Management by chuch williams chapter 16

Chapter 16
Control

MGMT
Chuck Williams

Designed & Prepared by
B-books, Ltd.
1


Basics of Control
After reading this section,
you should be able to:

1. describe the basic control process.

2


The Control Process
Begins
Begins by
by establishing
establishing clear
clear
standards
standards of
of performance
performance
Involves

Involves comparing
comparing actual
actual performance
performance
to
to desired
desired performance
performance
Takes
Takes corrective
corrective action
action to
to repair
repair
performance
performance deficiencies
deficiencies
Is
Is aa dynamic,
dynamic, cybernetic
cybernetic process
process

1

But…
But… control
control
isn’t
isn’t always

always
worthwhile
worthwhile or
or
possible
possible

Consists
Consists of
of feedback
feedback control,
control,
concurrent
concurrent control,
control, feedforward
feedforward control
control

3


Setting Standards
1. A good standard must enable goal
achievement
2. Listening to customers or observing
competitors
3. Benchmarking other companies
– Determine what to benchmark.
– Identify the companies against which to benchmark.
– Collect data to determine other companies’

performance standards.
1.1
4


Corrective Action
•

1.3

Identify performance
deviations

•

Analyze those
deviations

•

Develop and
implement programs
to correct them
Correct
Correct

Identify
Identify

Control

Control
Process
Process
Analyz
Analyz
ee
5


Dynamic, Cybernetic Process
Set
Set Standards
Standards
Develop
Develop && Implement
Implement
Program
Program for
for
Corrective
CorrectiveAction
Action

Measure
Measure
Performance
Performance
Compare
Compare with
with

Standards
Standards

1.4

Analyze
Analyze
Deviations
Deviations

Identify
Identify
Deviations
Deviations
6


Feedback, Concurrent,
and Feedforward Control

1.5

Feedback
Feedback
Control
Control

Gather
Gatherinformation
informationabout

aboutperformance
performance
deficiencies
deficienciesafter
afterthey
theyoccur
occur

Concurrent
Concurrent
Control
Control

Gather
Gatherinformation
informationabout
aboutperformance
performance
deficiencies
deficienciesas
asthey
theyoccur
occur

Feedforward
Feedforward
Control
Control

Monitor

Monitorperformance
performanceinputs
inputsrather
rather
than
thanoutputs
outputsto
toprevent
preventor
orminimize
minimize
performance
performancedeficiencies
deficienciesbefore
beforethey
they
occur
occur
7


Feedforward Control
Guidelines for Using Feedforward Control
1.1. Thorough
Thoroughplanning
planningand
andanalysis
analysisare
arerequired.
required.

2.
2. Careful
Carefuldiscrimination
discriminationmust
mustbe
beapplied
appliedin
inselecting
selecting
input
inputvariables.
variables.
3.
3. The
Thefeedforward
feedforwardsystem
systemmust
mustbe
bekept
keptdynamic.
dynamic.
4.
4. AAmodel
modelof
ofthe
thecontrol
controlsystem
systemshould
shouldbe
bedeveloped.

developed.
5.
5. Data
Dataon
oninput
inputvariables
variablesmust
mustbe
beregularly
regularlycollected.
collected.

1.5

6.6. Data
Dataon
oninput
inputvariables
variablesmust
mustbe
beregularly
regularlyassessed.
assessed.
7.7. Feedforward
Feedforwardcontrol
controlrequires
requiresaction.
action.
8

Control Loss
Is control
worthwhile?
Maybe,
maybe not.

Managers must
assess the regulation
costs and the cybernetic
feasibility.
9


Control Methods
After reading these sections,
you should be able to:

2. discuss the various methods that managers
can use to maintain control.
3. describe the behaviors, processes, and
outcomes that today’s managers are choosing
to control their organizations.
10


Control Methods

Bureaucratic
Bureaucratic

Normative
Normative

Objective
Objective

Concertive
Concertive

Self-Control
Self-Control

2
11


Bureaucratic Control
• Top-down control
• Use rewards and
punishment to influence
employee behaviors
• Use policies and rules to
control employees
• Often inefficient and highly
resistant to change
2.1
12

Objective Control
Objective
Objective
Control
Control

Use
Useof
ofobservable
observablemeasures
measuresof
ofworker
worker
behavior
behavioror
oroutputs
outputsto
toassess
assess
performance
performanceand
andinfluence
influencebehavior
behavior

