?2007PrenticeHall,Inc.

Allrightsreserved.FoundationsofControlChapter

18化裝品?2007PrenticeHall,Inc.Allrightsreserved.18–2LEARNINGOUTLINE

FollowthisLearningOutlineasyoureadandstudythischapter.WhatIsControlandWhyIsItImportant?Definecontrol.Contrastthethreeapproachestodesigningcontrolsystems.Discussthereasonswhycontrolisimportant.Explaintheplanning-controllinglink.TheControlProcessDescribethethreestepsinthecontrolprocess.Explainwhywhatismeasuredismorecriticalthanhowit’smeasured.Explainthethreecoursesofactionmanagerscantakeincontrolling.?2007PrenticeHall,Inc.Allrightsreserved.18–3LEARNINGOUTLINE(cont’d)

FollowthisLearningOutlineasyoureadandstudythischapter.ControllingOrganizationalPerformanceDefineorganizationalperformance.Describethemostfrequentlyusedmeasuresoforganizationalperformance.ToolsforOrganizationalPerformanceContrastfeedforward,concurrent,andfeedbackcontrols.Explainthetypesoffinancialandinformationcontrolsmanagerscanuse.Describehowbalancedscorecardsandbenchmarkingareusedincontrolling.?2007PrenticeHall,Inc.Allrightsreserved.18–4LEARNINGOUTLINE(cont’d)

