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Chapter 16 notecards from slides and textbook.

Define control:

control is any process that directs the activities or individuals toward the achievement of organizational goals. Control regulates activities and behaviors.

What are some symptoms of out-of-control companies?

<table border="3"><tr><td><b>Lax top management</b>: senior managers do not emphasize or value the need for controls or they set a bad example</td></tr><tr><td><b>absence of policies</b>: the firm's expectations are not established in writing</td></tr><tr><td><b>lack of agreed-upon standards</b>: organization members are unclear about what needs to be achieved</td></tr><tr><td><b>"shoot the messenger" management </b>: employees feel their careers would be at risk if they reported bad news</td></tr><tr><td><b>lack of periodic reviews</b>:managers do not asses performance on regular, timely basis</td></tr><tr><td><b>bad information systems</b>: key data are not measured and reportedly in a timely and easily accessible way</td></tr><tr><td><b>lack of ethics in the culture</b>: organization members have not interanlized a commitment to integrity</td></tr></table>

What are the 3 types of control?

<li> bureaucratic control<li>clan control<li>market control</li>

What is <b> bureaucratic control </b>?

<b> bureaucratic control </b> is the use of rules, regulations, and authority to guide performance. Measure progress toward a set of goals, and if necessary take corrective actions.

What is <b> market control </b>?

<b> market control </b>Control based on the use of pricing mechanisms and economic information to regulate activities within organizations.

What is <b> clan control</b> ?

<b> clan control</b> is Control based on the norms, values, shared goals, and trust among group members

What are the steps of the control cycle?

Step 1: Setting performance standards
Step 2: Measuring performance
Step 3: Comparing performance with the standard
Step 4: Taking corrective action to correct problems and reinforce success

What are some of the basic elements of the control process?

(1) control starts at the top of the organization and involves every level in the organization
(2)standards are the targets of performance
(3)performance standards can beQuantity, Quality, Time,Cost .

Why do u think its important to involve employees in performance standards?

you have to commit employees to achieve high standards.involving employees in setting standards helps the organization

What is a "standard"? (pg 576 textbook)

a standard is 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.

What are some examples of "measuring perofrmance"? (remember, measuring performance is part of the control process?

(1) counting units produced
(2) days absent
(3) papers filed
(4) dollars earned
*pg557 of textbook

What is "personal observation"?

Personal observation involves going to the area where activities take place and watching is occurring. the manager can directly observe work methods, employees' nonverbal signals and the general operation.

What are some disadvantages of personal observation?

It does not provide quantitative data and the information is usually general and subjective. Also, employees may see "personal observation " as a lack of trust because they are being observed.

Measurement is costly and hence usefulness of the information must justify the costs. TRUE OR FALSE

TRUE.

What is the <b> principle of exception </b>

a managerial principle stating that control is enhanced by concentrating on the exceptions to or significant deviations from the expected result or standard.
example: in many manufacturing processes, a significant deviation in either direction ( e.g. drilling a hole that is too small or tool large) is unacceptable. In other cases, a deviation in one direction, such as sales or customer service that fall below target, is a problem, but if it exceeds expectations then its a good sign.

Describe the fourth step of the control process (pg 579 textbook).

the last step involves taking the appropriate course of action to correct problems and reinforce successes. when there are significant deviations, then operations have to be adjusted to correct the problems. diagnose the skills and expertise of managers. employees who are performing better than the "standard" should be recognized and rewarded.

If actual performance is better than expected performance, what actions must you take?

(1)Reinforcing Action Taken: (e.g., increase rewards and recognition, consider increasing production targets, add new product lines)

If actual performance is worse than expected performance, what actions must you take?

(1) Corrective action: increase training, modify supervision, invest in newer equipment)

Name the three approaches to bureaucratic control:

(1) feedfoward control (2)concurrent control (3) feedback control.

What is feedfoward control?

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

What is concurrent control?

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

What is feedback controL?

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

Describe six sigma:

Six sigma aims for defect-free performance. it is a process designed to reduce defects on all organizational processes. It is a type of feedback control.

What is "budgeting"

Budgeting is The process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences; also called budgetary controlling. Budgetary control is one of the most widely recognized and commonly used methods of managerial control.

