Management Chapter 14: Managerial Control Flashcards

Questions and Answers

What is control?

Any process that directs the activities of individuals toward the achievement of the organizational goals.

Which of the following are signs that a company lacks control? (Select all that apply)

Absence of policies (correct)

Lax top management (correct)

Effective communication

Lack of agreed standards (correct)

What does lax top management signify?

Senior managers don't emphasize or value the need for controls, or they set a bad example.

What is the absence of policies?

The firm's expectations are not established in writing. Signup and view all the answers

What does lack of agreed standards imply?

Organization members are unclear about what needs to be achieved. Signup and view all the answers

What does 'shoot the messenger' management refer to?

Employees feel their careers would be at risk if they reported bad news. Signup and view all the answers

What is a lack of periodic review?

Managers don't assess performance on a regular basis. Signup and view all the answers

What defines bad information systems?

Key data are not measured and reported in a timely and easily accessible way. Signup and view all the answers

What does lack of ethics in the culture indicate?

Organization members have not internalized commitment to integrity. Signup and view all the answers

What is managerial control?

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What is bureaucratic control?

The use of rules, regulations, and authority to guide performance. Signup and view all the answers

What is market control?

Control based on the use of pricing mechanisms and economic information to regulate activities within organizations. Signup and view all the answers

What is clan control?

Control based on the norms, values, shared goals, and trust among group members. Signup and view all the answers

What are the 4 steps of control systems?

<ol> <li>Setting performance standards. 2. Measuring performance. 3. Comparing performance against the standards and determining deviations. 4. Taking action to correct problems and reinforce successes.</li> </ol> Signup and view all the answers

What is the principle of exception?

A managerial principle stating that control is enhanced by concentrating on the exceptions to or significant deviations from the expected result/standard. Signup and view all the answers

What is feed-forward control?

The control process used before operations begin, including policies, procedures, and rules designed to ensure that planned activities are carried out properly. Signup and view all the answers

What is concurrent control?

The control process used while plans are being carried out, including directing, monitoring, and fine-tuning activities as they are performed. Signup and view all the answers

What is feedback control?

Controls that focus on the use of information about previous results to correct deviations from the acceptable standard. Signup and view all the answers

What role does Six Sigma play?

At a six-sigma level, a process is producing fewer than 3.4 defects per million, which signifies a high level of accuracy. Signup and view all the answers

What is a management audit?

An evaluation of the effectiveness and efficiency of various systems within an organization. Signup and view all the answers

What is an external audit?

Investigates other organizations for possible merger or acquisition; determines the soundness of a company that will be used as a major supplier; discovers the strengths and weaknesses of a competitor. Signup and view all the answers

What is an internal audit?

Assesses what the company has done for itself and for its customers or other recipients of its goods/services. Signup and view all the answers

What is budgeting?

The process of investigating what is being done and comparing the results with the corresponding budget data to verify accomplishments or remedy differences. Signup and view all the answers

What are accounting audits?

Procedures used to verify accounting reports and statements. Signup and view all the answers

What is Activity-Based Costing (ABC)?

A method of cost accounting designed to identify streams of activity and allocate costs across particular business processes according to the amount of time employees devote to particular activities. Signup and view all the answers

What is a balance sheet?

A report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholder equity. Signup and view all the answers

What are assets?

The values of the various items the corporation owns. Signup and view all the answers

What are liabilities?

The amounts a corporation owes to various creditors. Signup and view all the answers

What is stockholder equity?

The amount accruing to the corporation's owners. Signup and view all the answers

What is a profit & loss statement?

An itemized financial statement of the income and the expenses of a company's operation. Signup and view all the answers

What is the current ratio?

A liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities. Signup and view all the answers

What is a debt-equity ratio?

A leverage ratio that indicates the company's ability to meet its long-term financial obligations. Signup and view all the answers

What is return on investment (ROI)?

A ratio of profit to capital used, or a rate of return from capital. Signup and view all the answers

What is management myopia?

Focusing on short-term earnings and profits at the expense of longer-term strategic obligations. Signup and view all the answers

What is a balanced scorecard?

Control system combining four sets of performance measures: Financial, Customer, Business Process, Learning, and Growth. Signup and view all the answers

Study Notes

Control

Refers to processes guiding individuals towards achieving organizational goals.

Signs of Lack of Control

Lax Top Management: Senior managers undervalue the necessity of controls or set poor examples.
Absence of Policies: Expectations are not documented, leading to ambiguity.
Lack of Agreed Standards: Members are unclear about organizational objectives, resulting in ineffective efforts.
"Shoot the Messenger" Management: Employees fear career repercussions for reporting unfavorable information.
Lack of Periodic Review: Insufficient performance assessments prevent timely adjustments.
Bad Information Systems: Poor data management leads to delays and inaccessibility of critical information.
Lack of Ethics in Culture: Integrity is not prioritized among organization members.

The Control Process

Consists of setting performance standards, measuring performance, comparing results to standards, and taking corrective actions.

Managerial Control Types

Bureaucratic Control: Utilizes rules and authority for performance guidance.
Market Control: Employs pricing and economic metrics for regulating organizational activities.
Clan Control: Based on shared values and trust among group members.

Steps in Control Systems

Establish performance standards.
Measure actual performance.
Compare performance to standards and identify variances.
Take corrective measures and recognize achievements.

Performance Standards

Standards serve as benchmarks for assessing performance in terms of quality, quantity, cost, and time.

Principle of Exception

Focus on significant deviations from expected results enhances managerial control.

Types of Control

Feed-forward Control: Implemented prior to operations to ensure proper execution of plans.
Concurrent Control: Monitors ongoing activities, allowing real-time adjustments.
Feedback Control: Analyzes past results to correct future deviations from standards.

Six Sigma

A process achieving less than 3.4 defects per million opportunities, indicating high accuracy and efficiency.
Results in lower production costs and improved customer satisfaction.

Audits

Management Audit: Evaluates the effectiveness and efficiency of organizational systems.
External Audit: Investigates potential mergers, assesses suppliers, and evaluates competitors.
Internal Audit: Reviews organizational performance regarding its services and customer satisfaction.

Budgeting

A process for comparing actual results against budgeted data to assess and rectify discrepancies.

Financial Assessments

Balance Sheet: Snapshot of a company's assets, liabilities, and equity at a specific time.
Assets: Corporate-owned items; essential for financial health.
Liabilities: Outstanding obligations to creditors.
Stockholder Equity: Residual value accruing to the company's owners.

Profit & Loss Statement

Comprehensive report detailing income and expenses from company operations.

Financial Ratios

Current Ratio: Indicates short-term asset sufficiency against liabilities.
Debt-Equity Ratio: Assesses leverage and ability to meet short-term obligations.
Return on Investment (ROI): Ratio that measures profit relative to capital used.

Management Myopia

Focused on short-term profits, often neglecting long-term strategic goals.

Balanced Scorecard

Integrated performance measurement system encompassing financial, customer, business process, and learning and growth metrics.

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Description

Test your knowledge on key concepts from Chapter 14 of Management, focusing on 'Managerial Control'. This quiz features flashcards that define important terms and identify signs of lack of control within organizations. Perfect for students looking to reinforce their understanding of managerial practices.