foundations of control-primce dudhatra-9724949948

8/7/2019 Foundations of Control-Primce Dudhatra-9724949948

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ninth editionninth edition

STEPHEN P. ROBBINSSTEPHEN P. ROBBINS

PowerPoint Presentation by Charlie CookPowerPoint Presentation by Charlie CookThe University of West AlabamaThe University of West Alabama

MARY COULTERMARY COULTER

prince dudhatraprince dudhatra--97249499489724949948

FoundationsFoundations

of Controlof Control

ChapterChapter

1818


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prince dudhatra-9724949948

L E A R N I N G O U T L I N EL E A R N I N G O U T L I N EFollow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

What Is Control and Why Is It Important?What Is Control and Why Is It Important?

Define control.Define control.

Contrast the three approaches to designing controlContrast the three approaches to designing control

systems.systems.

Discuss the reasons why control is important.Discuss the reasons why control is important.

Explain the planningExplain the planning--controlling link.controlling link.

The Control ProcessThe Control Process

Describe the three steps in the control process.Describe the three steps in the control process.

Explain why what is measured is more critical than howExplain why what is measured is more critical than how

its measured.its measured.

Explain the three courses of action managers can take inExplain the three courses of action managers can take in

controlling.controlling.


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L E A R N I N G O U T L I N E (contd)L E A R N I N G O U T L I N E (contd)Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

Controlling Organizational PerformanceControlling Organizational Performance

Define organizational performance.Define organizational performance.

Describe the most frequently used measures ofDescribe the most frequently used measures of

organizational performance.organizational performance.

Tools for Organizational PerformanceTools for Organizational Performance

Contrast feedforward, concurrent, and feedback controls.Contrast feedforward, concurrent, and feedback controls.

Explain the types of financial and information controlsExplain the types of financial and information controls

managers can use.managers can use.

Describe how balanced scorecards and benchmarking areDescribe how balanced scorecards and benchmarking are

used in controlling.used in controlling.


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L E A R N I N G O U T L I N E (contd)L E A R N I N G O U T L I N E (contd)Follow this Learning Outline as you read and study this chapter.Follow this Learning Outline as you read and study this chapter.

Contemporary Issues in ControlContemporary Issues in Control

Describe how managers may have to adjust controls forDescribe how managers may have to adjust controls for

crosscross--cultural differences.cultural differences.

Discuss the types of workplace concerns managers faceDiscuss the types of workplace concerns managers faceand how they can address those concerns.and how they can address those concerns.

Explain why control is important to customer interactions.Explain why control is important to customer interactions.

Discuss what corporate governance is and how itsDiscuss what corporate governance is and how its

changing.changing.


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What Is Control?What Is Control?

ControllingControllingThe process ofmonitoring activities to ensure thatThe process ofmonitoring activities to ensure that

they are being accomplished as planned and ofthey are being accomplished as planned and of

correcting any significant deviations.correcting any significant deviations.

The Purpose ofControlThe Purpose ofControlTo ensure that activities are completed in ways thatTo ensure that activities are completed in ways that

lead to accomplishmentoforganizationalgoals.lead to accomplishmentoforganizationalgoals.


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Designing Control SystemsDesigning Control Systems

MarketControlMarketControlEmphasizes the use ofexternal market mechanismsEmphasizes the use ofexternal market mechanisms

to establish the standards used inthe control system.to establish the standards used inthe control system.

External measures:External measures: price competition and relativeprice competition and relative

market sharemarket share BureaucraticControlBureaucraticControl

Emphasizes organizational authority and relies onEmphasizes organizational authority and relies on

rules, regulations, procedures, and policies.rules, regulations, procedures, and policies.

ClanControlClanControlRegulates behaviorby shared values, norms,Regulates behaviorby shared values, norms,

traditions, rituals, and beliefs ofthe firms culture.traditions, rituals, and beliefs ofthe firms culture.


