Management Controlling Useful vocabulary controlling market control bureaucratic

Management Controlling

Useful vocabulary • • • controlling market control bureaucratic control process range of variation immediate corrective action • basic corrective action • performance • organisational performance • productivity • organisational effectiveness • feed forward control • concurrent control • management by walking around • feedback control • economic value added (EVA) • market value added (MVA)

Today’s lecture We will: • Explain the nature and importance of control • Describe three steps in the control process • Explain how organisational performance is measured • Describe tools used to measure organisational performance • Discuss contemporary issues in control

What Is Control? • Controlling - the process of monitoring, comparing, and correcting work performance. • The Purpose of Control – To ensure that activities are completed in ways that lead to the accomplishment of organisational goals.

Why Is Control 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. – Empowering employees • Control systems provide managers with information and feedback on employee performance. – Protecting the workplace • Controls enhance physical security and help minimise workplace disruptions.

Planning-Controlling

The Control 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

The Control Process

Measuring: how and what we measure • Sources of Information (How) – Personal observation • Control Criteria (What) – Employees • Satisfaction – Statistical reports • Turnover – Oral reports • Absenteeism – Written reports – Budgets • Costs • Output • Sales

Sources of information for measuring performance

Comparing actual performance against the standard • Determining the degree of variation between actual performance and the standard • Range of variation - the acceptable parameters of variance between actual performance and the standard. • Variation = between maximum and minimum

Acceptable range of variation

Taking managerial action • Immediate corrective action - corrective action that corrects problems at once in order to get performance back on track. • Basic corrective action - corrective action that looks at how and why performance deviated before correcting the source of deviation.

Managerial decisions in the control process

Organisational performance

What is organisational performance? • Performance - the end result of an activity. • Organisational performance - the accumulated results of all the organisation’s work activities.

Measures of organisational performance • Productivity - the amount of goods or services produced divided by the inputs needed to generate that output. • Organisational effectiveness - a measure of how appropriate organisational goals are and how well those goals are being met. • Industry rankings – how well does the organisation compare to other organisations

Popular industry and company rankings

Popular industry and company rankings (cont. )

Types of control • Feed forward control - control that takes place before a work activity is done. • Concurrent control - control that takes place while a work activity is in progress. • Management by walking around - a term used to describe when a manager is out in the work area interacting directly with employees. • Feedback control that takes place after a work activity is done.

Types of control

Activity In 2 s or 3 s, give examples of these types of control in the workplace: • Feed forward • Concurrent • Management by walking around • Feedback

Financial Controls • Traditional Controls – Ratio analysis • Liquidity: can it meet current debt obligations • Leverage: can it meet interest payments on debts • Activity: how efficiently it’s using assets • Profitability: how efficiently and effectively it’s using assets to generate profit – Budget Analysis • Quantitative standards: numerical data • Deviations: changes from the standard

Popular financial ratios

Exhibit 18 -9: Popular Financial Ratios (cont. )

What is the balanced scorecard? • Balanced scorecard - a performance measurement tool that examines more than just the financial perspective. – Measures a company’s performance in four areas: • Financial • Customer • Internal processes • People/innovation/growth assets

Balanced scorecard explained The Financial Perspective covers the financial objectives of an organisation and allows managers to track financial success and shareholder value. The Customer Perspective covers the customer objectives such as customer satisfaction, market share goals as well as product and service attributes. The Internal Process Perspective covers internal operational goals and outlines the key processes necessary to deliver the customer objectives. The Learning and Growth Perspective covers the intangible drivers of future success such as human capital, organisational capital and information capital including skills, training, organisational culture, leadership, systems and databases.

Balanced scorecard

Activity • How can IT be used to support controlling? • Why do we need to control information?

Controlling information • • • Data protection Leaking secrets Sufficient information to measure Security Personal messages on social media Cyber attacks

Information controls • Management information system (MIS) - a system used to provide management with needed information on a regular basis. • Data - an unorganised collection of raw, unanalysed facts (e. g. , an unsorted list of customer names). • Information - data that has been analysed and organised such that it has value and relevance to managers.

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 to measure and compare against.

Suggestions for internal benchmarking

Issues in the workplace

Workplace concerns • Employee theft - any unauthorised taking of company property by employees for their personal use.

Activity In a group, use the book chapter to list the workplace concerns and give examples.

Example • So how could we use control tools to reduce or eliminate the problem of employee theft and violence?

Controlling employee theft

Controlling employee theft

Controlling workplace violence

Controlling workplace violence

Customer interactions • Service profit chain - the service sequence from employees to customers to profit. • Corporate governance - the system used to govern a corporation so that the interests of corporate owners are protected. – Board of Directors – Financial reporting and auditing committee

Summary Today: • Controlling and measuring • Tools used • Problems encountered • Possible solutions Tomorrow: • Return on Investment • Bring your Time Management Plans • Exam questions practise

Reading Please re-read all your slides and revise the Chapters for each management function: • Planning • Organising • Leading • Controlling

Activity • Imagine you work at a company where employees will pass free goods to friends and family. • What measures could you set up to stop this happening? • Should you stop this happening?