Welcome to AB140 Introduction to Management Unit 6 Seminar – Control Robin Watkins

Agenda Performance Management Four Steps of Control Systems The Role of Six Sigma (time permitting) Internal vs. External Audits (time permitting)

Introduction Control any process that directs activities toward organizational goal achievement Formal Control Systems (also referred to as Bureaucratic Control Systems) measure progress toward organizational goals, making corrections and adjustments as needed.

Finance “The finance function consists of the people, technology, processes, and policies that dictate tasks and decisions related to financial resources of a company. Depending on the organization and the industry in which it operates, this function may be simple or complex” (Mateevich, 2007, para.1).”

Accounting “Accounting is a body of principles and conventions as well as…general process for capturing financial information related to an entity’s resources and their use in meeting the entity’s goals. Accounting is a service function that provides information of value to all operating units…” (Henson, 2006, para.1).

Budgeting “Budget is the major formal mechanism through which necessary resources are obtained, distributed, spent and monitored” (Milakovich & Gordon, 2007, p357).

Finance Accounting & Budgets What Does it all Mean -Finance = Big Picture -Accounting = Processes how done -Budget = Operating plan or specifics

Budgets: -Include Income -Include Expenditures -Serve as a statement of financial intent -Indicate the organization’s program preferences -Controls or shapes organizations

Purpose Sound Fiscal Policy -Aimed at developing & stabilizing Business -Expenditures -Management of organizational debt -Monetary & Credit Controls

4 steps of control systems 1.Setting Performance Standards 2.Measuring Performance 3.Comparing performance against the standards and determining deviations 4.Taking action to correct problems and reinforce successes

Step 1 of Control Systems: 1. Setting performance standards –Standard - expected performance for a given goal, a target that establishes a desired performance level; motivates performance, and serves as a benchmark against which actual performance is assessed –Can you think of an example of a goal and its standard in your workplace?

Performance Appraisal Programs Performance Appraisal -A process, typically performed annually by a supervisor for a subordinate, designed to help employees understand their roles, objectives, expectations, and performance success. Performance management -The process of creating a work environment in which people can perform to the best of their abilities.

Step 2 of Control Systems: 2. Measuring performance How are performance goals measured in your workplace?

“How Come” Wouldn’t you want to know if performance is up to par or if something needs to be done to keep performance at peak efficiency?

The Balanced Scorecard Focuses on four related categories -Financial, customer, processes, and learning Ensuring the method’s success Translate strategy into a scorecard of clear objectives. Attach measures to each objective..

The Balanced Scorecard (cont.) Ensuring the method’s success Translate strategy into a scorecard of clear objectives. Attach measures to each objective. Cascade scorecards to the front line. Provide performance feedback based on measures. Empower employees to make performance improvements. Reassess strategy.

Step 3 of Control Systems: 3. Comparing performance against the standards and determining deviations What methods do you or your managers use to perform this step?

“How Come” Wouldn’t you want to know if performance is up to par or if something needs to be done to keep performance at peak efficiency?

Strategy Staff Performance + Organizational (Business) Strategy = Strategic Plan

Objective Determine what is working What needs to be tweaked or fixed What needs to be jettisoned

“With What” How do you know you are ahead?

“With What” How do you know you are ahead? -Check out the competition

Comparison Sources SHRM ASTD DOL BNA Other organizations and associations

Benchmarking Industry based standards -Less biased -More credible -More likely to produce non-subjective picture -Produce improvement areas

DOL & BNA Survey Results Organizations voluntarily provide data DOL has legislation backing collection Can be across industries

National Recognition Awards Baldridge Fortune Forbes Association Awards

Balanced Score Card Very popular technique Translates business objectives into categories -Finances -Customer Care or Service -Internal Processes & Procedures -Employee Development

Human Capital Value of Human Capital -No Investment in Human Capital -High Turnover -Lost Production -Low Quality -Low Customer Satisfaction -Lost Revenue

Balanced Score Card (cont.) How to -Categories selected -Related Topics activities measured scored -Predetermined Scale -Internal Value you determine or use a Benchmark Figure

Balanced Score Card (cont.) Value -Different tactics like: -Employee Benefits -Training -Recruiting -Employee Development HR Plan demonstrates value placed on human capital

Step 4 of Control Systems: 4. Taking action to correct problems and reinforce successes Can you name some methods that managers use to correct problems or reinforce successes in your workplace?

What’s the Point? Evaluation is Good -Transforms Organizations -Organizational Advancement -Employees Advance

The Control Process

Seminar Item 2 What is the role of Six Sigma? -Let’s begin by defining it. What is Six Sigma? -Sigma – perfect – defect free

Role of Six Sigma The higher the sigma number, the lower the level of variation or defects. At six-sigma-level, a process is producing fewer than 3.4 defects per million (approximately accuracy)

Role of Six Sigma, (continued) Management -Engages to eliminate product/services defects -One approach -Employee work improvement teams

Seminar Item 3 Discuss internal vs. external audits -What is an internal audit? -What is an external audit?

Audits External Audit - an evaluation conducted by one organization, such as a CPA firm, on another Internal Audit - a periodic assessment of a company’s own planning, organizing, leading, and controlling processes

Questions / concerns

Reference Henson, W. (2006) What is accounting and general accounting principles and functions. Retrieved February 15, 2009 at articles.info/e/a/title/What-is-accounting-and- general-accounting-principles-and-functionshttp://e- articles.info/e/a/title/What-is-accounting-and- general-accounting-principles-and-functions Mateevich, J. (2007) Finance function defined. Retrieved February 15, 2009 at articles.info/e/a/title/FINANCE-FUNCTION- DEFINED/ articles.info/e/a/title/FINANCE-FUNCTION- DEFINED/

Reference Milakovich, M.E. & Gordon, G.J. (2007) Public administration in America, 9 th Ed., Belmont, CA:Thomson Wadsworth. The Free Dictionary (n.d.) Retrieved February 15, 2009 at