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