MGT Chapter 14

principle of exception

: a managerial principle stating that control is enhanced by concentrating on the exceptions to or significant deviations from the expected result or standard

Management audit

<b>Def</b>: an evaluation of the effectiveness and efficiency of various systems within an organization

Feedforward control Concurrent control takes place while plans are being carried out. It includes directing, monitoring, and fine-tuning activities as they occur. 3. Feedback control focuses on the use of information about results to correct deviations from the acceptable standard after they arise.

Bureaucratic control combines what three approaches, that aredefined according to their timing?

market control

Business units may be treated as profit centers and trade resources (services or goods) with one another via what mechanism?

detect _____correct

Control systems _______ and ______+_significant variations, or discrepancies, in the results of planned activities.

100

For every customer who explicitly complains to you, how many will just go away without saying anything?

1. Top leadership set the standard. 2. The operator measured performance 3. The operator compared performance to standard and (4) identified a deviation

If top leadership determines that a certain manufacturing line should produce 1000 units of product per day, but the line operator can only produce 700 units per day, how would you use the control process to analyze this and remedy the deviation?

Lowers morale Tactical employee behavior Resistance

What are the three dangers associated with bureaucratic control?

Establish performance standards Measure performance Compare performance to standards Determine whether deviations exist

The four main steps in the control process are listed on pages

assets, liabilities

The most common liquidity ratio is current____ to current _______, called the current ratio or net working capital ratio.

Financial Customer Business process Learning and growth

What four indicators does the balanced scorecard use to give managers a quick overview of how the organization is doing

A method of cost accounting designed to identify streams of activity and then to allocate costs across particular business processes according to the amount of time employees devote to particular activities

What is activity based costing (or activity based accounting)

All about rules, regulations, and authority

What is bureaucratic control (pg. 326)?

ASSETS = LIABILITES + STOCKHOLDERS EQUITY

What is the relationship between liebailities, stockholders equity and assets?

Balance sheet- a report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity Profit and loss statement- an itemized financial statement of the income and expenses of a company's operations Assets - liabilities = stockholder's equity. Note that if liabilities are greater than assets, then stockholder's have no equity because the organization is in debt.

What's the difference between a balance sheet and an income statement

clan

When members of an organization have common values and goals—and trust one another—formal controls may be less necessary. Which type of control does this describe?

Control processes

__________are necessary to determine when the organization isn't performing to standards so that corrective action can take place before too much damage occurs.

debt-equity ratio

a leverage ratio that indicates the company's ability to meet its long-term financial obligations. debt less than 1.5 is considered not to be exccessive

current ratio

a liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities; 2 to 1 desirable min

activity-based costing (ABC)

a method of cost accounting designed to identify streams of activity and then to allocate costs across particular business processes according to the amount of time employees devote to particular activities

Return on investment (ROI)

a ratio of profit to capital used, or a rate of return from capita

balance sheet

a report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity

Oral reports

allow two-way communication. When a salesperson contacts his or her supervisor each evening to report the day's accomplishments, problems, and customer reactions, the manager can ask questions to gain additional information or clear up any misunderstandings. When necessary, tentative corrective actions can be worked out during the discussion.

external audit

an evaluation conducted by one organization, such as a CPA firm, on another

profit and loss statement

an itemized financial statement of the income and expenses of a company's operations

control

any process that directs the activities of individuals toward the achievement of organizational goals

Bureaucratic control

budgets, statistical reports, and performance appraisals to regulate behavior and results are examples of what type of control?

Production budget.

commonly is expressed in physical units. Required information for preparing this budget includes types and capacities of machines, economic quantities to produce, and availability of materials.

Bureaucratic (or formal) control systems

designed to measure progress toward set performance goals and, if necessary, to apply corrective measures to ensure that performance achieves managers' objectives.

Cash budget.

essential to every business. It should be prepared after all other budget estimates are completed. It shows the anticipated receipts and expenditures, the amount of working capital available, the extent to which outside financing may be required, and the periods and amounts of cash available.

