Management Ch. 8: Terms

participatory

An important characteristic of management by objectives is its _____________ nature.

clan control

The control exerted on individuals and groups by shared organizational values, norms, and standards of behavior.

Organizational learning

The process through which managers try to increase organizational members' abilities to understand and appropriately respond to changing conditions.

operating budget

A budget that states how managers intend to use organizational resources to achieve organizational goals. It is a blueprint that states how managers intend to use organizational resources to achieve organizational goals efficiently.

top-down change

A fast, revolutionary approach to change in which top managers identify what needs to be changed and then move quickly to implement the changes throughout the organization.

management by objectives (MBO)

A goal-setting process in which a manager and each of his or her employees negotiate specific goals and objectives for the employee to achieve and then periodically evaluate the extent to which the employee is achieving those goals.

bottom-up change

A gradual or evolutionary approach to change in which managers at all levels work together to develop a detailed plan for change. It can co-opt resistance to change from employees; uncertainty and resistance are minimized

balanced scorecard Robert Kaplan and David Norton in the early 1990s

A management control system that takes a comprehensive look at an organization's overall performance using four measures: financial, customer service, internal business processes, and the organization's capability for strategic learning and growth. Who was it developed by and when?

adaptive culture inert culture

An __________ develops an emphasis on entrepreneurship and respect for the employee and allows the use of organizational structures, such as the cross-functional team structure, that empower employees to make decisions and motivate them to succeed. By contrast, in an __________, employees are content to be told what to do and have little incentive or motivation to perform beyond minimum work requirements.

It is flexible enough to allow managers to respond as necessary to unexpected events; it provides accurate information about organizational performance; and it gives managers information in a timely manner because making decisions on the basis of outdated information is a recipe for failure.

An effective control system has three characteristics:

bureaucratic control

Control of behavior by means of a comprehensive system of rules and standard operating procedures. It is used when direct supervision is too expensive and management by objectives is inappropriate.

feedforward control

Control that allows managers to anticipate problems before they arise.

concurrent control

Control that gives managers immediate feedback on how efficiently inputs are being transformed into outputs so managers can correct problems as they arise. It is at the heart of programs to increase quality, in which workers are expected to constantly monitor the quality of the goods or services they provide at every step of the production process and inform managers as soon as they discover problems.

feedback control

Control that gives managers information about customers' reactions to goods and services so corrective action can be taken if necessary.

control systems

Formal target-setting, monitoring, evaluation, and feedback systems that provide managers with information about how well the organization's strategy and structure are working.

inert culture

If a company has an _________, poor working relationships frequently develop between the organization and its employees, and instrumental values of noncooperation, laziness, and loafing and work norms of output restriction are common.

objective financial measures, challenging goals and performance standards, appropriate operating budgets

In summary, three components—_____________, _____________, and _______________—are the essence of effective output control.

Step 1: Specific goals and objectives are established at each level of the organization. Step 2: Managers and their employees together determine the employees' goals. Step 3: Managers and their employees periodically review the employees' progress toward meeting goals.

Management by objectives involves three specific steps:

shape, regulate, govern

Managers use all three control systems to _______, _________, and _______ organizational activities, no matter what specific organizational structure is in place.

founder socialization ceremonies and rites stories and language

Organizational culture is transmitted to employees through the values of the ________, the process of ________, organizational _______________, and ________________.

invest in their employees rewards

Organizations with strong adaptive cultures _______________. In adaptive cultures employees often receive ________ linked directly to their performance and to the performance of the company as a whole.

stretch goals

Research suggests that the best goals are specific, difficult goals that challenge and stretch managers' abilities but are not out of reach and do not require an impossibly high expenditure of managerial time and energy. Such goals are often called _________.

financial customer service internal business processes learning and growth

The ________ component of the scorecard pertains to how well company actions contribute to the organization's overall financial condition; it typically includes measurements such as return on investment and net income. The __________ perspective concentrates on how well an organization provides service to its customers; it typically includes a variety of information on customer satisfaction and retention, which can be obtained in several ways including online surveys. The _____________ component addresses whether the organization's processes and workflow add value to customers and shareholders; it typically includes production and other operational statistics. Finally, the _____________ component focuses on how well company resources, including the workforce, are being managed to ensure a successful future for the company.

direct supervision

The most immediate and potent form of behavior control is __________ by managers who actively monitor and observe the behavior of their employees, teach them the behaviors that are appropriate and inappropriate, and intervene to take corrective action as needed. Moreover, when managers personally supervise employees, they lead by example and in this way can help employees develop and increase their own skill levels. It allows managers at all levels to become personally involved with their employees and allows them to mentor employees and develop their management skills.

organizational change

The movement of an organization away from its present state and toward some desired future state to increase its efficiency and effectiveness.

benchmarking

The process of comparing one company's performance on specific dimensions with the performance of other, high-performing organizations. It is a key tool in total quality management, an important change program.

organizational culture

The set of values, norms, and standards of behavior that control the way individuals and groups interact and work together to achieve organizational goals.

direct supervision, management by objectives, and rules and standard operating procedures.

