1. 8 th edition Steven P. Robbins Mary Coulter PowerPoint Presentation by Charlie Cook Copyright © 2005 Prentice Hall, Inc. All rights reserved.

2. 18–2 L E A R N I N G O U T L I N E Follow this Learning Outline as you read and study this chapter. What Is Control and Why Is It Important? Define control. Contrast the three approaches to designing control systems. Discuss the reasons why control is important. Explain the planning-controlling link. The Control Process Describe the three steps in the control process. Explain why what is measured is more critical than how it’s measured. Explain the three courses of action managers can take in controlling.

3. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–3 L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter. Controlling Organizational Performance Define organizational performance. Describe the most frequently used measures of organizational performance. Tools for Organizational Performance Contrast feedforward, concurrent, and feedback controls. Explain the types of financial and information controls managers can use. Describe how balanced scorecards and benchmarking are used in controlling.

4. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–4 L E A R N I N G O U T L I N E (cont’d) Follow this Learning Outline as you read and study this chapter. Contemporary Issues in Control Describe how managers may have to adjust controls for cross-cultural differences. Discuss the types of workplace concerns managers face and how they can address those concerns. Explain why control is important to customer interactions. Discuss what corporate governance is and how it’s changing.

5. What Is Control? The process of monitoring activities to ensure that they are being accomplished as planned and of correcting significant deviations. Control systems are judged in terms of how well they facilitate goal achievement. There are three different approaches to designing organizational control systems. © Prentice Hall, 200218-5

6. What Is Control? Approaches to designing organizational control systems. 1. market control - emphasizes the use of external market mechanisms to establish standards of performance. E.g., use of price competition, relevant market share to establish standards. When this approach is used? 1.useful where products and services are distinct. 2.useful where marketplace competition is considerable. 3.divisions turned into profit centers and judged by the percentage of total corporate profits each contributes © Prentice Hall, 200218-6

7. Approaches of Control systems 2. bureaucratic control - emphasizes organizational authority. Relies on administrative rules, procedures, and policies. Depends on standardization of activities, well- defined job descriptions, and other administrative mechanisms such as budgets. © Prentice Hall, 200218-7

8. Approaches of Control systems 3. clan control - behavior regulated by shared values, traditions, and other aspects of organizational culture. dependent on individual and group to identify expected behaviors and performance measures. It found where teams are common and technology changes often. E.g., teams of programmers. For example in IUG individuals are well aware of expectations regarding appropriate work behavior and performance standards. © Prentice Hall, 200218-8

9. 18-9 Control system Most organizations don’t rely totally on just one of these approaches to designing an effective control system.

10. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–10 Why Is Control Important? As the final link in management functions:  Planning  Controls let managers know whether their goals and plans are on target and what future actions to take.  Empowering employees  Control systems provide managers with information and feedback on employee performance.  Protecting the workplace  Controls enhance physical security and help minimize workplace disruptions.

11. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–11 Exhibit 18.2 The Planning–Controlling Link

12. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–12 The Control Process The Process of Control 1.Measuring actual performance. 2.Comparing actual performance against a standard. 3.Taking action to correct deviations or inadequate standards.

13. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–13 Exhibit 18.3 The Control Process

14. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–14 Measuring: How and What We Measure Sources of Information  Personal observation  Statistical reports  Oral reports  Written reports Control Criteria  Employees  Satisfaction  Turnover  Absenteeism  Budgets  Costs  Output  Sales

15. What we measure more critical than how we measure. Control criteria applicable to any management situation: 1.Employee satisfaction, absenteeism, and turnover. 2.Keeping costs within budgets. 3.Control system needs to recognize the diversity of activities 4.Some activities difficult to measure in quantifiable terms. 5.Most activities can be grouped into some objective segments that can be measured. 6.When objective measures are not available, should rely on subjective\qualitative measures What We Measure. © Prentice Hall, 200218-15

16. The Control Process Measuring: How we measure is done through four common sources of information that managers use. Each of these sources has its own advantages and drawbacks. © Prentice Hall, 200218-16

