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1. CHAPTER 14:
CONTROL SYSTEMS AND MANAGING
FINANCES AND PEOPLE
CH 14
© 2015 SAGE Publications

2. Organizational Systems Control
• An important part of determining performance is measuring and
controlling it
• Preliminary Control (Inputs): designed to anticipate and prevent possible
problems
• Concurrent Control (Transformation Process): action taken to ensure
that standards are met as inputs are transformed into outputs
• Rework Control (Outputs): action taken to fix an output
• Damage Control (Customer/Stakeholder Satisfaction): action taken to
minimize negative impacts on customers/ stakeholders due to faulty
outputs

3. Feedback in Organizational Systems
• Feedback (continuous improvement):
• Feedback loop: An important part of the systems process, particularly
from the customer and other stakeholders

4. Functional Department Control Systems
• Firms are commonly organized into four major functional
departments: operations, marketing, human resources, and
finance
• Information is a fifth major functional area that may be a stand-
alone department or may fall under the finance functional area
• In most organizations the operations department is the only
functional area that actually transforms the inputs into the
outputs of goods and services (products) that are sold to
customers

5. The Feedback Process Between Functional
Areas/Departments

6. Establishing Control Systems
1. Set objectives and standards
2. Measure performance
3. Compare performance to standards
4. Correct or reinforce

7. Control Frequency And Methods
• Controls are needed to accomplish organizational objectives
• Constant
• Periodic
• Occasional

8. Control Frequency
• Constant Controls are in continuous use
• Self-control
• Clan control
• Standing plans

9. Control Frequency
• Periodic Controls are used on a regular, fixed basis
• Regular meetings and reports
• Budgets
• Audits

10. Control Frequency
• Occasional Controls are used on a sporadic basis when
needed
• Observation
• The exception principle
• Special reports
• Project controls

11. Financial Controls and Budget Setting
• Accounting is referred to as the language of business and
profit is the primary measure of business success.
• A budget is a planned quantitative allocation of resources for
specific activities.
• Revenue and expenditure operating budgets
• Capital expenditures budget
• Financial budgeted cash flow, income statement, and balance sheet

12. Revenue & Expenditure Operating Budgets
• An operating budgets include the revenue and expense
budgets
• A revenue budget is a forecast of total income for the year
• An expense budget is a forecast of total operating spending
for the year. It is common for each functional area/department
manager to have an expenditure budget

13. Capital Expenditures Budget
• Includes all planned major asset investments
• The major assets owned by an organization are those that last
and are paid for over several years and enable the firm to make
a profit

14. Financial Budgets And Statements
• Actual statements report past results while the budget, or pro
forma statement, projects future results
• Income statement
• Balance sheet
• Cash flow statement

15. Primary Financial Statements
• Income Statement:
• Presents revenue and expenses and the profit or loss for the stated time
period.
• Balance Sheet:
• Presents the assets and liabilities and owners’ equity.
• Cash Flow Statement:
• Presents the cash receipts and payments for the stated time period.

16. Coaching
• The process of giving motivational feedback to maintain and
improve performance
• performance = ability × motivation × resources

17. Coaching Model
1. Describe current performance
2. Describe desired performance
3. Get a commitment to the change
4. Follow up

18. Walking Around
1. Listening
2. Teaching
3. Facilitating

19. Counseling
• Process of giving employees feedback so they realize that a
problem is affecting their job performance and referring
employees with problems to the EAP
• The employee assistance program (EAP) has a staff of people
who help employees get professional assistance in solving their
problems

20. Problem Employees
• Employees who do not have the ability to meet the job
performance standards
• Employees who do not have the motivation to meet job
performance standards
• Employees who intentionally violate standing plans
• Employees with problems

21. Discipline
• Discipline is corrective action to get employees to meet
standards and standing plans
• To adequately discipline, a manager must:
• Let employees know that action will be taken when standing plans or
performance requirements are not met
• Maintain authority when challenged