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

Chapter 16

ControlEvidence-Based Decision Making

Copyright © 2016 Pearson Canada Inc. 16-1

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.


Learning Outcomes:

4. Describe tools used to measure organizational performance.

5. Discuss contemporary issues in control.


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



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.


Exhibit 16-1 The Planning–Controlling Link



Decision support system :

A computer-based information system that provides decision makers with information relevant to the decisions they are making.



The final link in management functions:

• PlanningControls let managers know whether their goals and

plans are on target and what future actions to take.

• Empowering employeesControl systems provide managers with information and

feedback on employee performance.

• Protecting the workplaceControls enhance physical security and help minimize

workplace disruptions.


Exhibit 16-2 The Control Process


Step 1 – Measuring Performance

Sources of Information:• Personal observations• Statistical reports• Oral reports• Written reports

The Control Process


Exhibit 16-3 Common Sources of Information for Measuring Performance


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


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


Exhibit 16-4 Defining the Acceptable Range of Variation


Step 3 - Taking Managerial Action

Summary of Managerial Decisions:• “Doing nothing”

Only if deviation is insignificant

• Correcting actual (current) performanceImmediate or basic corrective action

• Revising the standardDetermine whether the standard is realistic, fair, and

achievable

The Control Process


Immediate corrective action

Corrective action that corrects problems at once to get performance back on track.

Basic corrective action

The Control Process


Corrective action that looks at how and why performance deviated and then proceeds to correct the source of deviation.

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.


The Control Process

Exhibit 16-6 Managerial Decisions in the Control Process


Controlling for Organizational and Employee Performance

Performance Standards

Managers in all types of businesses are responsible for managing organizational and employee performance.



What Is PerformanceThe end result of an activity.

Organizational PerformanceThe 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


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.



Controlling for Employee PerformanceSince 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.



Disciplinary actions:

Actions taken by a manager to enforce the organization’s work standards and regulations.


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 designRequiring 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



Management by walking around:

A term used to describe a manager being out in the work area, interacting directly with employees.


Feedback Control:

• Takes place after an activity is doneCorrective action is after-the-fact, when the problem

has already occurred.

• AdvantagesFeedback 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.



Exhibit 16-8 Types of Control


Financial Controls:

Managers might use traditional financial measures such as ratio analysis and budget analysis. Includes:

Leverage ratiosActivity ratios Profitability ratios




Data: Raw, unanalyzed facts.

Dashboard:


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.


Management Information Systems (MIS): A system used to provide management with needed information on a regular basis.



Balanced Scorecard: A measurement tool that uses goals set by managers in four areas to measure a company’s performance.

FinancialCustomerInternal processesPeople/innovation/growth assets



BenchmarkingThe 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.


Exhibit 16-9 Suggestions for Internal Benchmarking


Controlling Customer Interactions

Service profit chain

The service sequence from employees to customers to profit

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 directorsIncreased scrutiny of financial reporting



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.



Emerging Workplace Concerns

• Privacy versus monitoring:E-mail, telephone, computer, and Internet usage can all be

monitored

• Employee theftThe unauthorized taking of company property by employees for

their personal use

• ViolenceAnger, rage, and violence in the workplace is affecting employee

productivity


Exhibit 16-11 Types of Workplace Monitoring by Employers


Exhibit 16-12 Control Measures for Deterring or Reducing Employee Theft or Fraud


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

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