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Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
Chapter 13 - Control Systems: Financial and Human
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Chapter 13 - Control Systems: Financial and Human

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  • 1. Control Systems: Financial and Human
  • 2. Learning Outcomes <ul><li>List the four stages of the systems process and describe the type of control used at each stage. </li></ul><ul><li>Describe the appropriate feedback process within and between the functional areas/departments. </li></ul><ul><li>List the four steps in the control systems process. </li></ul><ul><li>Describe the differences among the three categories of control frequency. </li></ul><ul><li>Explain how the capital expenditures budget is different from the expense budget. </li></ul><ul><li>List the three primary financial statements and what is presented in each of them. </li></ul>After studying this chapter, you should be able to:
  • 3. Learning Outcomes (cont’d) <ul><li>Explain the importance of positive motivational feedback in coaching. </li></ul><ul><li>Explain the manager’s role in counseling and the role of the employee assistance program staff. </li></ul><ul><li>Define the key terms listed at the end of the chapter. </li></ul>After studying this chapter, you should be able to:
  • 4. IDEAS ON MANAGEMENT at The Ranch Golf Club <ul><li>How does The Ranch control the organizational system? How does The Ranch control the functional systems? </li></ul><ul><li>How does The Ranch use the control systems process, and how is it performing? </li></ul><ul><li>What control methods are used to achieve objectives and standards at The Ranch? </li></ul><ul><li>What are the major operating budget revenues and expenses at The Ranch? </li></ul><ul><li>How does The Ranch use capital expenditure budgets? How does The Ranch use financial statements and budgets? </li></ul><ul><li>Does Peter Clark coach his Jiffy Lube business, The Ranch, and sports teams the same way? </li></ul><ul><li>How does The Ranch get feedback to improve performance? </li></ul>
  • 5. Exhibit 13 – 1 ● The Systems Process with Types of Controls
  • 6. Organizational Systems Control <ul><li>Controlling </li></ul><ul><ul><li>The process of establishing and implementing mechanisms to ensure that objectives are achieved. </li></ul></ul><ul><li>Preliminary Control (Feedforward Control) </li></ul><ul><ul><li>Controls designed to anticipate and prevent possible problems (e.g., preventive maintenance) </li></ul></ul><ul><ul><li>Planning and organizing are the keys to preliminary control. </li></ul></ul><ul><ul><ul><li>Standing plans are designed to control employee behavior in recurring situations to prevent problems. </li></ul></ul></ul><ul><ul><ul><li>Contingency plans tell employees what to do if problems occur. </li></ul></ul></ul>
  • 7. Organizational Systems Control (cont’d) <ul><li>Concurrent Control </li></ul><ul><ul><li>Action taken to ensure that standards are met as inputs are transformed into outputs. </li></ul></ul><ul><li>Rework Control </li></ul><ul><ul><li>Action taken to fix an output. </li></ul></ul><ul><li>Damage Control </li></ul><ul><ul><li>Action taken to minimize negative impacts on customers/stakeholders due to faulty outputs. </li></ul></ul><ul><li>Feedback </li></ul><ul><ul><li>Information about outputs from customers and stakeholders. </li></ul></ul>
  • 8. &nbsp;
  • 9. Exhibit 13 –2 ● Systems Processes for Functional Areas/Departments
  • 10. Exhibit 13 –2 ● Systems Processes for Functional Areas/Departments (cont’d)
  • 11. Exhibit 13 –3 ● The Feedback Process between Functional Areas/Departments
  • 12. Exhibit 13 –4 ● The Control Systems Process <ul><li>Balanced Standards: </li></ul><ul><li>Quantity </li></ul><ul><li>Quality </li></ul><ul><li>Time </li></ul><ul><li>Cost </li></ul><ul><li>Behavior </li></ul>Identify Critical Success Factors (CSFs)
  • 13. Exhibit 13 –5 ● Operations Performance Report
  • 14. Join the Discussion Ethics &amp; Social Responsibility <ul><li>Academic Grades </li></ul><ul><ul><li>Why are professors giving higher grades today than were given 5, 10, or 20 years ago? </li></ul></ul><ul><ul><li>Are students who are putting in less time and getting higher grades being well prepared for a career with high standards after graduation? </li></ul></ul><ul><ul><li>Is it ethical and socially responsible for professors to drop standards and for colleges to award higher grades today than they did 5, 10, or 20 years ago? </li></ul></ul><ul><ul><li>Should colleges take action to raise standards? If so, what should they do? </li></ul></ul>
  • 15. Exhibit 13 –6 ● Types, Frequency, and Methods of Control
  • 16. &nbsp;
  • 17. Exhibit 13 –7 ● Steps in the Master Budgeting Process
  • 18. Budgeting <ul><li>Budget </li></ul><ul><ul><li>A planned quantitative allocation of resources for specific activities. </li></ul></ul><ul><li>Operating Budget </li></ul><ul><ul><li>Revenue Budget </li></ul></ul><ul><ul><ul><li>A forecast of total income for the year. </li></ul></ul></ul><ul><ul><li>Expense Budget </li></ul></ul><ul><ul><ul><li>A forecast of total operating spending for the year. </li></ul></ul></ul><ul><li>Capital Expenditures Budget </li></ul><ul><ul><li>All planned expenditures for major asset investments. </li></ul></ul>
  • 19. Join the Discussion Ethics &amp; Social Responsibility <ul><li>Expenses </li></ul><ul><ul><li>Is it ethical and socially responsible for PricewaterhouseCoopers to charge the full rate for travel expenses when it gets discounts? </li></ul></ul><ul><ul><li>If you worked for a company and knew it did this, would you say anything to anyone about it? If yes, to whom would you speak and what would you say? </li></ul></ul>
  • 20. Financial Statements <ul><li>Income Statement </li></ul><ul><ul><li>Presents revenues and expenses and the profit or loss for the stated period of time. </li></ul></ul><ul><li>The Balance Sheet </li></ul><ul><ul><li>Presents the assets and liabilities and owners’ equity for the stated period of time. </li></ul></ul><ul><li>Cash Flow Statement </li></ul><ul><ul><li>Presents the cash receipts and payments for the stated time period. </li></ul></ul>
  • 21. Exhibit 13 –8 ● IBM Financial Statements (in millions) Source : http://www.ibm.com, as of December, 2006.
