ADM 1100 Introduction To Business Management: November 21, 2018

ADM 1100
INTRODUCTION TO
BUSINESS MANAGEMENT
November 21, 2018
Copyright © 2019 Pearson Canada Inc. 17 - 1

Agenda
• Chapter 17
• Next Class – Exam review

What Is Controlling, and Why Is It
Important?
Controlling:
The process of monitoring activities to ensure that

they are being accomplished as planned,
correcting any significant deviations, and where
necessary modifying the plan

Important?
Why Is Control Important?
• One of the four management functions

• The only way managers know whether
organizational goals are being met and, if not,
the reasons why.

Interrelationship - The 4 Management
Functions

Important?
The final link in management functions:
• Planning
• Empowering employees
• Protecting the workplace

The Control Process
Control Process
A three-step process:
1. Measuring actual performance
2. Comparing actual performance against a
standard
3. Taking action to correct deviations or
inadequate standards

The Control Process

The Control Process
Step 1 – Measuring Performance
Sources of Information:
• Personal observations
• Statistical reports
• Oral reports
• Written reports

The Control Process
How We Measure
Four sources of information frequently used by
managers to measure actual performance are:
– personal observations
– statistical reports
– oral reports
– written reports

Common Sources of Information for
Measuring Performance
Blank Advantages Drawbacks
Personal observations • Get firsthand knowledge • Subject to personal
(management by walking • Information isn’t filtered biases
around) • Intensive coverage of • Time consuming
work activities • Can distract employees
Statistical reports • Easy to visualize • Provide limited
• Effective for showing information
relationships • Ignore subjective factors
Oral reports • Fast way to get • Information is filtered
information • Information cannot be
• Allow for verbal and documented
nonverbal feedback
Written reports • Comprehensive • Take more time to
• Formal prepare
• Easy to file and retrieve

The Control Process
What We Measure
• What we measure is probably more critical to the
control process than how we measure.
• The selection of the wrong criteria can result in
serious dysfunctional consequences.

The Control Process

The Control Process
Step 2 – Comparing
Comparing requires determining the degree of

variation between actual performance and the
standard.
• Significance of variation is determined by:

– The acceptable range of variation from the standard
(forecast or budget)
– The size (large or small) and direction (over or under)
of the variation from the standard

The Control Process
Range of variation
The acceptable degree of variation between actual

performance and the standard.

Defining the Acceptable Range of Variation

Sales Performance Figures for July, Beer
Unlimited
(number of cases)
Brand Standard Actual Over (Under)
Premium Lager (Okanagan Spring, 1075 913 (162)
Vernon, BC)
India Pale Ale (Alexander Keith’s, 800 912 112
Halifax)
Maple Brown Ale (Upper Canada 620 622 2
Brewery, Guelph, ON)
Blanche de Chambly (Brasseries 160 110 (50)
Unibroue, Quebec)
Full Moon (Alley Kat, Edmonton) 225 220 (5)
Black Cat Lager (Paddock Wood 80 65 (15)
Brewing, Saskatoon, Saskatchewan)
Bison Blonde Lager (Agassiz, 170 286 116
Winnipeg)
Total cases 3130 3128 (2)

The Control Process

The Control Process
Step 3 - Taking Managerial Action
Summary of Managerial Decisions:

• “Doing nothing”
– Only if deviation is insignificant
• Correcting actual (current) performance
– Immediate or basic corrective action
• Revising the standard
– Determine whether the standard is realistic, fair, and
achievable

The Control Process
Immediate corrective action
Corrective action that corrects problems at once to

get performance back on track.
Basic corrective action
Corrective action that looks at how and why

performance deviated and then proceeds to
correct the source of deviation.

The Control Process
Revise the Standard
– In some cases, variance may be a result of an
unrealistic standard—a goal that’s too low or too high.

Managerial Decisions in the Control Process

Controlling for Organizational and
Employee Performance
Performance Standards
Managers in all types of businesses are responsible
for managing organizational and employee
performance.

What Is Performance
The end result of an activity.

Organizational Performance
The accumulated end results of all of the
organization’s work processes and activities.
– Designing strategies, work processes, and work

activities.
– Coordinating the work of employees.

Organizational Productivity
The overall output of goods and/or services

divided by the inputs needed to generate that
output.

Organizational Effectiveness
A measure of how appropriate organizational

goals are and how well those goals are being met

Controlling for Employee Performance
Managers have to be concerned about controlling
for employee performance;
• quantity and quality to meet organizational goals
Disciplinary actions:
Actions taken by a manager to enforce the

organization’s work standards and regulations.