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Exhibit 18Exhibit 1811 Characteristics of Three Approaches to Control SystemsCharacteristics of Three Approaches to Control Systems

Type of ControlType of Control CharacteristicsCharacteristics

MarketMarket Uses external market mechanisms, such as price competitionUses external market mechanisms, such as price competition

and relative market share, to establish standards used inand relative market share, to establish standards used in

system. Typically used by organizations whose products orsystem. Typically used by organizations whose products or

services are clearly specified and distinct and thatfaceservices are clearly specified and distinct and thatface

considerable marketplace competition.considerable marketplace competition.BureaucraticBureaucratic Emphasizes organizational authority. Relies on administrativeEmphasizes organizational authority. Relies on administrative

and hierarchical mechanisms, such as rules, regulations,and hierarchical mechanisms, such as rules, regulations,

procedures, policies, standardizationofactivities, wellprocedures, policies, standardizationofactivities, well--

defined job descriptions, and budgets to ensure thatdefined job descriptions, and budgets to ensure that

employees exhibit appropriate behaviors and meetemployees exhibit appropriate behaviors and meet

performance standards.performance standards.

ClanClan Regulates employee behaviorby the shared values, norms,Regulates employee behaviorby the shared values, norms,

traditions, rituals, beliefs, and otheraspects ofthetraditions, rituals, beliefs, and otheraspects ofthe

organizations culture. Often used by organizations in whichorganizations culture. Often used by organizations in which

teams are common and technology is changingrapidly.teams are common and technology is changingrapidly.


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Why Is Control Important?Why Is Control Important?

As the finallinkin managementfunctions:As the finallinkin managementfunctions:PlanningPlanning

Controls let managers know whethertheirgoalsControls let managers know whethertheirgoals

and plans are ontarget and whatfuture actions toand plans are ontarget and whatfuture actions to

take.take.Empowering employeesEmpowering employees

Control systems provide managers with informationControl systems provide managers with information

and feedbackon employee performance.and feedbackon employee performance.

Protectingthe workplaceProtectingthe workplaceControls enhance physical security and helpControls enhance physical security and help

minimize workplace disruptions.minimize workplace disruptions.


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Exhibit 18Exhibit 1822 The PlanningThe PlanningControlling LinkControlling Link


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The Control ProcessThe Control Process

The Process ofControlThe Process ofControl1.1. Measuring actualMeasuring actual

performance.performance.

2.2. Comparing actualComparing actual

performance against aperformance against astandard.standard.

3.3. Taking actiontocorrectTaking actiontocorrect

deviations orinadequatedeviations orinadequate

standards.standards.


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Exhibit 18Exhibit 1833 The Control ProcessThe Control Process


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Measuring: How and What We MeasureMeasuring: How and What We Measure

Sources ofSources ofInformation (How)Information (How)

Personal observationPersonal observation

Statistical reportsStatistical reports

Oral reportsOral reports

Written reportsWritten reports

Control CriteriaControl Criteria(What)(What)

EmployeesEmployees

SatisfactionSatisfaction

TurnoverTurnover

AbsenteeismAbsenteeism

BudgetsBudgets

CostsCosts

OutputOutput

SalesSales


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Exhibit 18Exhibit 1844 Common Sources of InformationCommon Sources of Information

for Measuring Performancefor Measuring Performance


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ComparingComparing

Determiningthe degree ofvariation betweenDeterminingthe degree ofvariation betweenactual performance and the standard.actual performance and the standard.

Significance ofvariationis determined by:Significance ofvariationis determined by:

The acceptable range ofvariationfrom theThe acceptable range ofvariationfrom the

standard (forecastorbudget).standard (forecastorbudget).

The size (large orsmall) and direction (overorThe size (large orsmall) and direction (overor

under)ofthe variationfrom the standard (forecastunder)ofthe variationfrom the standard (forecast

orbudget).orbudget).


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Exhibit 18Exhibit 1855 Defining the Acceptable Range of VariationDefining the Acceptable Range of Variation


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Taking Managerial ActionTaking Managerial Action

Courses ofActionCourses ofAction DoingnothingDoingnothing

Only ifdeviationis judged to be insignificant.Only ifdeviationis judged to be insignificant.

Correcting actual (current) performanceCorrecting actual (current) performance

Immediate corrective actiontocorrectthe problemImmediate corrective actiontocorrectthe problem

atonce.atonce.

Basiccorrective actiontolocate and tocorrecttheBasiccorrective actiontolocate and tocorrectthe

source ofthe deviation.source ofthe deviation.

