Chapter 15 Flashcards
The process by which an
organization influences its
subunits and members to
behave in ways that lead to the
attainment of organizational
goals and objectives.
organizational control
*** the fourth facet of POLC
Organizational control typically involves four steps:
(1) establish standards, (2) measure performance, (3) compare performance to standards, and then (4) take
corrective action as needed.
15.2 KT
This chapter introduced the basics of controls, the process by which an
organization influences its subunits and members to behave in ways that
lead to attaining organizational goals and objectives. When properly
designed, controls lead to better performance by enabling the organization
to execute its strategy better. Managers must weigh the costs and benefits of
control, but some minimum level of control is essential for organizational
survival and success.
Recognizing that organizational controls can be
categorized in many ways, it is helpful at this point to
distinguish between two sets of controls:
(1) strategic
controls and (2) management controls, sometimes called
operating controls.
The process by which an
organization tracks the
strategy as it is being
implemented, detecting any
problem areas or potential
problem areas that might
suggest that the strategy is
incorrect, and making any
necessary adjustments.
strategic control
A process concerned with
executing the strategy.
Operational control
It is also valuable to understand that, within the strategic and operational levels of control, there are several types of control. The first two types can be mapped across two dimensions:
level of proactivity and outcome versus behavioral.
The active monitoring of
problems in a way that
provides their timely
prevention, rather than afterthe-fact reaction.
feedforward control
Processes that entail
monitoring and adjusting
ongoing activities.
concurrent control
Processes that involve the gathering of information about
a completed activity,
evaluating that information,
and taking steps to improve the similar activities in the future.
feedback controls
Processes that are generally
preferable when just one or
two performance measures
(say, return on investment or
return on assets) are good
gauges of a business’s health.
Outcome controls
The direct evaluation of
managerial and employee
decision making, not of the
results of managerial decisions
Behavioral controls
The management of a firm’s
costs and expenses to control
them in relation to budgeted
amounts.
Financial control
Processes that track aspects of
the organization that aren’t
immediately financial in
nature but are expected to lead
to positive financial
performance outcomes.
nonfinancial controls
15.3 KT
Organizational controls can take many forms. Strategic controls help
managers know whether a chosen strategy is working, while operating
controls contribute to successful execution of the current strategy. Within
these types of strategy, controls can vary in terms of proactivity, where
feedback controls were the least proactive. Outcome controls are judged by
the result of the organization’s activities, while behavioral controls involve
monitoring how the organization’s members behave on a daily basis.
Financial controls are executed by monitoring costs and expenditure in
relation to the organization’s budget, and nonfinancial controls complement
financial controls by monitoring intangibles like customer satisfaction and
employee morale.
A listing of all planned
expenses and revenues.
Budgeting
here are three basic financial reports that all
managers need to understand and interpret to manage their businesses
successfully:
(1) the balance sheet, (2) the income/profit and loss (P&L) statement,
and (3) the cash flow statement.
*** These three reports are often referred to
collectively as “the financials.”
This financial report is a snapshot of the business’s financial position at a certain point in time. This can be any day of the year, but these are usually done at the
end of each month. With a budget in hand, you project forward and develop pro
forma statements to monitor actual progress against expectations.
Balance sheet
Assets that are cash or can be readily converted to cash in
the short term, such as accounts receivable or
inventory.
Current assets
Assets that are not easily
converted to cash in the short
term; that is, they are assets
that only change over the long
term. Land, buildings,
equipment, vehicles, furniture,
and fixtures are some examples
of fixed assets.
Fixed assets
An asset that cannot be
physically touched, or is not
physical in nature.
Intangible assets (net)
Liabilities coming due in the
short term, usually the coming
year.
Current liabilities
Liabilities may be bank notes
or loans made to purchase the
business’s fixed asset structure.
Long-term debt/liabilities
come due in a time period of
more than 1 year.
Long-term debt
This refers to the amount of money the owner has invested in the firm.
This amount is determined by subtracting current liabilities and long-term debt
from total assets. This is what the owner would
have left in the event of liquidation, or the dollar amount of the total assets that the
owner can claim after all creditors are paid.
owner’s equity