Types of Discipline Problems and Examples of Each
Attendance Absenteeism, tardiness, abuse of sick leave

On-the-Job Behaviours Insubordination, failure to use safety devices,
alcohol or drug abuse
Dishonesty Theft, lying to supervisors, falsifying information
on employment application or on other
organizational forms
Outside Activities Criminal activities, unauthorized strike activities,
working for a competing organization (if no-
compete clause is part of employment)

Tools for Measuring Organizational
Performance - Types of Control

Performance
Feed-forward Control:
A type of control that focuses on preventing

anticipated problems, since it takes place before
the actual activity.

Performance
Concurrent Control:
A type of control that takes place while an activity

is in progress

Performance
Feedback Control:
Control that takes place after a work activity is done.

Performance
Feedback Control:
• Takes place after an activity is done
– Corrective action is after-the-fact, when the problem
has already occurred.
• Advantages
– Feedback provides managers with information on the
effectiveness of their planning efforts.
– Feedback enhances employee motivation by providing
them with information on how well they are doing.

Performance
Financial Controls:
Managers might use traditional financial measures such as
ratio analysis and budget analysis. Includes:
– Leverage ratios
– Activity ratios
– Profitability ratios

Performance
Information Controls:
Managers deal with information controls in two
ways:
1. as a tool to help them control organizational
activities
2. as an organizational asset they need to protect.

Performance
Management Information Systems (MIS):
A system used to provide management with

needed information on a regular basis.

Performance
Data:
Raw, unanalyzed facts versus processed

information
Dashboard:
An interface that presents managers and other
decision makers with an easy-to-read, real-time
user interface often employing a graphical
presentation of the data to enable decision makers
to make informed decisions quickly.

Performance
Balanced Scorecard:
A measurement tool that uses goals set by

managers in four areas to measure a company’s
performance.
– Financial
– Customer
– Internal processes
– People/innovation/growth assets

Performance
Benchmarking
The search for the best practices among

competitors or noncompetitors that lead to
their superior performance.
Benchmark
The standard of excellence against which

to measure and compare.

Suggestions for Internal Benchmarking
1. Connect best practices to strategies and goals. The organization’s strategies and
goals should dictate what types of best practices might be most valuable to others in
the organization.
2. Identify best practices throughout the organization. Organizations must have a way to
find out what practices have been successful in different work areas and units.
3. Develop best-practices reward and recognition systems. Individuals must be given an
incentive to share their knowledge. The reward system should be built into the
organization’s culture.
4. Communicate best practices throughout the organization. Once best practices have
been identified, that information needs to be shared with others in the organization.
5. Create a best-practices knowledge sharing system. There needs to be a formal
mechanism for organizational members to continue sharing their ideas and best
practices.
6. Nurture best practices on an ongoing basis. Create an organizational culture that
reinforces a “we can learn from everyone” attitude and emphasizes sharing
information.
Source: Based on “Extracting Diamonds in the Rough” by Tad Leahy, from Business Finance, August 2000.

Contemporary Issues in Control
Controlling Customer Interactions
Interaction between customers and employees
- Customer service
Service profit chain
The service sequence from employees to
customers to profit
High service value – positive customer satisfaction
Loyalty

Organizational Governance:
The system used to govern a corporation so that

the interests of stakeholders are protected.
– Changes in the role of boards of directors

– Increased scrutiny of financial reporting

Adjusting Controls for Cross-Cultural Differences &
Global Turmoil
• The use of technology to increase direct corporate
control of local operations.
• Legal constraints on corrective actions in foreign
countries.
• Difficulty with the comparability of data collected
from operations in different countries.

