Chapter 14: Managing Control Systems, Finances, and People

Concurrent Control (transformation process)

Action taken to ensure that standards are met as inputs are transformed into outputs Check quality during process, don't wait until product doesn't work to reject a faulty input part

Rework control (outputs)

Action taken to fix an output Necessary when preliminary and concurrent controls have failed Inspecting final product before it is sold

Damage Control (customer/stakeholder satisfaction)

Action taken to minimize impacts on customers/stakeholders due to faulty outputs. When the product has gotten to the customer, you need to use this

Handling Customer complaints

Admit mistake and apologize Ask for and agree on a solution Implement the solution quickly Prevent future complaints

financial budgets

Before the year begins, forecast of what each statement will be at the year's end Prepared last because you need the previous two budgets to find this one out Budget is a pro forma statement Includes income statement, balance sheet, cash flow statement, bonds, stocks

Control Frequencies

Constant, Periodic, Occasional

Feedback (continuous improvement)

Continually increase satisfaction to use feedback (not one of the four stages of system process)

Disciplining

Counseling happens before this, discipline happens when people break rules

Counseling

Dealing with problem employees who are not performing rather than fine tuning employees

Coaching model

Describe current performance Describe desired performance Get commitment to change Follow up

Preliminary Control (inputs)

Designed to anticipate and prevent possible problems Don't solve problems after they occur Planning and organizing are keys to this, aka feedforward control

Compare performance to standards

Determine how frequently to measure standards Set times to check in, easier out of the four steps Will help guide you on what to do in step 4 If deviation not less than 1%, then you need explanation

Steps in Master Budgeting Process

Develop revenue and expenditure operating budgets Develop capital expenditures budget Develop the financial budgeted cash flow, income statement, and balance sheet

EAP

Employee assistance program, staff of people who help employees get professional assistance

Functional Area/Department Control Systems

Feedback process can use multiple departments, go across them, and other members may receive outputs

Revenue budgets

Forecast of total income for the year Adds together projected income from all sources, such as sales for each product Marketing/sales departments provide the revenue figures for the entire firm based on the sales forecast

Expense budget

Forecast of total operating spending for the year Common for each functional area to have the expenditure budget Compensation is a major expense for many companies that cut wages and have laid off employees to cut expenses

Correct/reinforce

Give positive reinforce if things going well, otherwise must correct it Corrective action is the following: 1 - analyze why standard was not met 2 - use info to develop preliminary control 3 - give feedback to preliminary control to take corrective action that is necessary

Operating budgets

Include revenue and expense budgets Requires planning skills to make the budget, not math skills

Capital Expenditure Budget

Includes all planned major asset investments (land, new buildings, equipments) Most important budget Based on developing ways to bring in revenue through new and improved processes and products to create customer value and profits

Handling employee complains

Listen to complaint and paraphrase it Ask complainer to recommend a solution Schedule time to get all the facts and make a decision Develop a plan for addressing the complain Implement the plan and follow up

Management by Walking around

Listening - find out what's slowing people down Teaching - coaching to improve Facilitating - removing stumbling blocks preventing employees from improving performance

Standards

Measure performance levels in terms of quality, quantity, time, cost, and behavior

Occasional

Observation (watching people do their jobs) Exception principle (control left to worker until problem occurs they ask manager for help) Special reports (unexpected problems or opportunities) Project controls (nonrecurring or unique projects)

Progressive Discipline

Oral warnings Written warnings Suspension Dismissal

Resistance to Control

People respond to incentives and resist controls Abusive superiors will try to get emotional reactions to determine behavior, which is counterproductive

Budget

Planned quantitative allocation of resources for specific activities Definition does not include money, because all types of resources can be allocated. In this case, it's for a financial budget

What to focus on

Preliminary and concurrent control Cut down on rework and damage control, not as effective and more costly

Management Counseling

Process of giving employees feedback so they realize that a problem is affecting their performance and referring employees with problems to EAP

Coaching

Process of giving motivational feedback. Give more positive than negative feedback

Controlling

Process of monitoring progress, taking corrective action when needed to ensure that objectives are achieved

Discipline model

Refer to past feedback Ask why undesired behavior was used Give the discipline Get a commitment to change and develop a plan Summarize and state the follow Up

Periodic Control

Regular meetings and reports - can be oral or written Budgets - preparing a budget is a preliminary control, year progresses and it becomes concurrent, and then its reworked at the end of the year and can become damage control

Constant Control

Self control - monitor yourself Clan control - HR control in which organization relies heavily on its culture and norms Standing plans - policies, procedures, and rules developed to influence employees' behaviors

Four Steps of Control Systems Process

Set objectives and standards Measure performance Compare performance to standards Correct/reinforce

Set objectives and standards

Starting point for both planning and controlling Standards are needed to measure performance, through metrics

Audits

Two major types: accounting and management Accounting - maintain records of organization's transactions and assets Many orgs have internal auditing, make sure assets are reported to keep theft at a minimum Management audit - analyzes organization's planning, organizing, leading, and controlling functions to look for improvements

Measure performance

Use critical success factors (CSF) CSFs are limited number of areas in which satisfactory results will ensure successful performance, achieving the objective or standards