Steps of control, management homework help

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Attached is the discussion instructions as well as the required reading materials (chapters 7 and 8). Please answer each question substantively and support claims with examples from the reading material.

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Explain why the four steps involved in the controlling function are important. Why is a good understanding of the various ratios used by accountants and managers important to the controlling function? Give specific examples. Guided Response: Your initial post should be at least 250 words in length. Support your claims with examples from required material(s) and properly cite any references. 7 The Controlling Function Moodboard/Thinkstock Learning Objectives After completing this chapter, you should be able to: • Complete the steps involved in the organization’s constant and periodic control systems. • Prescribe specific corrections for problems identified at the functional/departmental level. • Use accounting and financial controls to improve company-wide performance. • Finalize all other aspects of the control process. Introduction Chapter 7 7.1 Introduction The modern organization operates in a complex, ever-changing environment. In fact, the external environment continues to be highly competitive thanks to the ever-increasing expectancies of customers, clients, and key stakeholders. Competitors also constantly vie for market share. Control systems and methods assist managers by providing information about the state of the organization’s production expectancies, financial condition, employee demands, operating systems, marketing activities, governmental influences, and other factors as they arise. Such information is essential to drive manager course correction decisions (Etzioni, 1964; Merchant, 1982). Successful organizations use effective and appropriate control systems to obtain organizational goals and objectives. In this chapter, we explore control systems and their importance to overall organizational success. The first section describes the natures of constant and periodic controls. Next, we consider specific departmental and functional area control systems. In the following section, we examine the role played by financial and accounting standards in an organization’s control process. Finally, we look at other forms of control . MANAGEMENT IN PR AC TICE At McDonald’s, Organizational Controls Move Fast Food into the New Millennium McDonald’s has long been known as the industry leader in fast food, specifically in the area of hamburgers, fries, and a soft drink. Numerous business textbooks describe how the company’s strategic model has led to growth domestically and internationally. Everything from the company’s take on where to place stores (location, location, location) to its mantra of quality, service, cleanliness, and value (McDonalds.com, 2013) to the company’s famous Hamburger University management training program suggests that numerous organizational activities and practices have set the standards for success in a crowded marketplace. The McDonald’s organization has shown the ability to adapt to international circumstances. In India, for example, where consuming beef would violate religious norms, the company created a beefless menu complete with vegetarian burgers and even vegetarian “cheese.” While critics point out that the children’s menu burger is not exactly a healthy choice (Petrun, 2007), it does appeal to a wide audience within that country. About a decade ago, however, the tide of public opinion began to turn against the company in some ways. Movies such as Supersize Me began a period in which McDonald’s and many other food companies experienced criticism regarding the health properties present in their menus. McDonald’s first corporate reaction was to change from using Larry French/AP Images for McDonald’s ▲▲McDonald’s has shown the capacity to adapt to changing circumstances, especially in the area of health-conscious menus. (continued) Introduction Chapter 7 cooking oil based on beef tallow to a vegetable version. Over time it became clear that, if the company were to succeed in a new era and environment, things would need to change. The corporate control system led the way. The company’s evolving sense of mission and vision created new standards for members of the entire organization to follow, from the CEO to individual employees (Git, 2013). Many stores now post the caloric content of each food offering. In 2013 McDonald’s announced plans to sell a greater variety of healthy foods in addition to its traditional menu. In response to concerns about increasing obesity rates among U.S. children, many of these foods were directed at younger consumers. In this instance, a corporation’s control system began to address two major goals. The first was to continue the organization’s success by maintaining customer patronage. The second, and perhaps loftier outcome, would be to sell more products that enable individuals to enjoy a quick meal out that may help them live longer with fewer health issues. In the future, you can expect McDonald’s and other corporations to continue using control systems as a tool for adapting to a changing world. Discussion Questions 1. Do you expect fast food to be healthy food? 2. Should McDonald’s continue to alter its mission to address public health concerns, or should it just give people what they want? 3. How would the most recent changes at McDonald’s affect the marketing department activities, food production, and individual employees waiting on customers in various stores? Controlling is the process of evaluating performance against established goals and creating methods appropriate to take corrective action to maintain or improve performance in any area of the organization. Control systems allow managers to analyze the state of the organization and its various constituent parts to determine if the plan and structural system are achieving expected results. The first distinction to be made involves the differences between what may be described as constant controls and periodic controls. Constant controls regulate organizational activities on a continual basis. Any time a standard is not met, the management team should immediately react with corrective action. Periodic controls assess organizational activities on a regularly scheduled basis. Then managers are able to undertake corrective action as needed. This section examines these two control processes. Constant Controls A great deal of organizational activity is guided by ongoing, continual standards. Such standards regulate the behaviors of individual employees, groups and departments, and the overall organization. Without this form of guidance, companies can quickly drift away from the actions, activities, and