  • 22. Human Controls <ul><li>Coaching </li></ul><ul><ul><li>The process of giving motivational feedback to maintain and improve performance. </li></ul></ul><ul><li>The Importance of Positive Feedback </li></ul><ul><ul><li>Many managers spend more time giving negative criticism than praise. </li></ul></ul><ul><ul><li>Managers who only criticize employees tend to demotivate them. </li></ul></ul><ul><li>Management by Walking Around (MBWA) </li></ul><ul><ul><li>Listening rather than talking </li></ul></ul><ul><ul><li>Teaching rather than telling </li></ul></ul><ul><ul><li>Facilitating rather than ordering </li></ul></ul>
  • 23. Exhibit 13 –9 ● Coaching Model
  • 24. Human Controls (cont’d) <ul><li>Types of Problem Employees </li></ul><ul><ul><li>Employees who do not have the ability to meet the job performance standards. </li></ul></ul><ul><ul><li>Employees who do not have the motivation to meet job performance standards. </li></ul></ul><ul><ul><li>Employees who intentionally violate standing plans . </li></ul></ul><ul><ul><li>Employees with problems . </li></ul></ul><ul><li>Counseling </li></ul><ul><ul><li>Dealing with problem employees by attempting to help solve the problem. </li></ul></ul>
  • 25. Exhibit 13 –10 ● Problem Employees The late employee The absent employee The dishonest employee The violent or destructive employee The alcoholic or drug user The nonconformist The employee with a family problem The insubordinate employee The employee who steals The sexual or racial harasser The safety violator The sick employee The employee who’s often socializing or doing personal work
  • 26. Human Controls (cont’d) <ul><li>Management Counseling </li></ul><ul><ul><li>Giving employees feedback so they realize that a problem is affecting their job performance. </li></ul></ul><ul><ul><li>Referring employees with problems to the employee assistance program. </li></ul></ul><ul><li>Employee Assistance Program (EAP) </li></ul><ul><ul><li>A staff of people who help employees get professional assistance in solving their problems. </li></ul></ul>
  • 27. Disciplining <ul><li>Discipline </li></ul><ul><ul><li>Corrective action to get employees to meet standards and standing plans. </li></ul></ul><ul><ul><li>Objectives: </li></ul></ul><ul><ul><ul><li>To change ineffective employee behavior. </li></ul></ul></ul><ul><ul><ul><li>To let employees know that action will be taken when standing plans or performance requirements are not met. </li></ul></ul></ul><ul><ul><ul><li>To maintain authority when challenged. </li></ul></ul></ul><ul><ul><li>Progressive discipline steps </li></ul></ul><ul><ul><ul><li>Oral warning, written warning, suspension, and dismissal </li></ul></ul></ul><ul><ul><ul><li>Documentation must be maintained. </li></ul></ul></ul>
  • 28. Exhibit 13 – 11 ● Guidelines for Effective Discipline <ul><li>Clearly communicate the standards and standing plans to all employees. </li></ul><ul><li>Be sure that the punishment fits the crime. </li></ul><ul><li>Follow the standing plans yourself. </li></ul><ul><li>Take consistent, impartial action when the rules are broken. </li></ul><ul><li>Discipline immediately, but stay calm and get all the necessary facts before you discipline. </li></ul><ul><li>Discipline in private. </li></ul><ul><li>Document discipline. </li></ul><ul><li>When the discipline is over, resume normal relations with the employee. </li></ul>
  • 29. &nbsp;
  • 30. Join the Discussion Ethics &amp; Social Responsibility <ul><li>Disciplining Ethical Behavior </li></ul><ul><ul><li>Have you ever been in or known of a situation in which people were rewarded for being unethical and disciplined for being ethical? If so, describe the situation. </li></ul></ul><ul><ul><li>Is it ethical and socially responsible for firms to establish controls that reward unethical behavior and discipline ethical behavior to make more money? </li></ul></ul>
  • 31. Exhibit 13 – 12 ● The Discipline Model
  • 32. KEY TERMS <ul><li>controlling </li></ul><ul><li>preliminary control </li></ul><ul><li>concurrent control </li></ul><ul><li>rework control </li></ul><ul><li>damage control </li></ul><ul><li>control systems process </li></ul><ul><li>standards </li></ul><ul><li>critical success factors </li></ul><ul><li>control frequency </li></ul><ul><li>management audit </li></ul><ul><li>budget </li></ul><ul><li>operating budgets </li></ul><ul><li>capital expenditures budget </li></ul><ul><li>financial statements </li></ul><ul><li>coaching </li></ul><ul><li>management by walking around (MBWA) </li></ul><ul><li>management counseling </li></ul><ul><li>employee assistance program (EAP) </li></ul><ul><li>discipline </li></ul>

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