Behavior
Behavior
Control
Control

Regulation
Regulationof
ofthe
thebehaviors
behaviorsand
and
actions
actionsthat
thatworkers
workersperform
perform
on
onthe
thejob
job

Output
Output
Control
Control

Regulation
Regulationof
ofworkers’
workers’results
resultsor
or
outputs
outputsthrough
throughrewards

rewardsand
and
incentives
incentives

2.2
13


Effective Output Control
1. Output control measures must be reliable,
fair, and accurate.
2. Employees and managers must believe that
they can produce the desired results.
3. The rewards or incentives tied to outcome
control measure must be dependent on
achieving established standards of
performance.
2.2
14


Normative Control
Created by:

Normative
Normative
Control
Control

– careful selection of employees
– observing experienced employees & listening to stories about the comp

2.3
15


Concertive Control
Concertive
Concertive
Control
Control

Regulation
Regulationof
ofworkers’
workers’behavior
behaviorand
and
decisions
decisionsthrough
throughwork
workgroup
groupvalues
values
and
andbeliefs
beliefs

Autonomous work groups

– operate without managers
– group members control processes, output, and
behaviors

2.4
16


Self-Control
• Also known as self-management
• Employees control their own behavior
• Employees make decisions within
well-established boundaries
• Managers teach others the skills they need
to maximize work effectiveness
• Employees set goals and monitor their own
progress
2.5
17


What to Control?

Balanced
Balanced
Scorecard
Scorecard

Customer
Customer

Defections
Defections

Budgets,
Budgets,
Cash
CashFlow,
Flow,
EVA
EVA

Quality
Quality

Waste
Wasteand
and
Pollution
Pollution

3
18


The Balanced Scorecard
Customer
Customer
Perspective
Perspective
Innovation

Innovation and
and Learning
Learning
Perspective
Perspective

Internal
Internal
Perspective
Perspective

Financial
Financial
Perspective
Perspective

3.1
19


Advantages of the
Balanced Scorecard
1. Forces managers to set goals and measure
performance in each of the four areas
2. Minimizes the chances of suboptimization
– performance improves in one area at the
expense of others

3.1
20

The Balanced Scorecard:
Southwest Airlines

3.1
21


The Financial Perspective
Cash
Cashflow
flow
analysis
analysis

Predicts
Predictshow
howchanges
changesin
inaabusiness
business
will
willaffect
affectits
itsability
abilityto
totake
takein
inmore

more
cash
cashthan
thanititpays
paysout
out

Provide
Provideaasnapshot
snapshotof
ofaacompany’s
company’s
Balance
sheets
Balance sheets financial position at a particular time
financial position at a particular time

Income
Income
statements
statements

3.2

Financial
Financial
ratios
ratios

Show

Showwhat
whathas
hashappened
happenedto
toan
an
organization’s
organization’sincome,
income,expenses,
expenses,
and
andnet
netprofit
profitover
overaaperiod
periodof
oftime
time
Used
Usedto
totrack
trackliquidity,
liquidity,efficiency,
efficiency,
and
andprofitability
profitabilityover
overtime
timecompared
compared

to
toother
otherbusinesses
businessesin
inits
itsindustry
industry
22


Beyond the Book

Basic Accounting Tools
Steps
Steps for
for aa Basic
Basic Cash
Cash Flow
FlowAnalysis
Analysis

1. Forecast sales
2. Project changes in anticipated cash flows
3. Project anticipated cash outflows
4. Project net cash flows by combining anticipated
cash inflows and outflows

23

Beyond the Book

Basic Accounting Tools
Parts
Parts of
of aa Basic
Basic Balance
Balance Sheet
Sheet

1. Assets
•
•

Current assets
Fixed assets

2. Liabilities
•
•

Current liabilities
Long-term liabilities

3. Owner’s equity
•
•
•

Stock

Additional paid in capital
Retained earnings
24


Beyond the Book

Basic Accounting Tools
Basic
Basic Income
Income Statement
Statement
+
=
=
=
=
=

SALES REVENUE
sales returns and allowances
other income
NET REVENUE
cost of goods sold
GROSS PROFIT
total operating expenses
INCOME FROM OPERATIONS
interest expense
PRETAX INCOME
income tax

NET INCOME

25