What is a sales budget? production budget?

sales budget: Usually data for the sales budget include forecasts of sales by month, sales area, and product. a promotional budget

what's a cost budget? capital budget? cash budget?

cost budget: used for areas of the organization that incur expenses but no revenue. <b>capital budget</b>: used for the cost of fixed assets. usually treated as investments. cash budget: shows anticipated receipts and expenditures, the amount of working capital available, the extent to which outside financing may be required, and the periods and amounts of cash available

Management audit? external audit? internal auditing

(1)An evaluation of the effectiveness and efficiency of various systems within an organization(2)An evaluation conducted by one organization, such as a CPA firm, on another organization (3)A periodic assessment of a company's own planning, organizing, leading, and controlling processes

What is activity-based costing (pg 587-589)?

this is 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.

What are the steps of activity-based costing?

employees are asked to break down what they do each day in order to define their basic activities. next managers look at the total expenses computed by traditional accounting--fixed costs, supplies, salaries, benefits and so on. for instance. if you're paying an employees a total of $371,917 in salaries and they spend $25 of their time processing sales orders then 25% of 371917 = 144, 846. the cost for the activity ( processing sales order) is 144, 846 under activity-based-accounting

What's the formula for the balance sheet?

assets = liabilities + stockholders equity.***remember a balance sheet is a report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders equity.

What kind of control is a balance sheet?

it is a financial control;

What is a profit & loss statement?

Profit and loss statement - Itemized financial statement of the income and expenses of a company's operations.

Why are profit & loss statements important? how are they used?

controlling by profit and loss is most commonly used for the entire enterprise and in the case of a diversified corporation, its divisions. A decentralized organization will use profit and loss statement.Each department in a decentralized organization use profit and loss statements to measure their costs and expected net income.

What is a current ratio?

A current ratio is a liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities. the desirable minimum according to financial analysts is 2:1 or 2.00. so if the current ratio of a company is $1,000,000/600,000, they are more than capable of supporting its current liabilities.

What is the debt-equity ratio?

the debt-equity ratio is a leverage ratio that indicates the company's ability to meet its long-term financial obligations. if long-term liabilities is (618,600) and stock holders equity is (1,757,563), then 618,600 divided by 1,757,563 =.35. their their debt to equity ratio is .35 which means that the company has financed itself by issuing stock rather than incurring any significant long-term debt.

What is return on investment?

Return on investment is a ratio fo profit to capital used or a rate of return from capital.

What does it mean to implement "rigid bureaucratic behavior?

this type of behavior occurs when control systems prompt employees to stay out of trouble by following the rules. but such systems often lead to poor customer service because employees only care about following rules and staying out of trouble. also, often people act in ways that will help them look good on the control system's measures.

What is "tactical behavior"? how do employees at work use this to hurt the organization?

tactical behavior --> "beating the system". the most common type of tactical behavior is to manipulate information or report false performance data. people may input false information into a computer system to cover up errors or theft.

describe "resistance to control".

often times, employees strongly resist control systems. control systems uncover mistakes threaten people's security and status, and decrease people's autonomy.

what's a balanced scorecard?

a balanced scorecard is a control system combining four sets of performance measures: financial, customer, business process, and learning and growth.

Whats the purpose of the balanced scorecard?

to broaden management's horizon beyond short term financial results so that the company's long-term success is more likely. also, control systems generally should include both financial and non-financial performance targets.

What are Market controls?

Market controls involve the use of economic forces to regulate performance. Price becomes an indicator of the value of the good or service & price competition has the effect of controlling productivity and performance. the bottom line: market controls help maintain low prices.

What is one kind of market control?

Market share. A CEO may use market controls such as market share to evaluate the performance of business unit heads.

How do market controls affect large, diversified companies?

market controls often are used to regulate independent business units. particularly in large conglomerate firms that act as holding companies.

How do market controls affect decision making processes?

Market controls ensure that business unit performance is in line with corporate objectives but decision making and power are decentralized to the business units.

What is the transfer price?

the transfer price is the charge by one unit in the organization for a good or service that it supplies to another unit of the same organization. Market controls such as transfer prices provide natural incentives to keep costs down and quality up.

Why is transfer price important?

consider this situation in which training and development activities can be done internally by the human resources department or outsourced by a consulting firm. if the human resources department cannot supply quality training at a reasonable price, there may be no reason for that department to exist inside the firm.

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