Chapter Sixteen Control: Techniques for Enhancing Organizational Effectiveness

B16-1 Panel 16.1 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Managing for Productivity & Results You as a manager… Competitive advantage Diversity Globalization Information technology Ethical standards Your happi- ness & goals …must operate in a complex environment and… Planning Organizing Leading Controlling …make decisions about the four manage- ment functions… …to achieve product- ivity and realize results

B16-2 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. What is Productivity?  Productivity: the formula of outputs divided by inputs for a specified period of time  Outputs: all goods and services produced  Inputs: not only labor but capital, materials and energy Productivity= or Outputs Inputs Goods + Services Labor + Capital + Materials + Energy

B16-3 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Controlling  Controlling: is defined as monitoring performance, comparing it with goals, and taking corrective action as needed.  Planning  Organizing  Leading  Controlling

B16-4 Panel 16.2 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Controlling for Productivity Planning You set goals and decide how to achieve them Organizing You arrange tasks, people, and other resources to accomplish the work Leading You motivate people to work hard to achieve the organizations goals Controlling You monitor performance, compare it with goals, and take corrective action as needed For product- ivity

B16-5 Panel 16.3 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Why is Control Needed? Control helps an organization… 1…adapt to change & uncertainty 2…discover irregularities & errors 3…reduce costs, increase productivity, or add value 4…detect opportunities 5…deal with complexity 6…decentralize decision making & facilitate teamwork

B16-6 Panel 16.4 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Steps in the Control Process Step 1: Establish standards Step 2: Measure performance Step 3: Compare perform- ance to standards Step 4: Take corrective action, if necessary If yes, take corrective action; revise standards If no, continue work progress & recognize success

B16-7 Panel 16.5 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Three Types of Control: Future, Present, and Past Future Oriented Feedforward controls Present Oriented Concurrent controls Past Oriented Feedback controls Before the work is done: Anticipates problems While the work is going on: Corrects problems as they occur After the work is done: Corrects problems after they occur Feedback

B16-8 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Levels & Areas of Control  Strategic control  Tactical control  Operational control  Physical resources  Human resources  Informational resources  Financial resources

B16-9 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Styles of Implementing Controls  Bureaucratic control  Market control  Clan control

B16-10 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Budget  Budget: is a formal financial projection

B16-11 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Financial Statements  Financial Statement: summary of some aspects of an organization’s financial status

B16-12 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Ratio Analysis  Ratio Analysis: practice of evaluating financial ratios

B16-13 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Audits  Audits: formal variations of on organization’s financial and operational systems

B16-14 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. TQM and Its Components  Total Quality Management (TQM): a comprehensive approach led by top management and supported throughout the organization—dedicated to continuous quality improvement, training, and customer satisfaction  Make continuous improvement a priority  Get every employee involved  Listen to and learn from customers and employees  Use accurate standards to identify and eliminate problems

B16-15 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Core Principles of TQM 1)People Orientation- Focusing Everyone on Delivering Customer Value 2)Improving Orientation—Focusing Everyone on Continuously Improving Work Processes

B16-16 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Some TQM Techniques  Quality circles  Self-managed teams  Special-purpose teams  Benchmarking  Outsourcing  Reduced cycle time

B16-17 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Keys to Successful Control  They are strategic and results-oriented  They are timely, accurate, and objective  They are realistic, positive, and understandable and encourage self-control  They are flexible

B16-18 McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Barriers to Control Success  Too much control  Too little employee participation  Overemphasis on means instead of ends  Overemphasis on paperwork  Overemphasis on one approach instead of multiple approaches

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Key Terms Used in This Chapter  Audits  Balance sheet  Budget  Bureaucratic control  Clan control  Concurrent control  Continuous improvement  Control process steps  Controlling  Control standard  External audit  Feedback control  Feedforward control  Financial statement  Fixed budget  Income statement  Incremental budgeting  Internal audit  ISO 9000 series  Lean Six Sigma  Internal audit  Management by exception  Market control  Operational control  Ratio analysis  Reduced cycle time  Six Sigma  Special-purpose team

McGraw-Hill/Irwin© 2006 The McGraw-Hill Companies, Inc. All rights reserved. Key Terms Used in This Chapter  Statistical process control  Strategic control  Tactical control  Total Quality Management (TQM)  Two core principles of TQM  Variable budget  Zero-based budgeting