Corrective ActionsCorrective Actions

Change strategy, structure, compensation scheme, orChange strategy, structure, compensation scheme, or

training programs; redesign jobs; orfire employeestraining programs; redesign jobs; orfire employees


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Taking Managerial Action (contd)Taking Managerial Action (contd)

Courses ofAction (contd)Courses ofAction (contd)Revisingthe standardRevisingthe standard

Examiningthe standard to ascertain whetherornotExaminingthe standard to ascertain whetherornot

the standard is realistic, fair, and achievable.the standard is realistic, fair, and achievable.

Upholdingthe validity ofthe standard.Upholdingthe validity ofthe standard.

Resettinggoals that were initially settoolow ortoo high.Resettinggoals that were initially settoolow ortoo high.


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Exhibit 18Exhibit 1877 ManagerialDecisions in the Control ProcessManagerial Decisions in the Control Process


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Controlling for OrganizationalControlling for Organizational

PerformancePerformance

What Is Performance?What Is Performance?

The end resultofan activityThe end resultofan activity

What Is OrganizationalWhat Is OrganizationalPerformance?Performance?

The accumulated end results ofalloftheThe accumulated end results ofallofthe

organizations work processes and activitiesorganizations work processes and activities

Designing strategies, work processes, and workDesigning strategies, work processes, and workactivities.activities.

Coordinatingthe workofemployees.Coordinatingthe workofemployees.


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Organizational Performance MeasuresOrganizational Performance Measures

OrganizationalEffectivenessOrganizationalEffectivenessMeasuring how appropriate organizationalgoals areMeasuring how appropriate organizationalgoals are

and how wellthe organizationis achievingits goals.and how wellthe organizationis achievingits goals.

Systems resource modelSystems resource model

The ability ofthe organizationto exploitits environmentinThe ability ofthe organizationto exploitits environmentinacquiring scarce and valued resources.acquiring scarce and valued resources.

The process modelThe process model

The efficiency ofanorganizations transformation processThe efficiency ofanorganizations transformation process

inconvertinginputs tooutputs.inconvertinginputs tooutputs.

The multiple constituencies modelThe multiple constituencies model

The effectiveness ofthe organizationin meeting eachThe effectiveness ofthe organizationin meeting each

constituencies needs.constituencies needs.


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Industry and Company RankingsIndustry and Company Rankings

Industry rankings on:Industry rankings on: ProfitsProfits

Return on revenueReturn on revenue

Return on shareholdersReturn on shareholders

equityequity

Growth in profitsGrowth in profits

Revenues per employeeRevenues per employee

Revenues per dollar ofRevenues per dollar of

assetsassets

Revenues per dollar ofRevenues per dollar ofequityequity

Corporate CultureCorporate CultureAuditsAudits

Compensation andCompensation and

benefits surveysbenefits surveys

Customer satisfactionCustomer satisfactionsurveyssurveys


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Exhibit 18Exhibit 1888 Popular Industry and Company RankingsPopular Industry and Company Rankings


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Tools for Controlling OrganizationalTools for Controlling Organizational

PerformancePerformance

Feedforward ControlFeedforward Control

Acontrolthat prevents anticipated problemsAcontrolthat prevents anticipated problems beforebefore

actualoccurrences ofthe problem.actualoccurrences ofthe problem.

Buildingin quality through design.Buildingin quality through design.Requiring suppliers conform to ISO 9002.Requiring suppliers conform to ISO 9002.

ConcurrentControlConcurrentControl

Acontrolthattakes place while the monitored activityAcontrolthattakes place while the monitored activity

is in progress.is in progress.

Direct supervisionDirect supervision: management by walking: management by walking

around.around.


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Exhibit 18Exhibit 1899 Types of ControlTypes of Control


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Performance (contd)Performance (contd)

FeedbackControlFeedbackControl

Acontrolthattakes place afteran activity is done.Acontrolthattakes place afteran activity is done.

Corrective actionis afterCorrective actionis after--thethe--fact, whenthefact, whenthe

problem has already occurred.problem has already occurred.

Advantages offeedbackcontrols:Advantages offeedbackcontrols:

Provide managers with informationontheProvide managers with informationonthe

effectiveness oftheirplanning efforts.effectiveness oftheirplanning efforts.

Enhance employee motivation by providingthemEnhance employee motivation by providingthem

with informationon how wellthey are doing.with informationon how wellthey are doing.