17. sources of information that managers 1.1. personal observation - permits intensive coverage. suffers from obtrusiveness: mistrust Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–17

18. Four common sources of information 2. statistical reports - numerical data are easy to visualize and effective for showing relationships. Use of graphs, bar charts. 3. oral reports - includes meetings, telephone calls.  May be best way to control work in a virtual environment  Technology permits creation of written record from oral report  Drawbacks - filtering of information © Prentice Hall, 200218-18

19. Four common sources of information 4. written reports - often more comprehensive and concise than oral reports  usually easy to file and retrieve  Comprehensive control efforts should use all four approaches. © Prentice Hall, 200218-19

20. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–20 Exhibit 18.4 Common Sources of Information for Measuring Performance

21. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–21 Comparing Determining the degree of variation between actual performance and the standard.  Significance of variation is determined by:  The acceptable range of variation from the standard (forecast or budget).  The size (large or small) and direction (over or under) of the variation from the standard (forecast or budget).

22. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–22 Exhibit 18.5 Defining the Acceptable Range of Variation

23. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–23 Exhibit 18.6 Sales Performance Figures for July, Eastern States Distributors

24. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–24 Taking Managerial Action Courses of Action  “Doing nothing”  Only if deviation is judged to be insignificant.  Correcting actual (current) performance  Immediate corrective action to correct the problem at once.  Basic corrective action to locate and to correct the source of the deviation.  Corrective Actions –Change strategy, structure, compensation scheme, or training programs; redesign jobs; or fire employees

25. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–25 Courses of Action  Revising the standard  Examining the standard to ascertain whether or not the standard is realistic, fair, and achievable. –Upholding/keeping the validity of the standard. –Resetting goals that were initially set too low or too high.

26. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–26 Exhibit 18.7 Managerial Decisions in the Control Process

27. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–27 Controlling for Organizational Performance What Is Performance?  The end result of an activity What Is Organizational Performance?  The accumulated end results of all of the organization’s work processes and activities  Designing strategies, work processes, and work activities.  Coordinating the work of employees

28. Organizational Performance Measures 1.Organizational Productivity. 2.Organizational Effectiveness. 3.Industry ranking. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–28

29. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–29 Organizational Performance Measures Organizational Productivity  Productivity: the overall output of goods and/or services divided by the inputs needed to generate that output.  Output: sales revenues  Inputs: costs of resources (materials, labor expense, and facilities)  Ultimately, a measure of how efficiently employees do their work.

30. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–30 Organizational Performance Measures Organizational Effectiveness  Measuring how appropriate organizational goals are and how well the organization is achieving its goals.

31. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–31 Three systems of measuring effectiveness:  Systems resource model  The ability of the organization to exploit its environment in acquiring scarce and valued resources. E.g., having skilled staff  The process model  The efficiency of an organization’s transformation process in converting inputs to outputs.  The multiple constituencies model  The effectiveness of the organization in meeting each constituencies’ needs.

32. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–32 Organizational Effectiveness Measures Industry rankings on:  Profits  Return on revenue  Return on shareholders’ equity  Growth in profits  Revenues per employee  Revenues per dollar of assets  Revenues per dollar of equity  Corporate Culture Audits  Compensation and benefits surveys  Customer satisfaction surveys

33. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–33 Exhibit 18.8 Popular Industry and Company Rankings

34. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–34 Tools for Controlling Organizational Performance Feedforward Control  A control that prevents anticipated problems before actual occurrences of the problem.  Building in quality through design.  Requiring suppliers conform to ISO 9002. Concurrent Control  A control that takes place while the monitored activity is in progress.  Direct supervision: management by walking around.

35. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–35 Types of Control Feedback Control  A control that takes place after an activity is done.  Corrective action is after-the-fact, when the problem has already occurred.  Advantages of feedback controls  Feedback provides managers with information on the effectiveness of their planning efforts.  Feedback enhances employee motivation by providing them with information on how well they are doing.

36. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–36 Exhibit 18.9 Types of Control

37. Contingency Factors in the Design of Control Systems © Prentice Hall, 200218-37

38. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–38 Tools for Controlling Organizational Performance: Financial Controls Traditional Controls  Ratio analysis  Liquidity  Leverage  Activity  Profitability  Budget Analysis  Quantitative standards  Deviations Other Measures  Economic Value Added (EVA)  Market Value Added (MVA)

39. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–39 Exhibit 18.10a Popular Financial Ratios

40. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–40 Exhibit 18.10b Popular Financial Ratios

41. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–41 Controlling Organizational Performance Balanced Scorecard  A measurement tool that uses goals set by managers in four areas to measure a company’s performance:  Financial, customer, internal processes, and people/innovation/growth assets.  Managers should develop goals in each of the 4 areas and measure perofrmance.

42. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–42 Information Controls Management Information Systems (MIS)  A system used to provide management with needed information on a regular basis.  Data: an unorganized collection of raw, unanalyzed facts (e.g., unsorted list of customer names).  Information: data that has been analyzed and organized such that it has value and relevance to managers.  MIS

43. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–43 Benchmarking of Best Practices Benchmarking  The search for the best practices among competitors or non-competitors that lead to their superior performance.  Benchmark: the standard of excellence against which to measure and compare.  A control tool for identifying and measuring specific performance gaps and areas for improvement.

44. 9 - 44 Benchmarking. The benchmarking process typically follows four steps. a.A benchmarking planning team is formed. The team’s initial task is to identify what is to be benchmarked, identify comparative organizations, and determine data collection methods. b.The team collects internal and external data. c.The data is analyzed to identify performance gaps and to determine the cause of the difference. d.An action plan is prepared and implemented.

45. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–45 Exhibit 18.11 Steps to Successfully Implement an Internal Benchmarking Best Practices Program 1.Connect best practices to strategies and goals. 2.Identify best practices throughout the organization. 3.Develop best practices reward and recognition systems. 4.Communicate best practices throughout the organization. 5.Create a best practices knowledge-sharing system. 6.Nurture/foster best practices on an ongoing basis.

46. Homework Refer to the book p. 408 and answer the following: - the questions 1-8. - last part p. 408 under the title “your turn..” answer point 1. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–46

47. Application Use an external Benchmarking to develop the teaching process in your collage. Refer to the previous slides and follow the steps. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–47

48. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–48 Contemporary Issues in Control Cross-Cultural Issues:  The use of technology to increase direct corporate control of local operations  Legal constraints on corrective actions in foreign countries  Difficulty with the comparability of data collected from operations in different countries

49. 1.Methods of controlling people and work can be quite different in other countries. E.g., global companies. 2.Differences are most marked in the measurement and corrective action steps. 3.In technologically advanced nations, controls are indirect. 4.In less technologically advanced nations, controls are more direct. Adjusting Controls for Cultural Differences © Prentice Hall, 200218-49

50. 1.Laws in different countries provide different constraints on corrective action: e.g., laying off employees, taking money out of the country. 2.Data used for controlling may not be comparable in different countries though for the same company but different branches. E.g., cost production per unit in China different from UK for the same company. Adjusting Controls for Cultural Differences © Prentice Hall, 200218-50

51. Workplace Privacy Employers have the right to monitor employee communications, examine employee computers and files, and use surveillance cameras Reasons for monitoring include prevention of: 1.Recreational\fun on-the-job Web surfing. 2.Creation of hostile work environments with e-mail. 3.Security leaks of critical information. Electronic Communications Privacy Act - 1986  Prohibits unauthorized interception\catching of electronic communication.  Workplace electronic monitoring is still legal. Contemporary Issues In Control © Prentice Hall, 200218-51

52. Workplace monitoring policies Workplace Privacy (cont.) companies are developing and enforcing workplace monitoring policies. 1.Develop unambiguous computer usage policy. 2.Inform employees that computers may be monitored. 3.Provide clear guidelines on acceptable use of company e-mail system and the Web. © Prentice Hall, 200218-52

53. Application Develop Workplace monitoring policies to IUG based on the previous slide. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–53

54. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–54 Workplace Concerns  Workplace privacy versus workplace monitoring:  E-mail, telephone, computer, and Internet usage  Productivity, harassment, security, confidentiality, intellectual property protection  Employee theft  The unauthorized taking of company property by employees for their personal use.  Workplace violence  Anger and violence in the workplace is affecting employee productivity.

55. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–55 Exhibit 18.12 Types of Workplace Monitoring by Employers Internet use 54.7% Telephone use 44.0% E-mail messages 38.1% Computer files 30.8% Job performance using video cameras 14.6% Phone conversations 11.5% Voice mail messages 6.8% Source: Based on S. McElvoy, “E-Mail and Internet Monitoring and the Workplace: Do Employees Have a Right to Privacy?” Communications and the Law, June 2002, p. 69.

56. Contemporary Issues In Control (cont.) Employee Theft Unauthorized taking of company property by employees for their personal use. Up to 85 percent of all organizational theft and fraud is committed by employees. Is an escalating problem in all types of organizations. © Prentice Hall, 200218-56

57. Explanation of employee theft The answer will depend on who you ask: 1.Industrial security - opportunity presents itself due to lack of controls and favorable circumstances 2.Criminology - people have financial-based pressures or vice-based pressures (such as gambling debts). 3.Clinical psychology - people are able to rationalize any type of behavior. E.g., every one does it. © Prentice Hall, 200218-57

58. 18–58 Exhibit 18.13 Control Measures for Employee Theft or Fraud

59. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–59 Exhibit 18.14 Workplace Violence 1.Witnessed yelling or other verbal abuse 42% 2.Yelled at co-workers themselves29% 3.Cried over work-related issues23% 4.Seen someone purposely damage machines or furniture14% 5.Seen physical violence in the workplace10% 6.Struck a co-worker2% Source: Integra Realty Resources, October-November Survey of Adults 18 and Over, in “Desk Rage.” BusinessWeek, November 20, 2000, p. 12.

60. Factors contribute to Workplace Violence Many factors contribute to workplace violence including: 1.Employee work driven by time, numbers, and crises. 2.Rapid and unpredictable change 3.Destructive communication style of manager 4.Authoritarian leadership 5.Defensive attitude 6.Double standards 7.Unresolved grievances\complains. 8.Emotionally troubled employees 9.Repetitive, boring work. © Prentice Hall, 200218-60

61. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–61 Contemporary Issues in Control (cont’d) Customer Interactions  Service profit chain  The service sequence from employees to customers to profit: service capability affects service value which impacts on customer satisfaction that, in turn, leads to customer loyalty in the form of repeat business (profit). Corporate Governance  The system used to govern a corporation so that the interests of the corporate owners are protected.  Changes in the role of boards of directors  Increased scrutiny of financial reporting

62. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–62 Exhibit 18.16 The Service Profit Chain

63. Review What would an organization have to do to change its dominant control approach from bureaucratic to clan? From clan to bureaucratic?  Changing to a clan approach would entail a radical change in corporate culture because you would be going from a control system that emphasized rules and administrative mechanisms to a control system that emphasized the cultural values and beliefs.  Changing from a clan approach to a bureaucratic approach would mean having in place the rules, procedures, and other administrative mechanisms that would be used to control employee behavior. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–63

64. Review When do electronic surveillance devices such as computers, video cameras, and telephone monitoring step over the line from “effective management controls” to “intrusions on employee rights”? Students should concentrate on the fact that organizations have the right to protect their assets and to monitor premises for illegal activities. However, the dilemma is “How much is too much?” Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–64

65. Review “Every individual employee in the organization plays a role in controlling work activities.” Do you agree or do you think that control is something that only managers are responsible for? Explain. Control is something that every individual employee plays a role in, particularly in organizations where employees have been empowered. But even in organizations where employees haven’t been empowered, these employees play a role in measuring, comparing, and correcting performance. However, managers will still be responsible for establishing the standards, approaches, and guidelines for measuring, comparing, and correcting. Copyright © 2005 Prentice Hall, Inc. All rights reserved.18–65