behaviors that allow them to succeed. Individual Constant Controls Each employee in any type of organization will be expected to follow certain standards and behavioral guidelines. The principles constitute the basic necessity of maintaining membership in the company. Two primary forms of individual constant controls include work procedures and the organization’s rule/discipline system. Introduction Chapter 7 Work procedures, or specific task instructions, guide the day-to-day operations of the firm. Often, such procedures are carefully spelled out in an organizational manual or handbook. At other times, they are part of the employee training process. Work procedures include directions regarding methods of operation for various tasks. Table 7.1 indicates work procedures for various vocations within an organization. Table 7.1 Examples of work procedures Food preparation Methods of cooking Methods of cleaning cooking equipment Methods for disposing of food waste Methods for maintaining a sanitary work area Accounting procedures Daily entries into accounting documents Methods for paying accounts due Methods for invoicing accounts receivable payments Manufacturing Methods of operating equipment Methods for maintaining/repairing equipment Sales Type of sales pitch to be used Methods for making suggestive sales Office management Methods for maintaining employee privacy Methods for filing information Store management Methods for handling payments, such as checks Methods for closing the store properly Environmental services Methods for disposing of waste Cleaning methods A second set of work procedures covers employee safety. Employees are taught how to complete tasks in the safest manner possible. Examples include wearing protective clothing and eyewear, wearing a hard hat, lifting heavy objects properly, using warning signals when appropriate, handling dangerous materials properly, and so forth. The company’s discipline system ties work procedures, safety procedures, and other elements of employee behavior together. As noted in Chapter 4, the human resources department is largely responsible for creating the system and then assessing penalties when employees violate various rules. All of these ingredients serve to ensure that employees take appropriate actions. Whenever a procedure or rule has been violated, the employee’s immediate supervisor is expected to take immediate corrective action. Infractions are normally reported to the human resources office, so that the incident can be recorded and corrective steps taken to make sure the employee does not break the rule or ignore the procedure in the future. In many organizations, human resources departments prepare policy manuals that spell out company rules, work procedures, and protocols for handling violations of these directives. In addition, various employee manuals spell out procedures across a variety of tasks. These documents, Introduction Chapter 7 when combined with direct supervision, provide the basis for constant control over the activities of employees across the organization. Departmental Constant Controls Individual departments have two forms of control that guide the entire unit. Group norms and functional area policies both help ensure the department stays aligned with the overall organization’s purposes and directives. Group norms form in both formal and informal settings. Norms, or rules of behavior, dictate how departmental members interact with one another and with managers at higher ranks. Norms tend to operate in the areas of productivity, work behaviors, and social behaviors. Norms often quickly evolve in the area of productivity. Management’s responsibility will be to ensure that such norms emphasize giving full effort to the greatest extent possible. Those who fail to meet the group standards may be “sanctioned” by coworkers to try harder or keep up with the pace set by the group. Sanctions take the forms of praise for positive actions and criticism for negative results. Work behaviors include the manner of dress the organization and department deem to be acceptable. In some companies, only a suit Brian McEntire/iStock/Thinkstock and tie are appropriate attire for men, and ▲▲Wearing the type of dress that an organization considers only conservative outfits are acceptable for acceptable is an example of a work behavior. women. In others, varying degrees of clothing options may be considered admissible, from work casual to blue jeans and T-shirts. Work behaviors also cover the use of language in daily operations. For some, use of profanity is the norm and takes place constantly. In other departments, such language would quickly meet with disapproval by coworkers and managers. The same holds true for the manner of addressing supervisors and others. In the legal system, a judge is referred to as “Your Honor” in any formal setting, for example. Social behaviors include views of office romances and relationships between employees and supervisors. Many organizations strongly discourage dating within a specific office, unit, or department. Relationships between employees and their supervisors are also often affected by norms. In some companies, it would be considered very bad form to socialize with someone of a higher rank. In others, such activities would be commonplace. As is the case with individual constant controls, violations of group norms often meet with quick and consistent corrections. Someone who acts inappropriately will encounter criticism and worse from peers and supervisors. Functional area policies are the dictates that guide activities of an organizational department or unit. Each department creates specific directives that should be aligned with overall company policies. When a policy is violated, management will step in and make certain the situation is corrected. Examples of functional area policies are provided in Table 7.2. Introduction Chapter 7 Table 7.2 Examples of functional area policies Accounting Methods of depreciation of assets Methods of inventory valuation Marketing Pricing systems Preferred promotional activities Protocols for hiring advertising agencies and public relations agencies Human resources Methods for recruiting and hiring employees that best match the company Pay systems Benefit programs Production Methods used for quality control Once again, departmental managers are expected to abide by functional area policies. Any that are not followed should meet with quick and consistent correction protocols. Company-Wide Constant Controls As noted in Chapter 2, mission statements define the organization’s overall purpose and reason for being. A corporation’s board of directors oversees the application of the company’s mission statement and is largely responsible for any alterations or revisions to that statement. Then, the CEO and other top managers will be