The three mechanisms of behavior control that managers can use to keep employees on track and make organizational structures work as they are designed to work:

(1) the actual outputs that result from the behavior of their members and (2) the behaviors themselves

To measure actual performance managers can measure or evaluate two things:

1. establishing rules is always easier than discarding them 2. there is a danger that people become so used to automatically following rules that they stop thinking for themselves (innovation is incompatible with the use of extensive bureaucratic control)

Two problems with bureaucratic control:

Step 1: Assessing the Need for Change Step 2: Deciding on the Change to Make Step 3: Implementing the Change Step 4: Evaluate the Change

What are the Four Steps in the Organizational Change Process?

Recognizing that there is a problem Identify the source of the problem

What are the components of the first step in the Organizational Change process Assessing the Need for Change?

Decide what the organization's ideal future state would be Identify obstacles to change

What are the components of the second step in the Organizational Change process Deciding on the Change to Make?

Deciding whether change will occur from the top down or from the bottom up Introduce and manage change

What are the components of the third step in the Organizational Change process Implementing the Change?

superior efficiency, quality, responsiveness to customers, and innovation

What are the four building blocks of competitive advantage?

Profit ratios, liquidity ratios, leverage ratios, activity ratios

What are the four measures of financial performance?

Step 1. Establish the standards of performance, goals, or targets against which performance is to be evaluated. Step 2: Measure actual performance. Step 3: Compare actual performance against chosen standards of performance. Step 4: Evaluate the result and initiate corrective action (that is, make changes) if the standard is not being achieved.

What are the four steps in the Organizational Control Process?

Direct supervision, MBO/balanced scorecard, rules and standard operating procedures

What are the mechanisms for control for Behavior Control?

Values, norms, socialization

What are the mechanisms for control for Organizational Culture/Clan Control?

Financial measures of performance, organizational goals, operating budgets

What are the mechanisms for control for Output Control?

output control, behavior control, and clan control

What are three important types of control systems?

1. it is expensive 2. it can demotivate employees 3. it is simply not feasible for complex jobs

What are three problems associated with direct supervision?

Inventory turnover and Days sale outstanding

What are two equations to measure Activity Ratios?

Debt-to-asset ratio and Times-covered ratio

What are two equations to measure Leverage Ratios?

Current ratio and Quick ratio

What are two equations to measure Liquidity Ratios?

Return on investment and Operating margin

What are two equations to measure the Profit Ratio?

(1) whether employees come to work on time and (2) whether employees consistently follow the established rules for greeting and serving customers.

What are two simple behavior measures:

complex; nonroutine; hard

When an organization and its members perform _________, _________ activities that are intrinsically _______ to measure, it is more challenging for managers to measure outputs or behavior.

zero-based budgeting (ZBB)

With this budgeting practice the manager of each group or business division creates each year's budget from a blank worksheet. Every amount for every line item is established based on what is necessary for carrying out the year's work to accomplish the year's goals. This may sound basic, but in practice, most managers have saved both time and effort by starting with the previous year's budget and adjusting it upward (or downward) to reflect any changes in goals or circumstances. This tends to leave in place spending done out of habit or provided as a cushion for managers confronting unexpected needs.

Adaptive cultures inert cultures

_________ are ones whose values and norms help an organization build momentum and grow and change as needed to achieve its goals and be effective. By contrast, __________ are those that lead to values and norms that fail to motivate or inspire employees; they lead to stagnation and often failure over time.

Outputs; behaviors

_________ are usually easier to measure than _________ because they are more tangible and objective.

Activity ratios Inventory turnover Days sales outstanding

_________ show how well managers are creating value from organizational assets. ___________ (Cost of Goods Sold/Inventory) measures how efficiently managers are turning over inventory so excess inventory is not carried. ______________ (current accounts receivable/ sales for period divided by days in period) reveals how efficiently managers are collecting revenue from customers to pay expenses.

controlling

__________ is the process whereby managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals. Using this, managers monitor and evaluate whether the organization's strategy and structure are working as intended, how they could be improved, and how they might be changed if they are not working.

Profit ratios Return on investment (ROI) Operating margin

__________ measure how efficiently managers are using the organization's resources to generate profits. ___________, an organization's net income before taxes divided by its total assets, is the most commonly used financial performance measure because it allows managers of one organization to compare performance with that of other organizations. _________ is calculated by dividing a company's operating profit (the amount it has left after all the costs of making the product and running the business have been deducted) by sales revenues.

Leverage ratios debt-to-assets ratio times-covered ratio

__________, such as the __________ (total debt / total assets) and the ___________ (profit before interest and taxes /total interests charges), measure the degree to which managers use debt (borrow money) or equity (issue new shares) to finance ongoing operations. An organization is highly leveraged if it uses more debt than equity.

Liquidity ratios current ratio quick ratio

_____________ measure how well managers have protected organizational resources to be able to meet short-term obligations. The __________ (current assets divided by current liabilities) tells managers whether they have the resources available to meet the claims of short-term creditors. The __________ shows whether they can pay these claims without selling inventory and it is found by doing Current assets - Inventory divided by Current liabilities.