Chapter 10 Flashcards
Monitoring
Define monitoring.
The process of determining what is being accomplished, evaluating results, taking steps to perpetuate positive results, and to correct undesirable deviations from standards.
What are the four components to monitoring?
A Management Information System
Standards & Benchmarks
Results
Corrective Actions
What is a Management Information System?
Gathers & presents information useful for measuring performance. Can be manual or computerized.
What are the four characteristics of a management information system?
Simplicity - Uncomplicated comparison
Accessibility - Delivery to management seamless
Merge Capability - Integrate internal and external information, such as competitive and economic data
Adaptability - Able to change with strategy changes
Why are standards & benchmarks important and how are they determined?
Serve as a basis for measuring performance.
Based on historical standards or engineered standards.
What are the two types of historical standards and which is better?
Internal or external sources. Internal are disadvantageous as they perpetuate the ‘we’ve always done this’ syndrome. Looking externally removes partiality associated with internal standards.
What are engineered standards?
Based on objective quantitative analysis of a specific work situation. For example measuring the number of transactions per employee to monitor the effectiveness of an admin employee.
How should results be measured?
Should be measured separately for key functions, departments, and individual employees.
Items to be reviewed include Financial Data & Sales Data.
Why is financial data important and where does it come from?
Extracted from previous budgets. Disadvantage: does not recognize changing economic or competitive conditions. External studies can be used as a source of benchmark data.
Identify five sales data standards.
Sales Volume - Comparing sales levels to those from a prior period. Economic factors may increase volume while brokerage is suffering from fewer sales.
Product Mix - Track in both categories
Commission Income - Premium volume is inappropriate as it does not reflect actual income.
Net Profit - The bottom line. The standard should incorporate contingent commissions.
Individual Performance - Individual employee goals should be developed, alongside training standards.
What is the purpose of corrective action?
Identify areas of concern. This may be by reducing number of employees or increasing marketing support. The purpose of corrective action in monitoring is to keep the actual performance as close to the strategic plan as possible when deviations have been identified.