Bureaucratic control

is the use of rules, standards, regulations, hierarchy, and legitimate authority to guide performance. It works best where tasks are certain and workers are independent.

involves going to the area where activities take place and watching what is occurring. The manager can directly observe work methods, employees' nonverbal signals, and the general operation. disadvantages: It does not provide accurate quantitative data; the information usually is general and subjective. Also, employees can misunderstand the purpose of personal observation as mistrust or lack of confidence.

personal observation

accounting audits

procedures used to verify accounting reports and statements

Leverage ratios

show the relative amount of funds in the business supplied by creditors and shareholders

Feedforward control

takes place BEFORE operations begin and includes policies, procedures, and rules designed to ensure that planned activities are carried out properly. Examples include inspection of raw materials and proper selection and training of employees.

Concurrent control

takes place WHILE plans are being carried out. It includes directing, monitoring, and fine-tuning activities as they occur.

To adapt to change & uncertainty To uncover irregularities & errors To reduce costs, increase productivity, or add value To detect opportunities To deal with complexity To decentralize decision making & facilitate teamwork

the 6 main reasons why control processes are necessary are as follows:

Stockholders' equity

the amount accruing to the corporation's owners.

Liabilities

the amounts the corporation owes to various creditors.

Absence of policies; control issue

the firm's expectations are not established in writing.

Budgetary control

the process of finding out what's being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences

budgeting

the process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences; also called <em>budgetary

Customer defections,

the proportion of customers who no longer do business with you because of dissatisfaction, are a way to help determine customer satisfaction with your company.

Feedback control

the use of information about results to correct deviations from the acceptable standard AFTER they arise.

Market control

the use of prices, competition, and exchange relationships to regulate activities in organizations as though they were economic transactions Managers who run these units may be evaluated on the basis of profit and loss

1.Assets

the values of the various items the corporation owns.

Clan control

unlike market and bureatic control; it does not assume that the interests of the organization and individuals naturally diverge. Instead it is based on the idea that employees may share the values, expectations, and goals of the organization and act in accordance with them.

Capital budget

used for the cost of fixed assets like plants and equipment. Such costs are usually treated not as regular expenses but as investments because of their long-term nature and importance to the organization's productivity.

interpersonal processes

Clan control is based on ________ ____________ of organization culture, leadership, and groups and teams. It works best where there is no "one best way" to do a job and employees are empowered to make decisions.

Writtten reports

Computer printouts and on-screen reports. Thanks to computers' data-gathering and analysis capabilities and decreasing costs, companies of any size can gather huge amounts of performance data.

"Shoot the messenger" management; control issue

Employees feel their careers would be at risk if they reported bad news.

bad information systems; control issue

Key data are not measured and reported in a timely and easily accessible way.

Lack of periodic reviews; control issue

Managers do not assess performance on a regular, timely basis.

tangible output

Market control is most effective where ______ _________ be identified and a market can be established between the parties to be controlled.

Operator control

Multiskilled operators can rectify their own problems as they occur. This strategy is more efficient because deviations are controlled closer to their source. It is also more satisfying because operators benefit by having a more enriched job.

Lack of agreed-upon standards; control issue

Organization members are unclear about what needs to be achieved.

Lack of ethics in the culture; control issue

Organization members have not internalized a commitment to integr

1.Writtten reports 2.Oral reports 3.Personal observation

Performance data commonly are obtained from three sources:

1.Assets are the values of the various items the corporation owns. 2.Liabilities are the amounts the corporation owes to various creditors. 3.Stockholders' equity is the amount accruing to the corporation's owners.

The balance sheet shows the financial picture of a company at a given time. This statement itemizes three elements:

Lax top management; control issue

Senior managers do not emphasize or value the need for controls, or they set a bad example.

Sales budget.

include forecasts of sales by month, sales area, and product.

Master budget

includes all the major activities of the business. It brings together and coordinates all the activities of the other budgets and can be thought of as a "budget of budgets."

Liquidity ratios

indicate a company's ability to pay short-term debts.

Profitability ratios

indicate management's ability to generate a financial return on sales or investment

1. quanity 2. quality 3. time used 4. cost

what are the common measures of performance standards?

1Setting performance standards. 2.Measuring performance. 3.Comparing performance against the standards and determining deviations. 4.Taking action to correct problems and reinforce successes.

what are the four major step of a typical control system?

Specialist control

—Operators of computer numerical control (CNC) machines must notify engineering specialists of malfunctions. With this traditional division of labor, the specialist takes corrective action.