Management Chapter 11

Study Notes

Controlling is the process of measuring performance and taking corrective action as needed
It is one of the four management functions, along with planning, organising, and leading
The control process involves four steps:
- Step 1: Setting objectives and standards
- Step 2: Measuring actual performance
- Step 3: Comparing results with objectives and standards
- Step 4: Taking corrective action as needed

Step 1: Setting objectives and standards
- Setting objectives provides a standard against which results are compared
- Metrics are measurement standards
- Output standards measure results in terms of quantity, quality, cost, or time
- Input standards measure the work efforts that go into the performance task
Step 2: Measuring actual performance
- Measurement is impossible without accurate and timely measurement
- Document outcomes
Step 3: Comparing results with objectives and standards
- Reveals whether the organisation is performing below, at, or above plan
- Control equation: Need for action = Desired performance - Actual performance
Step 4: Taking corrective action as needed
- Addresses any gap between desired and actual performance
- Management by exception focuses attention on situations that show the greatest need

Feedforward controls: used before work begins to prevent problems
Concurrent controls: used while work takes place to solve problems as they arise
Feedback controls: used after work is complete to inform future work
Internal controls: based on self-control by people in the workplace
- Make tasks clear, establish purpose, and provide appropriate resources
External controls: based on methods that structure situations to ensure outcomes
- Bureaucratic control: involves policies, procedures, budgets, and supervision
- Clan control: uses the organisation's culture to influence behaviour
- Market control: the influence of market competition on organisational decisions

Integrates planning and controlling by team leaders and team members
Involves setting performance objectives, planning how to achieve them, and reviewing performance outcomes
How to write a good performance objective:
- Clarify the target
- Make it measurable
- Define the timetable
- Avoid the impossible
- Add challenge
- Don't overcomplicate

Project management controls: used to manage projects
- Work breakdown structure: breaks large tasks into smaller ones and assigns them specific deliverables
- Gantt charts: a visual display of the scheduling of tasks
- CPM/PERT: breaks a project into a set of small subactivities and uses a network diagram to show timelines
Operations management and control: focuses on using people, technology, and other resources to the best advantage
- Quality control: uses total quality management (TQM), continuous improvement, and Six Sigma
- Inventory control: uses just-in-time scheduling and economic order quantities
- Purchasing control: uses centralised purchasing and supplier-purchaser partnerships
Breakeven analysis: used to make informed what-if decisions
- Breakeven point: the point at which revenues equal costs
- Breakeven equation: Breakeven point = Fixed costs ÷ (Revenue - Variable costs)
Financial control: uses financial ratios to measure performance
- Liquidity measures: current ratio and quick ratio
- Leverage measures: debt ratio
- Asset management measures: asset turnover and inventory turnover
- Profitability measures: net margin, return on assets (ROA), and return on equity (ROE)
Balanced scorecard: measures overall organisational performance in four areas: financial, customers, internal processes, and innovation