CHAPTER 11 Evaluation Control STRATEGIC MANAGEMENT BUSINESS POLICY
CHAPTER 11 Evaluation & Control STRATEGIC MANAGEMENT & BUSINESS POLICY 10 TH EDITION THOMAS L. WHEELEN J. DAVID HUNGER 1
Evaluation and Control 2
Evaluation and Control Information – –Performance data –Activity reports 3
Evaluation and Control Measuring performance – –The end result of activity 4
Evaluation and Control Types of Controls – –Behavior controls • How something is done through policies, procedures, rules, SOP’s 5
Evaluation and Control Types of Controls – –Output controls • What is to be accomplished; focus on end result through performance targets 6
Evaluation and Control Types of Controls – –Input controls • Resources – skills, abilities, values, motives 7
Evaluation and Control Types of Controls – –Behavior controls • ISO 9000 Standards Series • ISO 14000 Standards Series 8
Evaluation and Control Types of Controls – –Activity Based Costing (ABC) • Allocation of indirect and fixed costs to individual products or product lines • Based on value-added activities • More accurate charge of costs 9
Evaluation and Control Types of Controls – –Enterprise Risk Management (ERM) • Identify risks • Rank risks • Measure risks 10
Evaluation and Control Primary Measures of Performance – –Traditional Financial Measures • Return on investment (ROI) • Earnings per share (EPS) • Return on equity (ROE) • Operating cash flow • Free cash flow 11
Evaluation and Control Primary Measures of Performance – –Shareholder • Shareholder value • Economic value added (EVA) • Market value added (MVA) 12
Evaluation and Control Primary Measures of Performance – –Balanced Scorecard Approach • Financial • Customer • Internal business perspective • Innovation and learning 13
Evaluation and Control 14
Evaluation and Control Evaluating Top Management & Board – –Chairman-CEO Feedback Instrument –Management Audit –Strategic Audit 15
Evaluation and Control Divisional & Functional Performance – –Responsibility Centers • Standard cost centers • Revenue centers • Expense centers profit centers • Investment centers 16
Evaluation and Control Using Benchmarking – –Continual process of measuring products, service, and practices against the toughest competitors or those companies recognized as industry leaders 17
Evaluation and Control International Measurement Issues – –International transfer pricing –Repatriation of profit –piracy 18
Evaluation and Control Strategic Information Systems – –Enterprise Resource Planning (ERP) –Divisional and functional IS support 19
Evaluation and Control Problems in Measuring Performance – –Short-term orientation –Goal displacement • Behavior substitution • Suboptimization 20
Evaluation and Control Guidelines for Proper Control – –Minimum amount of information necessary –Meaningful activities and results –Timely –Long and short-term –Pinpointing exceptions –Meeting/exceeding standards 21
Evaluation and Control Strategic Incentive Management – –Weighted-factor method –Long-term evaluation method –Strategic funds method 22
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