Contemporary Issues in Control (5 of 5)
Emerging Workplace Concerns
• Privacy versus monitoring:
– E-mail, telephone, computer, and Internet usage can all
be monitored
• Employee theft
– The unauthorized taking of company property by
employees for their personal use
• Employee safety
– Anger, rage, and violence in the workplace is affecting
employee productivity
Control Measures for Deterring or Reducing
Employee Theft or Fraud
Feed-Forward Concurrent Feedback
Use careful pre-hiring screening. Treat employees with respect and Make sure employees know when
dignity. theft or fraud has occurred—not
Establish specific policies defining
naming names but letting people
theft and fraud and discipline Openly communicate the costs of
know this is not acceptable.
procedures. stealing.
Involve employees in writing policies. Let employees know on a regular Use the services of professional
basis about their successes in investigators.
Educate and train employees about
preventing theft and fraud. Redesign control measures.
the policies.
Use video surveillance equipment if Evaluate your organization’s culture
Have professionals review your
conditions warrant. and the relationships of managers
internal security controls.
Install “lock-out” options on and employees.
computers, telephones, and e-mail.
Use corporate hotlines for reporting
incidents.
Set a good example.
Sources: Based on A. H. Bell and D. M. Smith, “Protecting the Company Against Theft and Fraud,” Workforce Online,
December 3, 2000, www.workforce.com; J. D. Hansen, “To Catch a Thief,” Journal of Accountancy, March 2000, pp.
43–46; and J. Greenberg, “The Cognitive Geometry of Employee Theft,” in Dysfunctional Behavior in Organizations:
Nonviolent and Deviant Behavior, eds. S. B. Bacharach, A. O’Leary-Kelly, J. M. Collins, and R. W. Griffin, pp. 147–193
(Stamford, CT: JAI Press, 1998).

Next Class
Final exam review.

ADM 1100 Introduction To Business Management: November 21, 2018

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ADM 1100

November 21, 2018

Copyright © 2019 Pearson Canada Inc. 17 - 1

Copyright © 2019 Pearson Canada Inc. 17 - 2

The process of monitoring activities to ensure that

Copyright © 2019 Pearson Canada Inc. 17 - 3

• One of the four management functions

Copyright © 2019 Pearson Canada Inc. 17 - 4

Copyright © 2019 Pearson Canada Inc. 17 - 5

Copyright © 2019 Pearson Canada Inc. 17 - 6

Copyright © 2019 Pearson Canada Inc. 17 - 7

Copyright © 2019 Pearson Canada Inc. 17 - 8

Copyright © 2019 Pearson Canada Inc. 17 - 9

Copyright © 2019 Pearson Canada Inc. 17 - 10

Copyright © 2019 Pearson Canada Inc. 17 - 11

Copyright © 2019 Pearson Canada Inc. 17 - 12

Copyright © 2019 Pearson Canada Inc. 17 - 13

Comparing requires determining the degree of

• Significance of variation is determined by:

Copyright © 2019 Pearson Canada Inc. 17 - 14

The acceptable degree of variation between actual

Copyright © 2019 Pearson Canada Inc. 17 - 15

Copyright © 2019 Pearson Canada Inc. 17 - 16

Copyright © 2019 Pearson Canada Inc. 17 - 17

Copyright © 2019 Pearson Canada Inc. 17 - 18

Summary of Managerial Decisions:

Copyright © 2019 Pearson Canada Inc. 17 - 19

Corrective action that corrects problems at once to

Basic corrective action

Corrective action that looks at how and why

Copyright © 2019 Pearson Canada Inc. 17 - 20

Copyright © 2019 Pearson Canada Inc. 17 - 21

Copyright © 2019 Pearson Canada Inc. 17 - 22

Copyright © 2019 Pearson Canada Inc. 17 - 23

The end result of an activity.

– Designing strategies, work processes, and work

Copyright © 2019 Pearson Canada Inc. 17 - 24

The overall output of goods and/or services

Copyright © 2019 Pearson Canada Inc. 17 - 25

A measure of how appropriate organizational

Copyright © 2019 Pearson Canada Inc. 17 - 26

Actions taken by a manager to enforce the

Copyright © 2019 Pearson Canada Inc. 17 - 27

Attendance Absenteeism, tardiness, abuse of sick leave

Copyright © 2019 Pearson Canada Inc. 17 - 28

Copyright © 2019 Pearson Canada Inc. 17 - 29

A type of control that focuses on preventing

Copyright © 2019 Pearson Canada Inc. 17 - 30

A type of control that takes place while an activity

Copyright © 2019 Pearson Canada Inc. 17 - 31

Control that takes place after a work activity is done.

Copyright © 2019 Pearson Canada Inc. 17 - 32

Copyright © 2019 Pearson Canada Inc. 17 - 33

Copyright © 2019 Pearson Canada Inc. 17 - 34

Copyright © 2019 Pearson Canada Inc. 17 - 35

A system used to provide management with

Copyright © 2019 Pearson Canada Inc. 17 - 36

Raw, unanalyzed facts versus processed

Copyright © 2019 Pearson Canada Inc. 17 - 37

A measurement tool that uses goals set by

Copyright © 2019 Pearson Canada Inc. 17 - 38

The search for the best practices among

The standard of excellence against which