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Exhibit 18Exhibit 181010 Popular Financial Ratios (contd)Popular Financial Ratios (contd)


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Performance: Financial Controls (contd)Performance: Financial Controls (contd)

OtherMeasuresOtherMeasures

Economic Value Added (EVA)Economic Value Added (EVA)

How much value is created by what a companyHow much value is created by what a companydoes with its assets, less any capitalinvestments indoes with its assets, less any capitalinvestments in

those assets:those assets: the rate of return earned over andthe rate of return earned over and

above the costof capital.above the costof capital.

The choice is to use less capitalorinvestin highThe choice is to use less capitalorinvestin high--returnreturn

projects.projects.


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Performance: Financial Controls (contd)Performance: Financial Controls (contd)

OtherMeasures (contd)OtherMeasures (contd)

Market Value Added (MVA)Market Value Added (MVA)

The value thatthe stock market places on a firmsThe value thatthe stock market places on a firms

past and expected capitalinvestment projectspast and expected capitalinvestment projects

Ifthe firms marketvalue (its stock and debt)Ifthe firms marketvalue (its stock and debt)

exceeds the value ofits investcapital (its equityexceeds the value ofits investcapital (its equity

and retained earnings), then managers haveand retained earnings), then managers have

created wealth.created wealth.

The Practice ofManagingEarningsThe Practice ofManagingEarnings


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Controlling Organizational PerformanceControlling Organizational Performance

BalancedScorecardBalanced

Scorecard

Is a measurementtoolthat uses goals set byIs a measurementtoolthat uses goals set by

managers infourareas to measure a companysmanagers infourareas to measure a companys

performance:performance:

FinancialFinancialCustomerCustomer

Internal processesInternal processes

People/innovation/growth assetsPeople/innovation/growth assets

Is intended to emphasize that allofthese areas areIs intended to emphasize that allofthese areas are

importantto anorganizations success and thatthereimportantto anorganizations success and thatthere

should be a balance amongthem.should be a balance amongthem.


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Information ControlsInformation Controls

Purposes of InformationControlsPurposes of InformationControlsAs a toolto help managers controlotherAs a toolto help managers controlother

organizational activities.organizational activities.

Managers need the rightinformation atthe rightManagers need the rightinformation atthe right

time and inthe right amount.time and inthe right amount.

As anorganizational area that managers need toAs anorganizational area that managers need to

control.control.

Managers must have comprehensive and secureManagers must have comprehensive and secure

controls in place to protectthe organizationscontrols in place to protectthe organizations

importantinformation.importantinformation.


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Information ControlsInformation Controls

Management InformationS

ystems (MIS)Management Information

Systems (MI

S)

A system used to provide management with neededA system used to provide management with needed

informationon a regularbasis.informationon a regularbasis.

Data:Data: an unorganized collectionofraw,an unorganized collectionofraw,

unanalyzed facts (e.g., unsorted listofcustomerunanalyzed facts (e.g., unsorted listofcustomernames).names).

Information:Information: data that has been analyzed anddata that has been analyzed and

organized such thatit has value and relevance toorganized such thatit has value and relevance to

managers.managers.


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Contemporary Issues in ControlContemporary Issues in Control

CrossCross--Cultural IssuesCultural IssuesThe use oftechnology toincrease directcorporateThe use oftechnology toincrease directcorporate

controloflocaloperationscontroloflocaloperations

Legalconstraints oncorrective actions inforeignLegalconstraints oncorrective actions inforeign

countriescountries

Difficulty with the comparability ofdata collected fromDifficulty with the comparability ofdata collected from

operations in differentcountriesoperations in differentcountries


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Contemporary Issues in Control (contd)Contemporary Issues in Control (contd)

Workplace ConcernsWorkplace ConcernsWorkplace privacy versus workplace monitoring:Workplace privacy versus workplace monitoring:

EE--mail, telephone, computer, and Internet usagemail, telephone, computer, and Internet usage

Productivity, harassment, security, confidentiality,Productivity, harassment, security, confidentiality,

intellectual property protectionintellectual property protectionEmployee theftEmployee theft

The unauthorized takingofcompany property byThe unauthorized takingofcompany property by

employees fortheirpersonal use.employees fortheirpersonal use.

Workplace violenceWorkplace violenceAnger, rage, and violence inthe workplace isAnger, rage, and violence inthe workplace is

affecting employee productivity.affecting employee productivity.


