67 terms



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organizational control
process through which managers regulate organizational activities to make them consistent with expectations established in plans, targets, and standards of performance
The Control Process
1. Est. standards of performance (goals, bench marking)
2. Measure actual performance
3. Compare performance to standards
4. if adequate continue, if not take corrective action
- info on deficiency before it occurs
- focus on impacts
- info on deficiency as it occurs
- focua on real time adjustments
- info on deficiency after it happens
focus on outputs
hierarchical control
the monitoring if behavior through rules, policies, hierarchy of authority, written documentation and reward systems and other formal mechanisms
decentralized control
fostering compliance through the use of organizational culture, group norms, focus on goals rather than rules and procedures
hierarchical approach
ASSUMES people lack self discipline, cant be trusted
RESPONSIBILITY is on managers, supervisors
OUTCOME employees do as told, feel indifferent
decentralized approch
ASSUMES people can be trusted, work best when committed to org
RESPONSIBILITY is on everyone
OUTCOME employees take initiative, feel engaged
open book management
allowing employees access to information regarding the financial condition of the company
(charts, finical statements)
1. rewards tied to overall preformance
2. more motivation to take responsibility
budgetary control
process of setting targets, monitoring results and comparing them to budgets and making changes as needed
financial control
process of monitoring performance by calculating ratios, analyzing results and comparing them to standards and making changes as needed
budgetary control includes
top-down management
bottom up budgeting
traditional budgeting
zero based budgeting
expense budgeting
revenue budget
cash budget
capital budget
top- down management
budgeted amounts are imposed on middle and lower level managers
A- fast, top-management control
D- inaccurate, lack of involvement, lower levels
bottom up budgeting
lower level managers set budgets and pass them to top management for approval
A- more accurate, more involvement at lower levels
D- time intensive
Traditional budgeting
carry forward prior
budget and apply percentage change
A- easy, fast
D- use it or lose it mind set
zero based budgeting
requires a complete justification for every item in the budget (instead of carrying forward prior budget with % change)
A- cost- savings
D- time consuming
expense budget
anticipated and actual expenses
when expenses > budget- ineffiency or sales growing faster?
When expenses< budget- efficiency or failure to meet quality standards>
revenue budget
forecasted and actual revenues
revenues> budget- higher sales, how to meet demand
revenues < budget- poor sles, how to increase sales
cash budget
estimates receipts and expenditures of money (daily, weekly)
cash> short term needs- invest excess
cash < short term needs- barrow
capital budget
lists planned investments in major assets
includes: buildings, machinery, technology systems
controlling involves: evaluating return on investment
financial statements
information for financial control
-balance sheets and income statements
balance sheets
shows firm's financial position
-owners equity
income statement
summarizes financial performance
-net income/ bottom line
liquidity ratios
indicate ability to meet current debt obligations
activity ratios
measure internal performance (such as inventory use)
profitability ratios
describe profits relative to source (such as sales)
leverage ratios
evaluate the level of debt
Inadequate liquidity
vulnerability to unexpected expenses
unsatisfactory activity
wasted money, poor sales conversion
poor profitability
weak sales
too much debt
credit risk
balance scorecard
comprehensive control system that balances traditional measures with operational measures
-internal business process
-potential for learning/ growth
financial health and performance
-profit and cost
serving customers, how they view company
- retention, defection, satisfaction, opions
internal business process
production and operation stats
- safety stats, efficiency, quality
potential for learning/growth
change, improvement
- new products, services, innovation
performance metrics
1. forces all managers to set specific goals and measure performance
2. decreases chances of improved performance in one area at the expense of another (suboptimization)
why do people resist change
self interest conflict
lack of understanding and trust
different assessments and goals
self-interest conflict
fear of lose, desire to protect benifits
lack of understanding and trust
Don't understand intentions or purpose, bad past experiences with change
fear of unknown, lack of info
different assessments and goals
people experience different consequences
types of change
product change
a change in the org product or service outputs
driven by: low revenue/ sales/ customer satisfaction
purpose: adapt to markets, demands, competition
technology change
a change in the organizations production process/ how work is done
driven by: inefficiency/ new method development
purpose: increase effciency
people change
focus on the individual through training and development
culture change
focus on the entire org through changing values and norms
increasing ability to change
innovation roles
design org to encourage initiation of new ideas
-bottom up
-idea incubators
create conditions to facilitate internal/external coordination, share knowledge
innovation roles
processes that support entrepreneurship, autonomy, risk taking
-idea champions
-new venture teams
-skunk works
-new venture funds
the change process
create motivation to change, manager present critical info
experimentation with new processes/ behaviors, managers communication vision
rewards and reinforcement for acceptance, mangers institutionalize change
approaches to overcoming resistance and implenting change
1. create a sense of urgency
2. force field analysis
3. use an implementation tactic to overcome resistance
create sense of urgency
make people aware of need for change; crisis
force-field analysis
evaluate driving and restraining forces
-driving forces
-restraining forces
driving forces
motivation for change
restraining forces
barriers to change
implementation tactics
1. get top management support
2. communication and educate
3. participation
4. negotiate
5. coercion
get top management support
symbolizes, importance of change
-many debts involved or resources reallocated
communicate and educate
info is need, uncertainty, chance is technical
get people involved, see problems early
formally bargain to win acceptance and approval
- group has power over implementation
punishment, formal power
-crisis scenario, last resort