Management Chapt 15

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control process: sequential actions taken by management to establish performance standards, measure and evaluate performance, and take corrective action when indicated
input controls: corrective acftions tgaken during teh input phase of an organizations activities

also known as steering controls
process controls: control actions that impact the org's internal activities and serve to regulate and evaluate transformational activities
output controls: actions taken by management to regulate an org's output of goods or services or both
feedback: information about job or org performance derived fromt he work itself that is used ina corrective manner
financial controls: budgets and audits
behavioral controls: center upon the human side
3 major pints cocerning the importance of control: 1 Control is necessary to measure and evaluate org performance

2 control is a dynamic and ongoing process

3 control involves all facets of the org
Several (4) major issues in creating effective performance standards: 1 What does management measure

2. How is it measured

3. When should it be measured

4. What is a fair performance standard
create fair and equitable standards: by examining past performance as well as the performance of others in the industry
best data in the setting of realistic performance standards are: past worker performance levels and the performance levels achieved by other workers in the industry
measuring performance: quantitative

qualitative
evaluate the performance: meets standards---feedback

doesn't meet standards---take corrective actions
re-examine performance standards (maybe the standards were'nt met because the standards were to demanding
input control: or steering control
occurs before the activity
may include:
budget
job design
scheduling of work activities
process control: happens as the work is b eing done and may include quality control checks
output control: operates after the business activity but before delivery to the end user
it may include quality control checks
and ex post facto (after the fact) audits
budgets: formalized statements of the goals of an org stated in financial terms
budgets accomlish several important functions for managers: 1. they state future projections of revenues, expenses, and expected profits

2. can be used as financial performance standards

3. useful as managerial tools for planning

4. budgets reflect the limit of financial resources in an org

5. they furnish the framework and define the boundaries within which a the allocation of those funds must take place
budgets and audits consstructed and performed according to generally accepted financial and accounting standards provide a: universal evaluative framework

all businesses no matter of what size or nature can be compared based upon their level of achieved financial reults
top down budgeting method define advantages disadvantages: budget prepared by top management and imposed on all other org levels

advantage: creates accountability
making a specifice individual responsible for budgeting
this person part of top management has big picture of finacial condition of the org

disadvantage:
budgets are not created by those who have to carry it out
budgets that make sense at the top corporate level may be wildly impractical at the lower org level where they have to be carried out
bottom up budgeting method define advantages disadvantages: prepared by lower level management and submitted to top management for approval

advantages: it flows from those who have to execute the actual budget

disadvantages:
all managers will be in competition for the org resources, this approach may lead to manuevering and manipulative behaviors
it may also lead to inflation of a managers budget
operating budgets (3): cost center
revenue center
profit center
cost center approach budget: a budget that projects all the anticipated costs for a business over a designated period

this approach views each business unit as a cost or expense center and sets levels of spending for each area
revenue center approach define difficulties: deals with profits produced by the business unit

it projects future profit goals for each separate business line and these goals serve as performance standards

it does not take costs into account it concentrates solely on projected profits

this leads to 2 major difficulties

1. by not taking costs into account it is difficult for management to know if the company is actually making a profit

2. It is often difficult to accurately project profits since they are influenced by external economic and market forces that can neither be anticipated or controlled by management
profit center approach: combines both statements of revenues and costs to produce a statement of profits

used by management at appropriate org level where there can be effective control over both costs and revenue.

If management does not have control over costs and revenues this system will not work.
When it does work it creates performance standards for management that involve meeting profitability targets.
Financial Budgets (3): cash and capital expenditure budgets
material budgets
balance sheet budgets
cash budgets: future projections over a given period of time of the anticipated cash flow through a business org
capital expenditure budget: details capital investment in new org physical resources such as plants, land and machinery
material budget: input factors for production
materials must be acquired they include not only physical materials but also such things as labor
materials and labor which go directly into the final product are called direct cost factors.

the material budget concerns the direct cost factors and details how and in what amounts anorg will acquire its future material needs
balance sheet budget: combines all the other financial budgets into one org master budget

It shows the relationship beween an org's asset's, its leabilities, and its owners equity (what it has left)

If performance standards are not being met within one or more individual budgets, management can anticipate the probable effects upon the entire org and take appropriate corrective action
example of fixed budgets (2): operating and financial budgets
flexible budgets: take into account potential environmental changes and their probable impact on an org's achievements
Audits: formal evaluations of an org's financial situation
audits seek to answer (2): 1. are the finacial statements correct, do they accurately reflect the financial condition of the company, have they been performed according to the accounting and audit standards

Does the actual financial performance of an org meet the perfomance standards contained in the budget projections
management audit: periodic examination of managerial effectiveness

examines the current content and condition of management's goals and the plans created to achieve these goals.
internal management audit: conducted by internal personnel

advantages:
internal personnel know the firm the best but may have personal stakes inthe outcome of the evaluation
external management audit: completed by a professional consultant

advantages: may be more objective
if bad feelings are created by unpopular but realistic recomendations, these feelings will be attached to the consultant, an outsider and will be somewhat mitigated by the fact that this indivdual will leave when his assignment is completed

but may be quite costly
control of worker behavior: reward and motivaitonal systems

use of coercive power and discipline of workers

performance appraisal systems leading to corrective action as the direct result of managerial evaluation

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Deck Info

Number of cards 38