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Exhibit 18Exhibit 181212

Types of WorkplaceTypes of Workplace

Monitoring byMonitoring by

EmployersEmployers

Source: AmericanManagement

Association/ePolicy Institute Research, 2005ElectronicMonitoring & Surveillance Survey,

AmericanManagementAssociation.


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Exhibit 18Exhibit 181414 Workplace ViolenceWorkplace Violence

Witnessed yelling or other verbal abuse 42%

Yelled at co-workers themselves 29%

Cried over work-related issues 23%

Seen someone purposely damagemachines or furniture 14%

Seen physical violence in the workplace 10%

Struck a co-worker 2%

Source: Integra Realty Resources, October-NovemberSurvey ofAdults

18 and Over, inDeskRage.BusinessWeek,November20, 2000, p. 12.


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Exhibit 18Exhibit 181515 Control Measures forDeterring or ReducingControl Measures forDeterring or Reducing

Workplace ViolenceWorkplace Violence

Sources: Based onM. Gorkin, Five Strategies and Structures for

ReducingWorkplace Violence, Workforce Online (www.workforce.com).December3, 2000; InvestigatingWorkplace Violence:Where Do You

Start?Workforce Online (www.forceforce .com), December3, 2000;

Ten Tips onRecognizing and Minimizing Violence, Workforce Online

(www.workforce.com), December3, 2000; and Points toCover in aWorkplace Violence Policy,Workforce Online (www.workforce.com),

December3, 2000.


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CustomerInteractionsCustomerInteractionsService profitchainService profitchain

Is the service sequence from employees toIs the service sequence from employees to

customers to profit.customers to profit.

Service capability affects service value which impactsService capability affects service value which impactsoncustomersatisfactionthat, inturn, leads tooncustomersatisfactionthat, inturn, leads to

customerloyalty inthe form ofrepeat businesscustomerloyalty inthe form ofrepeat business

(profit).(profit).


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Exhibit 18Exhibit 181616 The Service Profit ChainThe Service Profit Chain

Source: Adapted and reprinted by permissionofHarvard Business Review. An exhibitfrom Puttingthe Service ProfitChaintoWork, by J. L. Heskett,

T. O. Jones, G. W. Loveman,W. E. Sasser, Jr., and L. A. Schlesinger. MarchApril1994: 166. Copyright (c) by the President and Fellows ofHarvard

College. Allrights reserved. See also J. L. Heskett,W. E. Sasser, and L. A. Schlesinger, The Service ProfitChain (New York: Free Press, 1997).


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Corporate GovernanceCorporate GovernanceThe system used togovern a corporation sothattheThe system used togovern a corporation sothatthe

interests ofthe corporate owners are protected.interests ofthe corporate owners are protected.

Changes inthe role ofboards ofdirectorsChanges inthe role ofboards ofdirectors

Increased scrutiny offinancialreporting (SarbanesIncreased scrutiny offinancialreporting (Sarbanes--Oxley Actof2002)Oxley Actof2002)

More disclosure and transparency ofcorporate financialMore disclosure and transparency ofcorporate financial

informationinformation

Certificationoffinancialresults by seniormanagementCertificationoffinancialresults by seniormanagement


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Terms to KnowTerms to Know

controllingcontrolling

marketcontrolmarketcontrol

bureaucraticcontrolbureaucraticcontrol

clancontrolclancontrol

control processcontrol process range ofvariationrange ofvariation

immediate correctiveimmediate corrective

actionaction

basiccorrective actionbasiccorrective action performanceperformance

organizationalorganizational

performanceperformance

productivityproductivity

organizationalorganizational

effectivenesseffectiveness

feedforward controlfeedforward control

concurrentcontrolconcurrentcontrol

management by walkingmanagement by walking

aroundaround

feedbackcontrolfeedbackcontrol

economicvalue addedeconomicvalue added

(EVA)(EVA)

marketvalue addedmarketvalue added

(MVA)(MVA)


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Terms to Know (contd)Terms to Know (contd)

managementinformationmanagementinformation

system (MIS)system (MIS)

datadata

informationinformation

balanced scorecardbalanced scorecard

benchmarkingbenchmarking

employee theftemployee theft

service profitchainservice profitchain

corporate governancecorporate governance

foundations of control-primce dudhatra-9724949948

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