Management chapter VIII

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Controlling

The process whereby managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals.

Control systems

Formal target setting, monitoring, evaluation, and feedback systems that provide managers with information about how well the organization's strategy and structure are working.

Feedforward control

Control that allows managers to anticipate problems before they arise.

Concurrent control

Control that gives managers immediate feedback on how efficiently inputs are being transformed into outputs so that managers can correct problems as they rise.

Feedback control

Control that gives managers information about customers' reactions to goods and services so that corrective action can be taken if necessary.

The control process

Step 1: establish the standards of performance, goals, or targets against which performance is to be evaluated.
Step 2: Measure actual performance.
Step 3: Compare actual performance against chosen standards of performance.
Step 4: Evaluate the result and initiate corrective action if the standard is not being achieved.

Profit ratios

Measure how efficiently managers are using the organization's resources to generate profits.

Liquidity ratios

Measure how well managers have protected organizational resources to be able to meet short term obligations.

Leverage ratio

Measure the degree to which managers use debt or equity to finance ongoing operations.

Activity ratios

Measures of how well managers are creating value from organizational assets.

Operating budget

A budget that states how managers intend to use organizational resources to achieve organizational goals.

Output control

Financial measures of performance
Organizational goals
Operating budgets

Behavior control

Direct supervision
Management by objectives
Rules and standard operating procedures

Organizational culture/clan control

Values
Norms
Socialization

Financial measures

Involves the management of costs and expenses in order to control them in relation to budgeted amounts.

Operating budgets: cost or expense

Amount of goods or services produced from a fixed budget.

Operating budgets: revenue

Max revenues from the sale of goods and services produced.

Operating budgets: profit

Difference between revenues generated and the budgeted costs of making those goods and services.

Problem with output control

Short term vs long term challenges and changes in task environment.

Behavior control

Direct supervision, Management by objectives, Bureaucratic control

Direct supervision

Actively monitor and observe the behavior of their subordinates. Teach subordinates & reinforce the behaviors that are appropriate and inappropriate. Intervene to take corrective action as needed.

Problems with direct supervision

Very expensive, Can demotivate subordinates, Might not be feasible, Privacy issues.

Bureaucratic control

Control through a system of rules and standard operating procedures(SOPs)

Problems with bureaucratic control

Easy to make rules, hard to discard them. Firms become too standardized. Incompatible with innovation.

Organizational culture and clan control

Values
Norms
Socialization

Organizational culture

Set of beliefs, values, norms, expectations and work routines.

Values

What a society believes to be good and desirable.

Norm

Unwritten rules and codes of conduct

Socialization

Internalizing organizational values and norms

Organizational control

The set of values, norms, standards of behavior, and common expectations that controls the ways in which individuals and groups in an organization interact with one another and work to achieve organizational goals.

Clan control

The control exerted on individuals and groups in an organization by shared values, norms, standards of behavior, and expectations.

Adaptive culture

Controls employee attitudes and behaviors.

Inert cultures

Those who lead to values and norms that fail to motivate or inspire employees.

Organizational change process

Assessing the need to change, deciding on what change to make, Implement the change, evaluate the change

Assessing the need to change

Recognizing that there is a problem and identify the source of the problem.

Deciding on what change to make

Decide what the ideal future state would be and identify obstacles to change.

Reducing obstacles to change

Improve communication, emphasizing group or shared goals and empowering employees

Implement the change--Top to down

Quicker to implement. Top managers identify the need to change, decide what to do, and the move quickly to implement it.

Implement the change--Bottom to up

Is more gradual. Top managers consult with middle and first line managers. Develop a plan for change. Reduces resistance from employees.

Evaluate the change--compare pre change to post change

Using various performance measures: market share, profits, or the ability of the managers to meet their goals.

Evaluate the change--use benchmarking

Compared performance on specific dimensions with the performance of high performing organizations.

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