Control Flashcards
Control 1
ensures that a company is achieving what it set out to accomplish.
Control 2
It compares
performance with desired results
and
provides the feedback necessary for management to evaluate results and take corrective action, as needed.
Control 3
“IF YOU CAN’T MEASURE IT, YOU CAN’T CONTROL IT”
Efficiency 1
“Doing things right
Getting the most output for the least input
Efficiency 2
resource usage, low waste
Effectiveness
“Doing the right things”
Attaining organizational goals
goal attainment with high degree
PERFORMANCE
the end result of activity
What Is Organizational Performance?
The accumulated end results of all of the organization’s work processes and activities
Coordinating the work of employees.
Designing strategies, work processes, and work activities.
Evaluation and Control process
Determine what to measure Establish the standards Measure Compare with the standards Take corrective action
What to measure ?
To assess performance; what to measure?
…depends on the organizational unit to be appraised and the objectives to be achieved
Evaluation and Control Information –
Sources of Information (How) Control Criteria (What)
Sources of Information (How)
Personal observation (activity reports) Statistical reports (performance data) Oral reports Written reports
Control Criteria (What)
-Employees Satisfaction Turnover Absenteeism -Budgets Costs Output Sales
Types of Controls
important
-Input controls
Resources – skills, abilities, values, motives
-Behavior controls
How something is done through policies, procedures, rules, SOP’s
-Output controls
What is to be accomplished; focus on end result through performance targets
Feedforward Control (input)
A control that prevents anticipated problems before actual occurrences of the problem
Feedforward Control (input) 2
Building in quality through design.
Requiring suppliers conform to ISO 9002.
Predictive maintenance
Concurrent Control (behavior)
A control that takes place while the monitored activity is in progress.
Concurrent Control (behavior) 2
Direct supervision: management by walking around.
Steering controls
Monitoring employee phone calls and PC’s
Feedback Control (output)
A control that takes place after an activity is done.
Corrective action is after-the-fact, when the problem has already occurred.
steering controls 1
they measure variables that influence future profitability
for example; inventory turnover ratio, customer satisfaction
steering controls 2
Most of the performance measurements tell what happened after the fact – not what is happening or what will happen
A firm, therefore, needs to develop measures that predict likely profitability.
Input controls
Input controls emphasize resources, such as knowledge, skills, abilities, values, and motives of employees.
Because it is “future” oriented it contains a factor of prediction and risk.
it is ignored consecuences might be unbearable.
Prevent the problem before it occurs. It is the cheapest way of dealing with it.
Types of Controls
Activity-Based Costing (ABC) (concurrent control) Enterprise Risk Management (ERM) (feedforward control) New position; Chief Risk Officer (CRO)- Scenario analysis- Value at risk (VAR); Effect of unlikely events in normal markets- Stress Testing- Earnings at risk (EAR)
Activity-Based Costing (ABC) (concurrent control)
Allocation of indirect and fixed costs to individual products or product lines
Based on value-added activities
More accurate charge of costs
Enterprise Risk Management (ERM)
feedforward control
Identify risks
Rank risks
Measure risks
Evaluation and Control Information –
Performance data
Activity reports
Primary Measures of Performance –
Traditional Financial Measures Shareholder value Economic value added (EVA) Market value added (MVA) Balanced Scorecard Approach
Traditional Financial Measures
Return on investment (ROI) Earnings per share (EPS) Return on equity (ROE) Operating cash flow Free cash flow
Shareholder value
the present value of the anticipated cash flow + value if liquidated.
Economic value added (EVA)
EVA = after-tax operating income – investment in assets X weighted average cost of capital.
Market value added (MVA)
MVA = market value of a corp. – capital contributed by shareholders and lenders
Balanced Scorecard Approach 1
important
Is a measurement tool that uses goals set by managers in four areas to measure a company’s performance,
Is intended to emphasize that all of these areas are important to an organization’s success and that there should be a balance among them
Balanced Scorecard Approach 2
important
Financial
How do we appear to shareholders?
Customer
How do customers view us?
Internal processes (internal business perspective)
What we must excel et?
People / innovation and learning / growth assets
Can we continue to improve and create value?
Using Benchmarking
Continual process of measuring products, service, and practices against the toughest competitors or those companies recognized as industry leaders
IT MAKES NO SENSE TO REINVENT SOMETHING THAT SOMEONE ELSE IS ALREADY USING
Benchmark
The standard of excellence against which to measure and compare.
Benchmarking
Is the search for the best practices among competitors or noncompetitors that lead to their superior performance.
Is a control tool for identifying and measuring specific performance gaps and areas for improvement.
International Measurement Issues
important
- International transfer pricing (tax evading)
- Repatriation of profit (transferring profits through dividends, royalties, and management fees)
- piracy
Problems in Measuring Performance
Workplace privacy versus workplace monitoring:
Employee theft
Workplace violence
Workplace privacy versus workplace monitoring:
E-mail, telephone, computer, and Internet usage
Productivity, harassment, security, confidentiality, intellectual property protection.
Employee theft
The unauthorized taking of company property by employees for their personal use.
Workplace violence
Anger, rage, and violence in the workplace is affecting employee productivity.
International Measurement Issues
- International transfer pricing (tax evading)
- Repatriation of profit (transferring profits through dividends, royalties, and management fees)
- piracy
