7- Mng Control System Flashcards
Mng control system- definition
Robert Athony: The process by which managers influence other members of the organisation to implement
the organisation’s strategies.
Maciariello: management control is concerned with coordination,
resource allocation, motivation, and performance measurement.
Controlling People- 4
Organisational structure
Culture and ethics
HR Mng
Policies, procedures and processes
Organisation structure
Outlines the roles and responsabilities of individuals and groups within an organisation
- Clear structure to allocate people to tasks and procedures
- A focus for decision making – with clear decision making responsibilities allocated to
departmental managers - Functional or project responsibilities can be allocated to specific parts of the structure
creating a control centre
HR Mng
Attracting and selecting suitably qualified staff
Training to give people the right skills and attitudes to do the best work
Rewarding of employees including incentive schemes
Employment contracts, setting out clear expectations of role
Setting and applying disciplinary procedures
Ensuring staff satisfaction and motivation, leading to good productivity
Performance appraisals to provide feedback
Culture and ethics
Culture and ethics
Culture is a combination of the VANE factors:
* Values
* Attitudes
* Norms
* Expectations
Cultural norms can affect an organisation and its success, particularly when such norms relate to
attitudes to:
* Working hard or long hours
* Loyalty
* Innovation
* Quality
* Customers
* Meeting deadlines
* Support for others
Control over culture can be exercised through:
- Statement of values outlining what the organisation stands for
- Training
- Recruitment of staff with new beliefs, values or approaches
- Senior management being seen to act in a new way
- New rules and procedures- clarifying expected behaviours
- New symbols - E.g. buildings, job titles, logos
- Changing groups and structures
- New reward systems to encourage new behaviour
Control through culture is known as the control environment.
Policies, procedures and processes
Management processes
Govern senior manager’s work: corporate governance,
strategic management
Operational processes
Processes that constitute the core business: purchasing,
manufacturing, advertising and marketing, and sales. (Create the primary value stream)
Supporting processes
Processes that support the core processes. Examples include
accounting, recruitment, and technical support.
Types of organisational control
Personal centralised
control
Common in small businesses where control occurs through the
owner’s supervision and reinforced by reward and punishment.
Growth leads to output or bureaucratic systems being adopted.
Output control
Found where quantifiable performance measures are needed
and based on levels of output and productivity. Employees can
work semi-autonomously towards set profitability targets.
Bureaucratic control
Controls based on formalised rules, with staff dictated by job
descriptions and task specifications. Maintained through
reward or punishment systems.
(Give each member if the team tasks that are specific to their job role)
Clan/Cultural control
Based on creating a culture, where the right behaviour is
naturally occurring. Relies on the careful selection of employees
and the level of trust in the organisation, as fewer rules and
procedures are required if employees can be trusted.
Performance management systems
Management by objectives
1. Balanced scorecard
- Drucker’s management by objectives (MBO)
Management by objectives
Objectives set at the top of the organisation, related to the organisation’s mission, and then
passed down the organisation to business units and on to staff.
Staff should be involved in the target-setting process, both for themselves and their division
Drucker’s five steps for effective mng by objectives
Set organisation
objectives
What does your company want to achieve? E.g. to have the
best customer service in the industry.
Align employee
objectives
What target can we give our employees to help us achieve this
goal of having the best customer service in the industry? E.g.
responding to all customer queries within a day.
Monitor performance
We need to have a way of checking that objectives are being
met. E.g. a review of customer queries at the end of the day to
ensure that no queries have gone unanswered for longer than a
day.
Evaluate performance
Who has been meeting their objectives and who hasn’t? We
need a way of quantifying whether the objective had been met
or not and who has/hasn’t met them, e.g. online project checklists for every employee.
Review and feedback
We need to give positive feedback to those who have met
them, and suggest to those who didn’t ways in which they can
improve in the future. This also applies to review at higher
levels too.
Drucker’s eight key objectives
Market standing
Objectives should be set according to where the company is
compared to its competitors, focussed on e.g. increasing market share
or improving market standing.
Innovation
New or updated products generate higher profits in the long-term
and keep the company ahead of the competition.
Productivity
E.g. Objectives would concern output over time or per employee to
ensure the best use of resources
Physical and financial
resources
Objectives relating to the use, acquisition, and maintenance of capital
and monetary resources, e.g. an objective to maintain positive cash
flow.
Managerial performance
and development
Objectives to ensure that managers are performing effectively, e.g.
based on accuracy and timeliness or training
Worker performance and
attitude
Objectives to improve the effectiveness of workers and, hence their
productivity and motivation. E.g. measuring worker productivity
targets or staff satisfaction surveys.
Public responsibility
Objectives regarding corporate social responsibility and ethics. These
ensure that the reputation of the business is maintained and costly
legal issues are avoided.
Profitability
Objectives should be set here as this is often the best measure of
current performance.
Balance scorecard
In order to overcome the possible short-termism of financial measures, Kaplan and Norton developed the Balanced Scorecard which outlined four key areas in which
company and divisional performance should be measured, to focus on both the short and long
term needs of the organisation.
The key idea is that managers are to be appraised on a variety of measures which include nonfinancial measures so that their focus is both long and short term.
Balance scorecard- performance measures
The four perspectives and suitable performance measures
Customer perspective
Focusing on the customer and meeting their needs. Measures include:
Customer satisfaction
Number of returns
Number of customers moving to the competition
Call waiting time/service time
Delivery time-frame% of deliveries on time
Internal business
perspective
Focusing on the way the business works and operates with particular
focus on productivity and efficiency. Measures include:
Production time per unit
Number of defective products
Cost per unit
Material wastage rates
Innovation and learning
perspective
Focusing on innovating in product and processes and developing and
learning for the future. Measures include:
The number of new products developed
Sales from new products
Development time of new products
R&D spending
Amount of time per employee on training
Number of qualified staff
Number of training programmes available
Financial
Financial performance is vital to the organisations success, as it gives
an indicator of shareholder wealth and ability to survive long term. It
must be balanced against the other factors. Measure include:
Profits
Return on investment
Residual income
Costs (variance analysis)
Sales
Problems with the balanced scorecard:
There are a lot of measures to work towards. This can make it hard for managers and staff
to know what to focus upon as it is difficult to achieve targets based on all measures
Some measures conflict, e.g. better quality also increases costs and so it’s hard to know
what balance to achieve
Significant additional information is required to be produced, which may be time
consuming and costly and require new information systems
It requires a new mindset and culture change may be required to ensure staff buy into the
new system
Linked to strategy
The organisation must follow through form the business strategy to ensure they are
focused on the long term direction of the business
Clear objectives should be set under each category according the SMART criteria,
measured at the end of the period
Lessons learnt from actual results help to improve performance in future periods and
help achieve the organisations strategic goals
