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Control

Any process that directs the activities of individuals toward the achievement of organizational goals

Bureaucratic control

The use of rules, regulations, and authority to guide performance

Market control

Control based on the use of pricing mechanisms and economic information to regulate activities within organizations

Clan control

Control based on the norms, values, shared goals, and trust among group members.

The Control Cycle

1 - Setting performance standards.
2 - Measuring performance.
3 - Comparing performance against the standards and determining deviations.
4 - Taking action to correct problems and reinforce successes.

Standard

Expected performance for a given goal: a target that establishes a desired performance level, motivates performance, and serves as a benchmark against which actual performance is assessed.

Measuring Performance

- Written Reports
- Oral Reports
- Personal Observation

Principle of Exception

A managerial principle stating that control is enhanced by concentrating on the exceptions to or significant deviations from the expected result or standard.

Specialist control

Operators of computer-numerical-control (CNC) machines must notify engineering specialists of malfunctions

Operator control

Multi-skilled operators can rectify their own problems as they occur

Feedforward control

The control process used before operations begin, including policies, procedures, and rules designed to ensure that planned activities are carried out properly.

Concurrent control

The control process used while plans are being carried out, including directing, monitoring, and fine-tuning activities as they are performed.

Feedback control

Control that focuses on the use of information about previous results to correct deviations from the acceptable standard.

The Role of Six Sigma

At a six-sigma level, a process is producing fewer than 3.4 defects per million, which means it is operating at a 99.99966 percent level of accuracy
and Six Sigma companies have not only close to zero product or service defects but also substantially lower production costs and cycle times and much higher levels of customer satisfaction

Management audit

An evaluation of the effectiveness and efficiency of various systems within an organization

External audit

An evaluation conducted by one organization, such as a CPA firm, on another.

Internal audit

A periodic assessment of a company's own planning, organizing, leading, and controlling processes.

What an external audit does

Investigates other organizations for possible merger or acquisition, determines the soundness of a company that will be used as a major supplier and discovers the strengths and weaknesses of a competitor to maintain or better exploit the competitive advantage of the investigating organization

What an internal audit does

Assesses what the company has done for itself
and what it has done for its customers or other recipients of its goods or services.

Budgeting

The process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences and is also called budgetary controlling.

Types of Budgets

Sales, Cost, Capital, Production, Cash and Master

Accounting audit

Procedures used to verify accounting reports and statements.

Activity-based costing (ABC)

A method of cost accounting designed to identify streams of activity and then to allocate costs across particular business processes according to the amount of time employees devote to particular activities

Balance Sheet

A report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity.

Assests

The values of the various items the corporation owns.

Liabilities

The amounts a corporation owes to various creditors

Stockholders' equity

The amount accruing to the corporation's owners.

Assests =

Liabilities + Stockholders' equity

Profit and Loss Statement

An itemized financial statement of the income and expenses of a company's operations

Current Ratio

A liquidity ratio that indicates the extent to which short term assets can decline and still be adequate to pay short-term liabilities

Debt-equity Ratio

A leverage ratio that indicates the company's ability to meet its long-term financial obligations

Return on investment (ROI)

A ratio of profit to capital used, or a rate of return from capital

Management myopia

Focusing on short-term earnings and profits at the expense of longer-term strategic obligations.

The Downside to Bureaucratic Control

- Rigid bureaucratic behavior
- Tactical behavior
- Resistance to control

Designing an Effective Control System

Establish valid performance standards.
Provide adequate information to employees.
Ensure acceptability to employees.
Maintain open communication.

Balanced scorecard

Control system combining four sets of performance measures: financial, customer, business process, and learning and growth

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