MGMT Chapter 14

Balanced scorecard
an integrated and “balanced” set of measures for four critical areas of perspectives: financial, customers, internal business and innovation and learning
Balanced-Scorecard: Advantages
-Requires managers to link measures of organizational success more closely to strategic objectives.
-Encourages managers to assess whether success in one area may be coming at the expense of poor performance in another area.
-Focuses on more than just financial numbers.
Balanced-Scorecard: Disadvantages
Over-focus on financial ratios and budgetary controls and neglecting controls in other areas, financial perspective focuses on the past and the other three focus on the future
Break-even point:
amount of a product that must be solid to cover a firm’s fixed and variable costs (R=C)
Budgetary control:
a type of tactical control based on responsibility for meeting financial targets and evaluating how well those targets have been met
Bureaucratic control
an approach to tactical control that stresses adherence to rules and regulations and is imposed by others
Commitment (clan) control
an approach to tactical control that emphasizes consensus and shared responsibility for meeting goals
Types of Tactical Control
Budgetary, Human Resources Policies & Procedures, Supervisor Structure, Financial Control
Concurrent control
a type of operational control that evaluates the conversion of inputs to outputs while it is happening
Control
regulation of activities and behaviors within organizations; adjustments or conformity to specifications or objectives
-Without control, very little coordination can take place within an organization.
Human resources policies and procedures:
a type of tactical control based on the organizations overall approach to utilitizing its human resources
Operational control
assessment and regulation of the specific activities and methods an organization uses to produce goods and services
Post control
a type of operational control that checks quality after production of goods and service outputs
Precontrol
a type of preoperational control that focuses on the quality, quantity, and characteristics of the inputs into the production process
Types of Operational Control
Post Control, Concurrent Control
Standard:
a performance target, should be as specific as possible
Strategic control
assessment and regulation of how the organization as a whole fits it external environment and meets its long-range objectives and goals
Supervisor structure:
a type of tactical control based on reporting levels in an organization
Tactical control
assessment and regulation of the day-to-day functions of the organization and its major units
-focuses on implementing strategy
How is the control function linked to other managerial functions?
-Control is a necessary function that follows, but compliments, the other major functions of management, which include planning, organizing and leading.
– If prior functions of managing are carried out properly, generating positive responses to controls will be much easier (If the preceding functions work well, then control tends to work well)
Who is responsible for setting standards?
-It starts at the top of the organization, and ideally, should eventually involve every level of employee.
-Those at the top should articulate a vision and formulate broad strategic goals for the organization.
key issues managers consider when establishing standards
How stringent the standards should be, who should set the standards, the degree of difficulty of the standards themselves, how specific should they be
managerial control issues involving budgets
1. Fixed or flexible budgets: Should the company use a fixed or flexible budget?
2. Bonuses based on budgets: Should compensation bonuses be based on the achievement of budgetary targets?
3. Evaluation criteria: Whether those responsible for meeting specified targets should be evaluated only on expenditures and revenues over which they have direct control, or if they should be evaluated on a final “net” figure based on all costs and revenues for a given unit.
4. Tightness of the Budget: Maybe the most important, but is what degree of “stretch” should there be in the budget?
Which is best, Pre, concurrent, or post control?
Precontrol is the best because the more stringent you are about quality of inputs, the less need for control in the later two stages
What factors determine the usefulness of information to the control process?
Did the information contained in the reports actually help managers do their jobs better?
Financial Controls
type of tactical control that include several important quantitative ratios involving key financial statistics
ROI or ROE
-return on investment or return on equity
-compares amount of net profit before taxes (numerator) to total amount of assets invested (denominator)