative
market share
Bureaucratic Control
mphasizes organizational authority and relies on
rules, regulations, procedures, and policies.
Clan Control
Regulates behavior by shared values, norms,
traditions, rituals, and beliefs of the firm's culture.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-7
Why Is ControI Important?
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.
mpowering employees
Control systems provide managers with information and
feedback on employee performance.
Protecting the workplace
Controls enhance physical security and help minimize
workplace disruptions.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-8
Exhibit 18.2 Exhibit 18.2
The PIanning-ControIIing Link
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-9
The ControI 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.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-10
Exhibit 18.3 Exhibit 18.3
The ControI Process
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-11
Measuring: How and What We Measure
Sources of Information
PersonaI observation
StatisticaI reports
OraI reports
Written reports
ControI Criteria
EmpIoyees
Satisfaction
Turnover
Absenteeism
Budgets
Costs
Output
SaIes
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-12
Exhibit 18.4 Exhibit 18.4
Common Sources of Information for
Measuring Performance
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-13
Comparing
Determining the degree of variation between
actual performance and the standard.
$ignificance 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).
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-14
Exhibit 18.5 Exhibit 18.5
efining the AcceptabIe Range of Variation
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-15
Exhibit 18.6 Exhibit 18.6
SaIes Performance Figures for JuIy, Eastern
States istributors
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-16
Taking ManageriaI Action
Courses of Action
Doing nothing
Only if deviation is judged to be insignificant.
Correcting actual (current) performance
mmediate 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
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-17
Taking ManageriaI Action (cont'd)
Courses of Action (cont'd)
Revising the standard
xamining the standard to ascertain whether or not the
standard is realistic, fair, and achievable.
&pholding the validity of the standard.
Resetting goals that were initially set too low or too high.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-18
Exhibit 18.7 Exhibit 18.7
ManageriaI ecisions in the ControI Process
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-19
ControIIing for OrganizationaI
Performance
What s Performance?
The end result of an activity
What s 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
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-20
OrganizationaI 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
nputs: costs of resources (materials, labor expense,
and facilities)
&ltimately, a measure of how efficiently employees do
their work.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-21
OrganizationaI Performance Measures
Organizational ffectiveness
Measuring how appropriate organizational goals are
and how well the organization is achieving its goals.
Systems resource modeI
The ability of the organization to exploit its environment in
acquiring scarce and valued resources.
The process modeI
The efficiency of an organization's transformation process
in converting inputs to outputs.
The muItipIe constituencies modeI
The effectiveness of the organization in meeting each
constituencies' needs.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-22
OrganizationaI Effectiveness Measures
Industry rankings on:
Profits
Return on revenue
Return on sharehoIders'
equity
Growth in profits
Revenues per empIoyee
Revenues per doIIar of
assets
Revenues per doIIar of
equity
Corporate CuIture
Audits
Compensation and
benefits surveys
Customer satisfaction
surveys
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-23
Exhibit 18.8 Exhibit 18.8
PopuIar Industry and
Company Rankings
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-24
TooIs for ControIIing OrganizationaI
Performance
Feedforward Control
A control that prevents anticipated problems before
actual occurrences of the problem.
Building in quality through design.
Requiring suppliers conform to $O 9002.
Concurrent Control
A control that takes place while the monitored activity
is in progress.
irect supervision: management by walking around.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-25
TooIs for ControIIing OrganizationaI
Performance (cont'd)
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
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.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-26
Exhibit 18.9 Exhibit 18.9
Types of ControI
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-27
TooIs for ControIIing OrganizationaI
Performance: FinanciaI ControIs
TraditionaI ControIs
Ratio anaIysis
Liquidity
Leverage
Activity
ProfitabiIity
Budget AnaIysis
Quantitative standards
eviations
Other Measures
Economic VaIue Added
(EVA)
Market VaIue Added
(MVA)
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-28
Exhibit 18.10a Exhibit 18.10a
PopuIar FinanciaI Ratios
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-29
Exhibit 18.10b Exhibit 18.10b
PopuIar FinanciaI Ratios
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-30
TooIs for ControIIing OrganizationaI
Performance: FinanciaI ControIs (cont'd)
Other Measures
conomic Value Added (VA)
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.
