1. PowerPoint Presentation by Charlie Cook The University of West Alabama chapter 13 Part 5: Controlling Copyright © 2009 South-Western/Cengage Learning. All rights reserved. Control Systems: Financial and Human

2. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–2 Learning Outcomes 1. 1.List the four stages of the systems process and describe the type of control used at each stage. 2. 2.Describe the appropriate feedback process within and between the functional areas/departments. 3. 3.List the four steps in the control systems process. 4. 4.Describe the differences among the three categories of control frequency. 5. 5.Explain how the capital expenditures budget is different from the expense budget. 6. 6.List the three primary financial statements and what is presented in each of them. After studying this chapter, you should be able to:

3. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–3 Learning Outcomes (cont’d) 7. 7.Explain the importance of positive motivational feedback in coaching. 8. 8.Explain the manager’s role in counseling and the role of the employee assistance program staff. 9. 9.Define the key terms listed at the end of the chapter. After studying this chapter, you should be able to:

4. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–4 IDEAS ON MANAGEMENT at The Ranch Golf Club 1. 1.How does The Ranch control the organizational system? How does The Ranch control the functional systems? 2. 2.How does The Ranch use the control systems process, and how is it performing? 3. 3.What control methods are used to achieve objectives and standards at The Ranch? 4. 4.What are the major operating budget revenues and expenses at The Ranch? 5. 5.How does The Ranch use capital expenditure budgets? How does The Ranch use financial statements and budgets? 6. 6.Does Peter Clark coach his Jiffy Lube business, The Ranch, and sports teams the same way? 7. 7.How does The Ranch get feedback to improve performance?

5. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–5 Exhibit 13–1 ● The Systems Process with Types of Controls

6. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–6 Organizational Systems Control ControllingControlling  The process of establishing and implementing mechanisms to ensure that objectives are achieved. Preliminary Control (Feedforward Control)Preliminary Control (Feedforward Control)  Controls designed to anticipate and prevent possible problems (e.g., preventive maintenance)  Planning and organizing are the keys to preliminary control.  Standing plans are designed to control employee behavior in recurring situations to prevent problems.  Contingency plans tell employees what to do if problems occur.

7. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–7 Organizational Systems Control (cont’d) Concurrent ControlConcurrent Control  Action taken to ensure that standards are met as inputs are transformed into outputs. Rework ControlRework Control  Action taken to fix an output. Damage ControlDamage Control  Action taken to minimize negative impacts on customers/stakeholders due to faulty outputs. FeedbackFeedback  Information about outputs from customers and stakeholders.

8. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–8

9. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–9 Exhibit 13–2 ● Systems Processes for Functional Areas/Departments

10. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–10 Exhibit 13–2 ● Systems Processes for Functional Areas/Departments (cont’d)

11. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–11 Exhibit 13–3 ● The Feedback Process between Functional Areas/Departments

12. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–12 Exhibit 13–4 ● The Control Systems Process Balanced Standards: Quantity Quality Time Cost Behavior Identify Critical Success Factors (CSFs)

13. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–13 Exhibit 13–5 ● Operations Performance Report

14. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–14 Join the Discussion Ethics & Social Responsibility Academic GradesAcademic Grades 1. Why are professors giving higher grades today than were given 5, 10, or 20 years ago? 2. Are students who are putting in less time and getting higher grades being well prepared for a career with high standards after graduation? 3. Is it ethical and socially responsible for professors to drop standards and for colleges to award higher grades today than they did 5, 10, or 20 years ago? 4. Should colleges take action to raise standards? If so, what should they do?

15. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–15 Exhibit 13–6 ● Types, Frequency, and Methods of Control

16. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–16

17. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–17 Exhibit 13–7 ● Steps in the Master Budgeting Process

18. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–18 Budgeting BudgetBudget  A planned quantitative allocation of resources for specific activities. Operating BudgetOperating Budget  Revenue Budget  A forecast of total income for the year.  Expense Budget  A forecast of total operating spending for the year. Capital Expenditures BudgetCapital Expenditures Budget  All planned expenditures for major asset investments.

19. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–19 Join the Discussion Ethics & Social Responsibility ExpensesExpenses 1. Is it ethical and socially responsible for PricewaterhouseCoopers to charge the full rate for travel expenses when it gets discounts? 2. If you worked for a company and knew it did this, would you say anything to anyone about it? If yes, to whom would you speak and what would you say?

20. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–20 Financial Statements Income StatementIncome Statement  Presents revenues and expenses and the profit or loss for the stated period of time. The Balance SheetThe Balance Sheet  Presents the assets and liabilities and owners’ equity for the stated period of time. Cash Flow StatementCash Flow Statement  Presents the cash receipts and payments for the stated time period.

21. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–21 Exhibit 13–8 ● IBM Financial Statements (in millions) Source: http://www.ibm.com, as of December, 2006.

22. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–22 Human Controls CoachingCoaching  The process of giving motivational feedback to maintain and improve performance. The Importance of Positive FeedbackThe Importance of Positive Feedback  Many managers spend more time giving negative criticism than praise.  Managers who only criticize employees tend to demotivate them. Management by Walking Around (MBWA)Management by Walking Around (MBWA)  Listening rather than talking  Teaching rather than telling  Facilitating rather than ordering

23. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–23 Exhibit 13–9 ● Coaching Model

24. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–24 Human Controls (cont’d) Types of Problem EmployeesTypes of Problem Employees 1. Employees who do not have the ability to meet the job performance standards. 2. Employees who do not have the motivation to meet job performance standards. 3. Employees who intentionally violate standing plans. 4. Employees with problems. CounselingCounseling  Dealing with problem employees by attempting to help solve the problem.

25. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–25 Exhibit 13–10 ● Problem Employees The late employee The absent employee The dishonest employee The violent or destructive employee The alcoholic or drug user The nonconformist The employee with a family problem The insubordinate employee The employee who steals The sexual or racial harasser The safety violator The sick employee The employee who’s often socializing or doing personal work

26. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–26 Human Controls (cont’d) Management CounselingManagement Counseling  Giving employees feedback so they realize that a problem is affecting their job performance.  Referring employees with problems to the employee assistance program. Employee Assistance Program (EAP)Employee Assistance Program (EAP)  A staff of people who help employees get professional assistance in solving their problems.

27. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–27 Disciplining DisciplineDiscipline  Corrective action to get employees to meet standards and standing plans.  Objectives:  To change ineffective employee behavior.  To let employees know that action will be taken when standing plans or performance requirements are not met.  To maintain authority when challenged.  Progressive discipline steps  Oral warning, written warning, suspension, and dismissal  Documentation must be maintained.

28. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–28 Exhibit 13–11 ● Guidelines for Effective Discipline A.Clearly communicate the standards and standing plans to all employees. B.Be sure that the punishment fits the crime. C.Follow the standing plans yourself. D.Take consistent, impartial action when the rules are broken. E.Discipline immediately, but stay calm and get all the necessary facts before you discipline. F.Discipline in private. G.Document discipline. H.When the discipline is over, resume normal relations with the employee.

29. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–29

30. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–30 Join the Discussion Ethics & Social Responsibility Disciplining Ethical BehaviorDisciplining Ethical Behavior 1. Have you ever been in or known of a situation in which people were rewarded for being unethical and disciplined for being ethical? If so, describe the situation. 2. Is it ethical and socially responsible for firms to establish controls that reward unethical behavior and discipline ethical behavior to make more money?

31. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–31 Exhibit 13–12 ● The Discipline Model

32. Copyright © 2009 South-Western/Cengage Learning. All rights reserved.13–32 KEY TERMS controllingcontrolling preliminary controlpreliminary control concurrent controlconcurrent control rework controlrework control damage controldamage control control systems processcontrol systems process standardsstandards critical success factorscritical success factors control frequencycontrol frequency management auditmanagement audit budgetbudget operating budgetsoperating budgets capital expenditures budgetcapital expenditures budget financial statementsfinancial statements coachingcoaching management by walking around (MBWA)management by walking around (MBWA) management counselingmanagement counseling employee assistance program (EAP)employee assistance program (EAP) disciplinediscipline