FollowthisLearningOutlineasyoureadandstudythischapter.ContemporaryIssuesinControlDescribehowmanagersmayhavetoadjustcontrolsforcross-culturaldifferences.Discussthetypesofworkplaceconcernsmanagersfaceandhowtheycanaddressthoseconcerns.Explainwhycontrolisimportanttocustomerinteractions.Discusswhatcorporategovernanceisandhowit’schanging.?2007PrenticeHall,Inc.Allrightsreserved.18–5WhatIsControl?ControllingTheprocessofmonitoringactivitiestoensurethattheyarebeingaccomplishedasplannedandofcorrectinganysignificantdeviations.ThePurposeofControlToensurethatactivitiesarecompletedinwaysthatleadtoaccomplishmentoforganizationalgoals.?2007PrenticeHall,Inc.Allrightsreserved.18–6DesigningControlSystemsMarketControlEmphasizestheuseofexternalmarketmechanismstoestablishthestandardsusedinthecontrolsystem.Externalmeasures:pricecompetitionandrelativemarketshareBureaucraticControlEmphasizesorganizationalauthorityandreliesonrules,regulations,procedures,andpolicies.ClanControlRegulatesbehaviorbysharedvalues,norms,traditions,rituals,andbeliefsofthefirm’sculture.?2007PrenticeHall,Inc.Allrightsreserved.18–7Exhibit18–1 CharacteristicsofThreeApproachestoControlSystemsTypeofControlCharacteristicsMarketUsesexternalmarketmechanisms,suchaspricecompetitionandrelativemarketshare,toestablishstandardsusedinsystem.Typicallyusedbyorganizationswhoseproductsorservicesareclearlyspecifiedanddistinctandthatfaceconsiderablemarketplacecompetition.BureaucraticEmphasizesorganizationalauthority.Reliesonadministrativeandhierarchicalmechanisms,suchasrules,regulations,procedures,policies,standardizationofactivities,well-definedjobdescriptions,andbudgetstoensurethatemployeesexhibitappropriatebehaviorsandmeetperformancestandards.ClanRegulatesemployeebehaviorbythesharedvalues,norms,traditions,rituals,beliefs,andotheraspectsoftheorganization’sculture.Oftenusedbyorganizationsinwhichteamsarecommonandtechnologyischangingrapidly.?2007PrenticeHall,Inc.Allrightsreserved.18–8WhyIsControlImportant?Asthefinallinkinmanagementfunctions:PlanningControlsletmanagersknowwhethertheirgoalsandplansareontargetandwhatfutureactionstotake.EmpoweringemployeesControlsystemsprovidemanagerswithinformationandfeedbackonemployeeperformance.ProtectingtheworkplaceControlsenhancephysicalsecurityandhelpminimizeworkplacedisruptions.?2007PrenticeHall,Inc.Allrightsreserved.18–9Exhibit18–2 ThePlanning–ControllingLink?2007PrenticeHall,Inc.Allrightsreserved.18–10TheControlProcessTheProcessofControlMeasuringactualperformance.Comparingactualperformanceagainstastandard.Takingactiontocorrectdeviationsorinadequatestandards.?2007PrenticeHall,Inc.Allrightsreserved.18–11Exhibit18–3 TheControlProcess?2007PrenticeHall,Inc.Allrightsreserved.18–12Measuring:HowandWhatWeMeasureSourcesofInformation(How)PersonalobservationStatisticalreportsOralreportsWrittenreportsControlCriteria(What)EmployeesSatisfactionTurnoverAbsenteeismBudgetsCostsOutputSales?2007PrenticeHall,Inc.Allrightsreserved.18–13Exhibit18–4 CommonSourcesofInformationforMeasuringPerformance?2007PrenticeHall,Inc.Allrightsreserved.18–14ComparingDeterminingthedegreeofvariationbetweenactualperformanceandthestandard.Significanceofvariationisdeterminedby:Theacceptablerangeofvariationfromthestandard(forecastorbudget).Thesize(largeorsmall)anddirection(overorunder)ofthevariationfromthestandard(forecastorbudget).?2007PrenticeHall,Inc.Allrightsreserved.18–15Exhibit18–5 DefiningtheAcceptableRangeofVariation?2007PrenticeHall,Inc.Allrightsreserved.18–16Exhibit18–6 SalesPerformanceFiguresforJuly,EasternStatesDistributors?2007PrenticeHall,Inc.Allrightsreserved.18–17TakingManagerialActionCoursesofAction“Doingnothing〞Onlyifdeviationisjudgedtobeinsignificant.Correctingactual(current)performanceImmediatecorrectiveactiontocorrecttheproblematonce.Basiccorrectiveactiontolocateandtocorrectthesourceofthedeviation.CorrectiveActionsChangestrategy,structure,compensationscheme,ortrainingprograms;redesignjobs;orfireemployees?2007PrenticeHall,Inc.Allrightsreserved.18–18TakingManagerialAction(cont’d)CoursesofAction(cont’d)RevisingthestandardExaminingthestandardtoascertainwhetherornotthestandardisrealistic,fair,andachievable.Upholdingthevalidityofthestandard.Resettinggoalsthatwereinitiallysettoolowortoohigh.?2007PrenticeHall,Inc.Allrightsreserved.18–19Exhibit18–7 ManagerialDecisionsintheControlProcess?2007PrenticeHall,Inc.Allrightsreserved.18–20ControllingforOrganizationalPerformanceWhatIsPerformance?TheendresultofanactivityWhatIsOrganizational

Performance?Theaccumulatedendresultsofalloftheorganization’sworkprocessesandactivitiesDesigningstrategies,workprocesses,andworkactivities.Coordinatingtheworkofemployees.?2007PrenticeHall,Inc.Allrightsreserved.18–21OrganizationalPerformanceMeasuresOrganizationalProductivityProductivity:theoveralloutputofgoodsand/orservicesdividedbytheinputsneededtogeneratethatoutput.Output:salesrevenuesInputs:costsofresources(materials,laborexpense,andfacilities)Ultimately,productivityisameasureofhowefficientlyemployeesdotheirwork.?2007PrenticeHall,Inc.Allrightsreserved.18–22OrganizationalPerformanceMeasuresOrganizationalEffectivenessMeasuringhowappropriateorganizationalgoalsareandhowwelltheorganizationisachievingitsgoals.SystemsresourcemodelTheabilityoftheorganizationtoexploititsenvironmentinacquiringscarceandvaluedresources.TheprocessmodelTheefficiencyofanorganization’stransformationprocessinconvertinginputstooutputs.ThemultipleconstituenciesmodelTheeffectivenessoftheorganizationinmeetingeachconstituencies’needs.?2007PrenticeHall,Inc.Allrightsreserved.18–23IndustryandCompanyRankingsIndustryrankingson:ProfitsReturnonrevenueReturnonshareholders’equityGrowthinprofitsRevenuesperemployeeRevenuesperdollarofassetsRevenuesperdollarofequityCorporateCultureAuditsCompensationandbenefitssurveysCustomersatisfaction

