1. Chapter 16 Control Evidence-Based Decision Making Copyright © 2016 Pearson Canada Inc.16-1

2. Learning Outcomes: 1.Explain the nature and importance of control. 2.Describe the three steps in the control process. 3.Explain how organizational and employee performance are measured. Copyright © 2016 Pearson Canada Inc.16-2

3. Learning Outcomes: 4.Describe tools used to measure organizational performance. 5.Discuss contemporary issues in control. Copyright © 2016 Pearson Canada Inc.16-3

4. What Is Controlling, and Why Is It Important? Controlling: The process of monitoring activities to ensure that they are being accomplished as planned, correcting any significant deviations, and where necessary modifying the plan Copyright © 2016 Pearson Canada Inc.16-4

5. What Is Controlling, and Why Is It Important? Why Is Control Important? It’s the final link in the four management functions. It is the only way managers know whether organizational goals are being met and, if not, the reasons why. Copyright © 2016 Pearson Canada Inc.16-5

6. Exhibit 16-1 The Planning–Controlling Link Copyright © 2016 Pearson Canada Inc.16-6

7. What Is Controlling, and Why Is It Important? Decision support system : A computer-based information system that provides decision makers with information relevant to the decisions they are making. Copyright © 2016 Pearson Canada Inc.16-7

8. What Is Controlling, and Why Is It Important? 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. Copyright © 2016 Pearson Canada Inc.16-8

9. Exhibit 16-2 The Control Process Copyright © 2016 Pearson Canada Inc.16-9

10. Step 1 – Measuring Performance Sources of Information: Personal observations Statistical reports Oral reports Written reports The Control Process Copyright © 2016 Pearson Canada Inc.16-10

11. Exhibit 16-3 Common Sources of Information for Measuring Performance Copyright © 2016 Pearson Canada Inc.16-11

12. What We Measure - What we measure is probably more critical to the control process than how we measure. - The selection of the wrong criteria can result in serious dysfunctional consequences. The Control Process Copyright © 2016 Pearson Canada Inc.16-12

13. Step 2 – Comparing Comparing requires 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 The Control Process Copyright © 2016 Pearson Canada Inc.16-13

14. Exhibit 16-4 Defining the Acceptable Range of Variation Copyright © 2016 Pearson Canada Inc.16-14

15. Step 3 - Taking Managerial Action Summary of Managerial Decisions: “Doing nothing”  Only if deviation is insignificant Correcting actual (current) performance  Immediate or basic corrective action Revising the standard  Determine whether the standard is realistic, fair, and achievable The Control Process Copyright © 2016 Pearson Canada Inc.16-15

16. Immediate corrective action Corrective action that corrects problems at once to get performance back on track. Basic corrective action The Control Process Copyright © 2016 Pearson Canada Inc.16-16 Corrective action that looks at how and why performance deviated and then proceeds to correct the source of deviation.

17. Revise the Standard  In some cases, variance may be a result of an unrealistic standard—a goal that’s too low or too high. In this case, the standard—not the performance—needs corrective action. Copyright © 2016 Pearson Canada Inc.16-17 The Control Process

18. Exhibit 16-6 Managerial Decisions in the Control Process Copyright © 2016 Pearson Canada Inc.16-18

19. Controlling for Organizational and Employee Performance Performance Standards Managers in all types of businesses are responsible for managing organizational and employee performance. Copyright © 2016 Pearson Canada Inc.16-19

20. Controlling for Organizational and Employee Performance What Is Performance The end result of an activity. 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. Copyright © 2016 Pearson Canada Inc.16-20

21. Controlling for Organizational and Employee Performance Organizational Productivity The overall output of goods and/or services divided by the inputs needed to generate that output.  Ultimately, a measure of how efficiently employees do their work. Copyright © 2016 Pearson Canada Inc.16-21

22. Controlling for Organizational and Employee Performance Controlling for Employee Performance Since managers manage employees, they also have to be concerned about controlling for employee performance; that is, making sure employees’ work efforts are of the quantity and quality needed to accomplish organizational goals. Copyright © 2016 Pearson Canada Inc.16-22

23. Controlling for Organizational and Employee Performance Disciplinary actions: Actions taken by a manager to enforce the organization’s work standards and regulations. Copyright © 2016 Pearson Canada Inc.16-23

24. Tools for Measuring Organizational Performance Feed-forward Control: A type of control that focuses on preventing anticipated problems, since it takes place before the actual activity.  Building in quality through design  Requiring suppliers conform to ISO 9002 Concurrent Control: A type of control that takes place while an activity is in progress  Direct supervision: management by walking around Copyright © 2016 Pearson Canada Inc.16-24

25. Tools for Measuring Organizational Performance Management by walking around: A term used to describe a manager being out in the work area, interacting directly with employees. Copyright © 2016 Pearson Canada Inc.16-25

26. Feedback Control: Takes place after an activity is done  Corrective action is after-the-fact, when the problem has already occurred. Advantages  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. Copyright © 2016 Pearson Canada Inc.16-26 Tools for Measuring Organizational Performance

27. Exhibit 16-8 Types of Control Copyright © 2016 Pearson Canada Inc.16-27

28. Financial Controls: Managers might use traditional financial measures such as ratio analysis and budget analysis. Includes:  Leverage ratios  Activity ratios  Profitability ratios Copyright © 2016 Pearson Canada Inc.16-28 Tools for Measuring Organizational Performance

29. Data: Raw, unanalyzed facts. Dashboard: Copyright © 2016 Pearson Canada Inc.16-29 An interface that presents managers and other decision makers with an easy-to-read, real-time user interface often employing a graphical presentation of the data to enable decision makers to make informed decisions quickly.

30. Tools for Measuring Organizational Performance Management Information Systems (MIS): A system used to provide management with needed information on a regular basis. Copyright © 2016 Pearson Canada Inc.16-30

31. Tools for Measuring 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  People/innovation/growth assets Copyright © 2016 Pearson Canada Inc.16-31

32. Tools for Measuring Organizational Performance Benchmarking The search for the best practices among competitors or noncompetitors that lead to their superior performance. Benchmark The standard of excellence against which to measure and compare. Copyright © 2016 Pearson Canada Inc.16-32

33. Exhibit 16-9 Suggestions for Internal Benchmarking Copyright © 2016 Pearson Canada Inc.16-33

34. Controlling Customer Interactions Service profit chain The service sequence from employees to customers to profit Contemporary Issues in Control Copyright © 2016 Pearson Canada Inc.16-34

35. Contemporary Issues in Control Organizational Governance: The system used to govern a corporation so that the interests of stakeholders are protected.  Changes in the role of boards of directors  Increased scrutiny of financial reporting Copyright © 2016 Pearson Canada Inc.16-35

36. Contemporary Issues in Control Adjusting Controls for Cross-Cultural Differences & Global Turmoil 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. Copyright © 2016 Pearson Canada Inc.16-36

37. Contemporary Issues in Control Emerging Workplace Concerns Privacy versus monitoring:  E-mail, telephone, computer, and Internet usage can all be monitored Employee theft  The unauthorized taking of company property by employees for their personal use Violence  Anger, rage, and violence in the workplace is affecting employee productivity Copyright © 2016 Pearson Canada Inc.16-37

38. Exhibit 16-11 Types of Workplace Monitoring by Employers Copyright © 2016 Pearson Canada Inc.16-38

39. Exhibit 16-12 Control Measures for Deterring or Reducing Employee Theft or Fraud Copyright © 2016 Pearson Canada Inc.16-39