expected to carry out the mission and prevent the organization from drifting off course. Vision statements then outline the direction for the organization as it moves into the future. At the most basic level, mission and vision statements serve as the ultimate constant controls because they regulate and guide the entire organization. Top-level managers, even in companies without boards of directors, should constantly examine the path the organization takes, making sure the actions remain consist with these statements. Thus any activity that pulls the organization away from its mission should be corrected as quickly as possible. A few years ago, when Toyota experienced problems in the area of product quality, the CEO quickly apologized and promised to get the organization back on course. Over the years, many similar statements have been made by company executives when they recognized the need to remain true to the organization’s mission. In 2013, Chris Franz, CEO of Peak Venture Group, stated the company needed to return to its core mission of reaching out to the community and providing resources to local entrepreneurs (Gillentine, 2013). In summary, a series of individual, departmental, and company-wide standards and practices create one level of organizational control. Any time one of these guidelines is violated, managers are advised to step in and make immediate corrections. Organizations with high-quality, constant control systems are much more likely to survive and succeed over time. When constant controls are complemented by periodic controls, the company’s odds of success rise to an even higher level. Periodic Controls Planning and controlling are inseparable parts of the management system. Standards are set in planning, and the controlling system uses those standards to identify and correct problems. The Introduction Chapter 7 standard control process consists of four steps (Anthony & Govindarajan, 2007; Steers, Ungston, & Mowday, 1985): 1. Review the standards set in the planning process. 2. Measure performance at the strategic, tactical, and operational levels. 3. Compare performance outcomes with the standards that were set. 4. Make a decision: • Successful performance should be rewarded. • Unsuccessful performance should be corrected. Reviewing Performance Standards Control processes are carried out on three levels: company-wide, departmental or functional area, and individual. These are the same three levels at which plans were written. At the ­company-wide level, the executive team is responsible for evaluation of activities. Departmental managers assess success in their functional areas. Supervisors working in concert with the human resources department conduct individual performance appraisals. Planning forms the basis for an effective control system. Managers who fail to prepare quality standards have no basis for evaluating performance. The goal-setting literature (Locke, Shaw, Saari, & Latham, 1981) has taught us that quality goals reflect the following characteristics: • • • • difficult but attainable measurable clearly stated flexible At all three levels, members of the organization should be challenged to achieve at the highest levels. Difficult but attainable goals establish an environment in which employees are not tempted to slack off when goals are too easy and are readily met, or to give up when goals are too hard. Measurable goals are a necessity. Without tangible performance targets, control systems cannot work. Clearly stated goals eliminate hedging and fudging. Managers and workers at all levels are accountable for results. Accomplishing the objectives that have been set forms the basis for promotion decisions and other rewards. Goal setting should remain flexible. When organizational circumstances change, the planning and goal-setting systems should be adjusted to the new circumstances. Measuring Actual Performance Many individuals and departments gather data to conduct performance analysis. This data can be quantitative, qualitative, or both. Staff members in various positions make reports that measure actual performance across the company. Top management examines the documents in reports that contain information regarding strategic goals, such as market share, profitability, and well-being of various strategic business units. Judgments are made about the numbers as well as more subjective concepts, such as the strength of the company’s brand name and image. Departmental leaders report on statistics from each area. Examples include the items shown in Table 7.3. In the performance analysis process, individual measures are developed for the performance appraisal process: Production workers are assessed with measures of individual output. Salespeople face sales quotas. Each area has goals that have been set for individual employees. Introduction Chapter 7 Table 7.3 Tactical/functional analyses Function Examples of factors to analyze Production Costs, on-time delivery rates, consumer views of quality Quality control Rates of defects/returns Marketing Market share, brand loyalty or power Sales By total volume, product lines, individual products Accounting Errors noted by auditors Finance Cost of capital, liquidity, leverage (debt ratio) Information technology Quality of website, online ordering systems, support of internal operations Research and development Number of innovations adopted Human resources Rates of absenteeism, tardiness, turnover Comparing Performance to Standards Performance data that has been gathered can be compared with the established standards. For example, the budget is compared to the actual department income statement. The variance between the actual performance and the budget allows the manager to assess how he or she performed during the period in question. When making comparisons, five outcomes are possible: 1. The person or unit greatly exceeded the standard. 2. The standard was met. 3. The standard was missed slightly. 4. The standard was missed. 5. The standard was badly missed. As an example, suppose a product has been on the market for six months. A sales goal was established for 100,000 units to be produced and sold in the coming year. If the total sales turn out to be 150,000 units, the standard was greatly exceeded and management must establish a more realistic standard for the following year. If the ...
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OUTLINE

INTRODUCTION

BODY

CONCLUSION

REFERENCE


MGT

1

Control Function
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MGT

2
CONTROL FUNCTION
Controlling is the process of evaluating performance against goals and creates necessary

methods for taking actions to improve or maintain the performance of the organization. The
process includes the following steps; establishing and reviewi...

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