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Chapter 16 Control

Studies show that as much as 90% of communication is?
Non Verbal (body language, face tone, etc.)
What are the 3 basic methods of control?
1) Feedback 2) Concurrent 3) Feed forward
When does the control process begin?
When management set goals such as satisfying 90 percent of customers or increasing sales by 5 percent
When is control achieved?
When behavior and work procedures conform to standards when company goals are accomplished.
Name the basic control process:
1. Begins with the establishment of clear standards of performance. 2. Involves a comparison of performance to those standards
3. Takes correct action, If needed, to repair performance deficiencies. 4. Is a dynamic, cybernetic process. 5. Consists of three basic methods: feedback control, concurrent control, and feed forward control.
Is preventive measure a form of control?
Yes
How do managers set standards?
1). It must enable goal achievement
Control
A regulatory process of establishing standards to achieve organizational goals, comparing actural performance against the standards, and taking corrective action when necessary.
Standards
a basic of comparison for measuring the extent to which various kinds of organizational performance are satisfactory or unsatisfactory
Benchmarking
the process of identifying outstanding practices, processes, and standards in other companies and adapting them to your company
Cybernetic
The process of steering or keeping on course (derives from the Greek word kubernetes, meaning steerman)
Feedback control
a mechanism for gathering information about performance deficiencies after they occur. This information is then used to correct or prevent performance deficiencies
Study after study has clearly shown that feedback improves both _________ and _________ performance
Individual and organizational
If feedback has a downside, what is it?
It’s that feedback always comes after the fact
Concurrent control
a mechanism for gathering information about performance deficiencies as they occur, thereby eliminating or shortening the delay between performance and feedback
Feedforward control
a mechanism for monitoring performance inputs rather than outputs to prevent or minimize performance deficiencies before they occur.
Control loss
the situation in which behavior and work procedures do not conform to standards
Regulation costs
the costs associated with implementing or maintaining control
Cybernetic feasibility
the extent to which it is possible to implement each step in the control process
Bureaucratic control
the use of hierarchical authority to influence employee behavior by rewarding or punishing employees by rewarding or punishing employees for compliance or noncompliance with organizational policies, rules, and procedures
Objective control
the use of observable measures of worker behavior or outputs to assess performance and influence behavior
Behavior control
the regulation of the behaviors and actions that workers perform on the job
Output control
the regulation of workers’ results or outputs through rewards and incentives
Normative control
the regulation of workers’ behavior and decisions through widely shared organizational values of beliefs
Concertive control
the regulation of workers’ behavior and decisions through work group values and beliefs
Self-control (self-management)
a control system in which managers and workers control their own behavior by setting their own goals, monitoring their own progress, and rewarding themselves for goal achievement
Balanced scorecard
Measurement of organizational performance in four equally important areas: finances, customers, internal operations, and innovation and learning
Suboptimization
performance improvement in one part of an organization at the expense of decreased performance in another part
Cash flow analysis
a type of analysis that predicts how changes in a business will affect its ability to take in more cash than it pays out
Balance sheets
Accounting statements that provide a snapshot of a company’s financial position at a particular time
Income statements (profit and loss statements)
accounting statements, also called profit-and-loss statements, that show what has happened to an organization’s income, expenses, and net profit over a period of time.
Financial ratios
calculations typically used to track a business’s liquidity (cash), efficiency, and profitability over time compared to other businesses in its industry
Budgets
Quantitative plans through which managers decide how to allocate available money to best accomplish company goals
Economic value added (EVA)
the amount by which company profits (revenues, minus expenses, minus taxes) exceed the cost of capital in a given year
Customer defections
a performance assessment in which companies identify which customers are leaving and measure the rate at which they are leaving
Value
Customer perception that the product quality is excellent for the price offered
What are the two kinds of objective control:
Behavior and Output
Managers can use five different methods to achieve control in their organization, what are they?
Bureaucratic, objective, normative, concertive and self control
Ways in which companies are controlling the 4 basic parts of the Balance Score Card’s
1. Financial perspective (budgets, cash flows, and economic value added)
2. Customer perspective (customer defections)
3. Internal perspective (total quality management)
4. Innovation & Learning perspective (waste & pollution)
2 phases in the development of concertive control
1. Group members learn to work with each other, supervise each others work
2. Beliefs and values developed in phase one develops into more objective rules as new members join teams.
Customer Defections
A performance assessment in which companies identify with customers are leaving and measure the rate at which they are leaving.
Cybernetic Control Process
• Begins by setting standards
• Measuring performance
• And then comparing performance to the standards (compare with standards)
• Identify Deviations
• Analyze deviations
• Develop and Implement Program for Corrective Action
Calculating Economic Value Added (EVA)
1) Calculate net operating profit after taxes (NOPAT)
2) Identify how much capital the company has invested (i.e., spent)
3) Determine the cost (i.e., rate) paid for capital (usually between 5 percent and 13 percent)
4) Multiply capital used (Step 2) times cost of capital (Step 3)
5) Subtract the total dollar cost of capital from net profit after taxes.

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