1. Copyright © 2005 Pearson Education Canada Inc. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-1 Chapter 10 Evaluation and Control

2. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-2 Copyright © 2005 Pearson Education Canada Inc. Evaluation and Control Process that ensures that the company is achieving what it set out to accomplish. Compares performance with desired results.

3. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-3 Copyright © 2005 Pearson Education Canada Inc. Corporate Governance Refers to the relationship among the board of directors, top management, and shareholders in determining the direction and performance of the corporation.

4. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-4 Copyright © 2005 Pearson Education Canada Inc. Agency Theory Problems arise in corporations because the agents (top management) are not willing to bear responsibility for their decisions unless they own a substantial amount of stock in the corporation.

5. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-5 Copyright © 2005 Pearson Education Canada Inc. Stewardship Theory Executives tend to be more motivated to act in the best interest of the corporation than their own self-interests. Theory argues that over time, senior executives tend to view the corporation as an extension of themselves.

6. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-6 Copyright © 2005 Pearson Education Canada Inc. Corporate Governance RESPONSIBILITIES Setting corporate strategy, overall direction, mission or vision Hiring and firing the CEO and top management Controlling, monitoring, or supervising top management Reviewing and approving the use of resources Caring for shareholder interests Board of Directors

7. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-7 Copyright © 2005 Pearson Education Canada Inc. Corporate Governance Ownership Concentration  The situation when a small number of large investors own a larger proportion of a corporation’s shares

8. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-8 Copyright © 2005 Pearson Education Canada Inc. Corporate Governance Executive Compensation  The use of financial incentives to align the interests of the owners and managers of a corporation

9. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-9 Copyright © 2005 Pearson Education Canada Inc. Evaluation and Control

10. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-10 Copyright © 2005 Pearson Education Canada Inc. Evaluation and Control Types of Controls:  Behaviour Controls Policies, rules, SOP’s, directives  Output Controls Objectives, targets, milestones  Input Controls Resources, knowledge, skills, values

11. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-11 Copyright © 2005 Pearson Education Canada Inc. Evaluation and Control Activity-Based Costing:  ABC Allocating indirect and fixed costs to individual product lines based on the value-added activities going into that product

12. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-12 Copyright © 2005 Pearson Education Canada Inc. Evaluation and Control Balanced Scorecard:  Financial How do we appear to shareholders?  Customer How do customers view us?  Internal Business Perspective What must we excel at?  Innovation and Learning Can we continue to improve and create value?

13. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-13 Copyright © 2005 Pearson Education Canada Inc. Evaluation and Control Strategic Information Systems:  Communicate to those people responsible for formulating and implementing strategic plans ERP (enterprise resource planning)  Unites all of a company’s major business activities from order processing to production within a single family of software modules

14. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-14 Copyright © 2005 Pearson Education Canada Inc. Evaluation and Control Problems in Measuring Performance:  Short-term orientation  Goal displacement  Behaviour substitution  Suboptimization

15. Concepts in ﴀﴀﴀﴀ Strategic Management, Canadian Edition Wheelen, Hunger, Wicks 10-15 Copyright © 2005 Pearson Education Canada Inc. Evaluation and Control Guidelines for Proper Control: 1. Minimum amount of information 2. Monitor meaningful activities 3. Timely 4. Long-term and short-term 5. Pinpointing exceptions 6. Reward meeting or exceeding standards