Management Ch 10: Managerial Control

Return on investment

Net profit after taxes/Total assets Measures the efficiency of assets to generate profits

Profit margin on sales

Net profit after taxes/Total sales Identifies the profits that are generated

Inventory turnover

Sales/Inventory The higher the ratio, the more efficiently inventory assets are used

Total asset turnover

Sales/Total Assets The fewer assets used to achieve a given level of sales, the more efficiently management uses the organization's total assets

Planning-Controlling Link

Controlling (Standards, Measurements, Comparison, Actions) ---> Planning (Goals, Objective, Strategies, Plans) ---> Organizing (Structure, Human Resource Management) ---> Leading (Motivation, Leadership, Communication, Individual and Group Behavior) ---> back to controlling to complete the circle

Acid Test

Current Assets less inventories/Current Liabilities Tests liquidity more accurately when inventories turn over slowly or are difficult to sell

Current Ratio

Current Assets/Current Liabilities Tests the organization's ability to meet short-term obligations

What We Measure

what is measured is probably more critical to the control process than how it's measured

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

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

Measuring Actual Performance

(1) How We Measure (2) What We Measure

The Control Process

(1) Measuring actual performance (2) Comparing actual performance against standards (3) Taking managerial action

Types of Discipline Problems and Examples

-Attendance: absenteeism, tardiness, abuse of sick days -On-the-job Behaviors: insubordination, failure to use safety devices, alcohol or drug abuse -Dishonesty: theft, lying to supervisors, falsifying information on employment application or on other organizational forms -Outside Activities: criminal activities, unauthorized strike activities, working for a competing organization (if no-compete clause is part of employment)

Adjusting Controls for Cross-Cultural Differences

-Control techniques can be quite different for different countries -Differences are primarily in the measurement and corrective action steps of the control process -Managers in foreign countries also need to be aware of constraints on corrective actions they can take

Comparing Actual Performance Against the Standard

-Determining the degree of variation between actual performance and the standard -Range of Variation

Workplace privacy

-Employers can (and do) 1. Read your e-mail 2. tap your telephone 3. monitor your work computer 4. store and review computer files 5. monitor you in an employee bathroom or dressing room 6. track your whereabouts in a company vehicle

Tools for measuring organizational performance

-Feed forward control -Concurrent control -Management by walking around -Feedback control

Why is control important?

-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 minimize workplace disruptions

Traditional Controls

-Ratio Analysis 1. Liquidity 2. Leverage 3. Activity 4. Profitability -Budget Analysis 1. Quantitative standards 2. Deviations

Liquidity

-Ratio's 1. Current Ratio 2. Acid Test

Profitability

-Ratio's: 1. Profit margin on sales 2. Return on investments

Leverage

-Ratio: 1. Debt to assets

Activity

-Ratios: 1. Inventory turnover 2. Total asset turnover

Written Reports: Benefits Vs. Drawbacks

Benefits: -comprehensive -formal -easy to file and retrieve Drawbacks: -take more time to prepare

Statistical Reports: Benefits Vs. Drawbacks

Benefits: -easy to visualize -effective for showing relationships Drawbacks: -provide limited information -ignore subjective factors

Oral Reports: Benefits Vs. Drawbacks

Benefits: -fast way to get information -allow for verbal and nonverbal feedback Drawbacks: -information is filtered -information cant be documented

Personal Observations: Benefits Vs. Drawbacks

Benefits: -get firsthand knowledge -information isn't filtered -intensive coverage of work activities Drawbacks: -subject to personal bias -time consuming -obtrusive

Taking Managerial Action

Managers can choose to: do nothing, correct the actual performance, or revise the standards -Immediate Corrective Action -Basic Corrective Action

Debt to assets

Total Debt/Total Assets The higher the ratio, the more leveraged the organization

The Role Boards of Directors

a group, independent from management, looking out for the interests of shareholders who were not involved in the day-to-day management of the organization

Organization Effectiveness

a measure of how appropriate organizational goals are and how well those goals are being met

Management by walking around

a term used to describe when a manager is out in the work area interacting directly with employees

Disciplinary actions

actions taken by a manager to enforce the organization's work standards and regulations

Employee theft

any unauthorized taking of company property by employees for their personal use

Feedback control

control that takes place after a work activity is done

Performance

is the end result of an activity

Delivering Effective Performance Feedback

managers need to provide their employees with feedback so that the employees know where they stand in terms of their work

How We Measure

personal observations, statistical reports, oral reports, and written reports

Workplace Violence

the U.S. National Institute of Occupational Safety and Health still says that each year, some 2 million American workers are victims of some form of workplace violence

Range of Variation

the acceptable parameters of variance between actual performance and the standard

Organizational Performance

the accumulated results of all organization's work activities

Productivity

the amount of goods or services produced divided by the inputs needed to generate that output

Controlling

the process of monitoring, comparing, and correcting work performance

Corporate governance

the system used to govern a corporation so that the interests of corporate owners are protected

The Purpose of Control

to ensure that activities are completed in ways that lead to the accomplishment of organizational goals