surveys?2007PrenticeHall,Inc.Allrightsreserved.18–24Exhibit18–8 PopularIndustryandCompanyRankings?2007PrenticeHall,Inc.Allrightsreserved.18–25ToolsforControllingOrganizationalPerformanceFeedforwardControlAcontrolthatpreventsanticipatedproblemsbeforeactualoccurrencesoftheproblem.Buildinginqualitythroughdesign.RequiringsuppliersconformtoISO9002.ConcurrentControlAcontrolthattakesplacewhilethemonitoredactivityisinprogress.Directsupervision:managementbywalkingaround.?2007PrenticeHall,Inc.Allrightsreserved.18–26Exhibit18–9 TypesofControl?2007PrenticeHall,Inc.Allrightsreserved.18–27ToolsforControllingOrganizationalPerformance(cont’d)FeedbackControlAcontrolthattakesplaceafteranactivityisdone.Correctiveactionisafter-the-fact,whentheproblemhasalreadyoccurred.Advantagesoffeedbackcontrols:Providemanagerswithinformationontheeffectivenessoftheirplanningefforts.Enhanceemployeemotivationbyprovidingthemwithinformationonhowwelltheyaredoing.?2007PrenticeHall,Inc.Allrightsreserved.18–28ToolsforControllingOrganizationalPerformance:FinancialControlsTraditionalControlsRatioanalysisLiquidityLeverageActivityProfitabilityBudgetAnalysisQuantitativestandardsDeviationsOtherMeasuresEconomicValueAdded(EVA)MarketValueAdded(MVA)?2007PrenticeHall,Inc.Allrightsreserved.18–29Exhibit18–10 PopularFinancialRatios?2007PrenticeHall,Inc.Allrightsreserved.18–30Exhibit18–10 PopularFinancialRatios(cont’d)?2007PrenticeHall,Inc.Allrightsreserved.18–31ToolsforControllingOrganizationalPerformance:FinancialControls(cont’d)OtherMeasuresEconomicValueAdded(EVA)Howmuchvalueiscreatedbywhatacompanydoeswithitsassets,lessanycapitalinvestmentsinthoseassets:therateofreturnearnedoverandabovethecostofcapital.Thechoiceistouselesscapitalorinvestinhigh-returnprojects.?2007PrenticeHall,Inc.Allrightsreserved.18–32ToolsforControllingOrganizationalPerformance:FinancialControls(cont’d)OtherMeasures(cont’d)MarketValueAdded(MVA)Thevaluethatthestockmarketplacesonafirm’spastandexpectedcapitalinvestmentprojectsIfthefirm’smarketvalue(itsstockanddebt)exceedsthevalueofitsinvestcapital(itsequityandretainedearnings),thenmanagershavecreatedwealth.ThePracticeofManagingEarnings?2007PrenticeHall,Inc.Allrightsreserved.18–33ControllingOrganizationalPerformanceBalancedScorecardIsameasurementtoolthatusesgoalssetbymanagersinfourareastomeasureacompany’sperformance:FinancialCustomerInternalprocessesPeople/innovation/growthassetsIsintendedtoemphasizethatalloftheseareasareimportanttoanorganization’ssuccessandthatthereshouldbeabalanceamongthem.?2007PrenticeHall,Inc.Allrightsreserved.18–34InformationControlsPurposesofInformationControlsAsatooltohelpmanagerscontrolotherorganizationalactivities.Managersneedtherightinformationattherighttimeandintherightamount.Asanorganizationalareathatmanagersneedtocontrol.Managersmusthavecomprehensiveandsecurecontrolsinplacetoprotecttheorganization’simportantinformation.?2007PrenticeHall,Inc.Allrightsreserved.18–35InformationControlsManagementInformationSystems(MIS)Asystemusedtoprovidemanagementwithneededinformationonaregularbasis.Data:anunorganizedcollectionofraw,unanalyzedfacts(e.g.,unsortedlistofcustomernames).Information:datathathasbeenanalyzedandorganizedsuchthatithasvalueandrelevancetomanagers.?2007PrenticeHall,Inc.Allrightsreserved.18–36BenchmarkingofBestPracticesBenchmarkThestandardofexcellenceagainstwhichtomeasureandcompare.BenchmarkingIsthesearchforthebestpracticesamongcompetitorsornoncompetitorsthatleadtotheirsuperiorperformance.Isacontroltoolforidentifyingandmeasuringspecificperformancegapsandareasforimprovement.?2007PrenticeHall,Inc.Allrightsreserved.18–37Exhibit18–11 StepstoSuccessfullyImplementanInternalBenchmarkingBestPracticesProgramConnectbestpracticestostrategiesandgoals.Identifybestpracticesthroughouttheorganization.Developbestpracticesrewardandrecognitionsystems.Communicatebestpracticesthroughouttheorganization.Createabestpracticesknowledge-sharingsystem.Nurturebestpracticesonanongoingbasis.?2007PrenticeHall,Inc.Allrightsreserved.18–38ContemporaryIssuesinControlCross-CulturalIssuesTheuseoftechnologytoincreasedirectcorporatecontroloflocaloperationsLegalconstraintsoncorrectiveactionsinforeigncountriesDifficultywiththecomparabilityofdatacollectedfromoperationsindifferentcountries?2007PrenticeHall,Inc.Allrightsreserved.18–39ContemporaryIssuesinControl(cont’d)WorkplaceConcernsWorkplaceprivacyversusworkplacemonitoring:E-mail,telephone,computer,andInternetusageProductivity,harassment,security,confidentiality,intellectualpropertyprotectionEmployeetheftTheunauthorizedtakingofcompanypropertybyemployeesfortheirpersonaluse.WorkplaceviolenceAnger,rage,andviolenceintheworkplaceisaffectingemployeeproductivity.?2007PrenticeHall,Inc.Allrightsreserved.18–40Exhibit18–12

