ch 9 AI QUIZ

Why and How Managers Control

• Controlling is measuring performance and ensuring plans are realized.
• Information serves as the basis for control
• Benefits of controlling include organizational learning.
• After-action reviews are structured reviews of lessons learned and results accomplished in a project.
• After-action reviews makes continuous improvement a shared norm.

Types of Control

• Feedforward controls (preliminary controls) occur before the work or activity begins.
• Feedforward controls ensure clear objectives, proper directions, and available resources.
• Concurrent controls focus on what happens during the work process, like direct supervision.
• Feedback controls (post-action controls) happen after the work is completed.
• Feedback controls emphasizes the quality of end results.

Internal and External Control

• Managers can trust people to control themselves or structure situations for control.
• Self-control is fostered by participation, empowerment, involvement, and a clear sense of mission and goals.
• Bureaucratic control is external and uses authority, policies, procedures, job descriptions, budgets, and supervision.
• Clan control (normative control) influences behavior through norms and expectations set by the organizational culture.
• Strategic control guides an organization through unanticipated events during project implementation.
• Market control is the influence of customers and competition on organizational behavior.

The Control Process

• Involves four steps: establishing objectives and standards, measuring performance, comparing performance to standards, and taking corrective action.
• Focus on critical results when setting objectives.
• The Pareto principle states that 80% of consequences come from 20% of causes.
• Output standards measure actual outcomes.
• Input standards measure work efforts.
• Actual performance is measured using output and input standards.
• The control equation is: Need for action = Desired performance - Actual performance.
• Historical comparisons use past experience to evaluate current performance.
• Management by exception is giving attention to situations with the greatest need for action.
• Problem situations are where actual performance is less than desired.
• Opportunity situations are where performance exceeds expectations.

Control Tools and Techniques

• Projects are one-time events with unique components and time constraints.
• Project management oversees planning, supervision, and control to ensure timely and within-budget completion.
• Gantt charts visually display the scheduling of project tasks.
• CPM/PERT (Critical Path Method/Program Evaluation and Review Technique) breaks projects into sub-activities to ensure the right sequence of events.
• Inventory control minimizes inventory size to meet immediate needs and reduce carrying costs.
• Economic Order Quantity (EOQ) automatically orders a fixed number of items when inventory falls to a set level.
• Just-in-time (JIT) scheduling delivers materials just in time for use, reducing inventory costs.
• The break-even point is where revenues equal costs, calculated as: Fixed Costs / (Price - Variable Cost).
• Break-even analysis is a what-if calculation under different cost and revenue conditions.

Financial Controls

• Financial controls use the balance sheet and income statement.
• The balance sheet shows assets, liabilities, and owner's equity at a point in time: Assets = Liabilities + Owner's Equity.
• The income statement shows profits or losses over a period: Sales - Expenses = Net Income.
• Financial ratios assess liquidity, leverage, asset management, and profitability.
• Liquidity measures the ability to pay short term bills
• Leverage measures the ability to earn more in returns than the cost of dept
• Asset management measures the ability to use resources efficiently and operate at minimum cost
• Profitability measures the ability to earn revenues greater than costs
• Key ratios include:
• Net Margin (Net Income / Sales).
• Return on Assets (Net Income / Total Assets).
• Return on Equity (Net Income / Owner's Equity).

Balanced Scorecards

• Balanced scorecards provide a comprehensive view of a business.
• Developing a scorecard starts with clarifying the organization's mission and vision.
• Considers measures of:
• Financial performance.
• Customer satisfaction.
• Internal process improvement.
• Innovation and learning.