The choice is to use less capital or invest in high-return
projects.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-31
TooIs for ControIIing OrganizationaI
Performance: FinanciaI ControIs (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
f 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.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-32
ControIIing OrganizationaI Performance
Balanced $corecard
A measurement tool that uses goals set by managers
in four areas to measure a company's performance:
Financial, customer, internal processes, and
people/innovation/growth assets
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-33
Information ControIs
Management nformation $ystems (M$)
A system used to provide management with needed
information on a regular basis.
ata: 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.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-34
Benchmarking of Best Practices
Benchmarking
The search for the best practices among competitors
or noncompetitors that lead to their superior
performance.
Benchmark: the standard of excellence against which
to measure and compare.
A control tool for identifying and measuring specific
performance gaps and areas for improvement.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-35
Exhibit 18.11 Exhibit 18.11
Steps to SuccessfuIIy ImpIement an InternaI
Benchmarking Best Practices Program
1. Connect best practices to strategies and goaIs.
2. Identify best practices throughout the organization.
3. eveIop best practices reward and recognition
systems.
4. Communicate best practices throughout the
organization.
5. Create a best practices knowIedge-sharing system.
6. Nurture best practices on an ongoing basis.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-36
Contemporary Issues in ControI
Cross-Cultural ssues
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
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-37
Contemporary Issues in ControI (cont'd)
Workplace Concerns
Workplace privacy versus workplace monitoring:
-mail, telephone, computer, and nternet usage
Productivity, harassment, security, confidentiality,
intellectual property protection
mployee 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.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-38
Exhibit 18.12 Exhibit 18.12
Types of WorkpIace Monitoring by EmpIoyers
Internet use 54.7%
TeIephone use 44.0%
E-maiI messages 38.1%
Computer fiIes 30.8%
Job performance using video cameras 14.6%
Phone conversations 11.5%
Voice maiI messages 6.8%
Source: Based on $. Mclvoy, -Mail and nternet Monitoring and the Workplace: Do
mployees Have a Right to Privacy? ommunications and the Law, June 2002, p. 69.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-39
Exhibit 18.13 Exhibit 18.13
ControI Measures for EmpIoyee Theft or Fraud
Sources: Based on A.H. Bell and D.M. $mith. Protecting the
Company Against Theft and Fraud, orkforce Online
(.orkforce.com) December 3, 2000; J.D. Hansen. To
Catch a Thief, ournal of Accountancy, March 2000, pp. 4346;
and J. Greenberg, The Cognitive Geometry of mployee Theft, in
Dysfunctional Behavior in Organizations: Nonviolent and Deviant
Behavior, eds. $.B. Bacharach, A. O'Leary-Kelly, J.M. Collins, and
R.W. Griffin ($tamford, CT: JA Press, 1998), pp. 14793.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-40
Exhibit 18.14 Exhibit 18.14
WorkpIace VioIence
Witnessed yeIIing or other verbaI abuse 42%
YeIIed at co-workers themseIves 29%
Cried over work-reIated issues 23%
Seen someone purposeIy damage
machines or furniture 14%
Seen physicaI vioIence in the workpIace 10%
Struck a co-worker 2%
Source: ntegra Realty Resources, October-November $urvey of Adults
18 and Over, in Desk Rage. Businesseek, November 20, 2000, p. 12.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-41
Exhibit 18.15 Exhibit 18.15
ControI Measures for
eterring or Reducing
WorkpIace VioIence
$ources: Based on M. Gorkin, Five $trategies and $tructures for
Reducing Workplace Violence, orkforce Online (.orkforce.com).
December 3, 2000; nvestigating Workplace Violence: Where Do You
$tart? orkforce Online (.forceforce.com), December 3, 2000;
Ten Tips on Recognizing and Minimizing Violence, orkforce Online
(.orkforce.com), December 3, 2000; and Points to Cover in a
Workplace Violence Policy, orkforce Online (.orkforce.com),
December 3, 2000.
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-42
Contemporary Issues in ControI (cont'd)
Customer nteractions
$ervice profit chain
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).
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
ncreased scrutiny of financial reporting
Copyright 2005 Prentice HaII, Inc. AII rights reserved. 18-43
Exhibit 18.16 Exhibit 18.16
The Service Profit Chain