TypesofWorkplaceMonitoringbyEmployersSource:AmericanManagementAssociation/ePolicyInstituteResearch,“2005ElectronicMonitoring&SurveillanceSurvey,〞AmericanManagementAssociation.?2007PrenticeHall,Inc.Allrightsreserved.18–41Exhibit18–13 ControlMeasuresforEmployeeTheftorFraudSources:BasedonA.H.BellandD.M.Smith.“ProtectingtheCompanyAgainstTheftandFraud,〞WorkforceOnline()December3,2000;J.D.Hansen.“ToCatchaThief,〞JournalofAccountancy,March2000,pp.43–46;andJ.Greenberg,“TheCognitiveGeometryofEmployeeTheft,〞inDysfunctionalBehaviorinOrganizations:NonviolentandDeviantBehavior,eds.S.B.Bacharach,A.O’Leary-Kelly,J.M.Collins,andR.W.Griffin(Stamford,CT:JAIPress,1998),pp.147–93.?2007PrenticeHall,Inc.Allrightsreserved.18–42Exhibit18–14 WorkplaceViolenceWitnessedyellingorotherverbalabuse 42%Yelledatco-workersthemselves 29%Criedoverwork-relatedissues 23%Seensomeonepurposelydamage

machinesorfurniture 14%Seenphysicalviolenceintheworkplace 10%Struckaco-worker 2%Source:IntegraRealtyResources,October-NovemberSurveyofAdults18andOver,in“DeskRage.〞BusinessWeek,November20,2000,p.12.?2007PrenticeHall,Inc.Allrightsreserved.18–43Exhibit18–15 ControlMeasuresforDeterringorReducingWorkplaceViolenceSources:BasedonM.Gorkin,“FiveStrategiesandStructuresforReducingWorkplaceViolence,〞WorkforceOnline().December3,2000;“InvestigatingWorkplaceViolence:WhereDoYouStart?〞WorkforceOnline(),December3,2000;“TenTipsonRecognizingandMinimizingViolence,〞Wor