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Module 12 Managerial Evaluation and Control

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Title: Module 12 Managerial Evaluation and Control


1
Module 12 Managerial Evaluation and Control
2
Outline
  • Evaluation and control as a management function
  • The control process
  • Tools for controlling organisational performance
  • Managerial approaches to implementing controls
  • Assessing control systems

3
  • Evaluation and control as a management functions

Planning Goals Objectives Strategies plans
Controlling Standard (target) Measuring Comparing
Managerial Action
Organising Structure Human resources management
Leading Motivation Leadership communication
4
Evaluation and control as a management function
  • Why is control system important?
  • To ensure actions taken to achieve the goals
    which has been set.
  • To ensures resources are used for organisational
    objectives supporting organising and leading
    functions
  • To make sure goals (objectives) are being met
    and take whatever action if necessary to offset
    any deviations or address inadequate objectives.
  • To reduce reluctance of managers to delegate
    authority and empower employees
  • Protect the organisation and the physical
    workplace

5
Levels of control
  • Strategic control
  • Monitoring critical environmental factors
  • Tactical control
  • Assessing implementation of tactical plans at
    department level
  • Operational control
  • Overseeing implementation of operating plans,
    monitoring day-to-day results

6
  • Levels of control
  • Top

  • management
  • Middle

  • management
  • 1st
    level

  • management

Strategic planning
Strategic control
Tactical planning
Tactical control
Operational planning
Operational control
7
Evaluation and control as a management function
  • Evaluation
  • Evaluation is a part of the overall control
    process, and decision-making depends on good
    evaluation. It will provide benefits as follows
  • Providing direction on the right track or not.
  • Providing guidance to everybody what is
    happening in the department ? And how does it
    perform comparing to others? Need to improve?
  • Inspiring confidence in everybody praise for
    well performance
  • Impacting organisational reputation
  • Increasing ability to capture customer value

8
The Control Process
  • Steps in the control process
  • Determine what to measure
  • Establish objectives and standards
  • Measure performance
  • Compare performance against standards
  • Take action
  • Recognise positive performance take corrective
    action as necessary
  • Adjust standards measures as necessary

9
Steps in the control process
Standard met or exceed
Determine what to measure
Establish Objectives and standards
Measure performance
Compare Performance Against standards
Standard Not met
Take Corrective Action as necessary
Recognise performance
Adjust standards and measures as necessary
10
The Control Process
  • Measuring
  • How we measure?
  • Observation (management by walking around)
  • Statistical data
  • Oral report
  • Written report

11
The Control Process
  • What we measure?
  • performance indicators of a company
  • Financial performance
  • managerial performance ex market share, growth
    rate, innovation, employee satisfaction, absent
    rate, turnover of employee.
  • market performance share price, P/E ratio
  • milestone performance or strategic performance
    indicators short term performance indicators
    (ex port operational indicators)

12
The Control Process
  • Comparing
  • Gap analysis
  • How big is the gap? Positive or negative?
  • Whats your reaction if you found there is a huge
    deviation between actual performance and expected
    outcome?

13
The Control Process Take actions
  • Correct the actual performance
  • If the source of deviation is inadequate
    performance, the management would like to change
    strategies, for example, introducing training
    programme, alter remuneration practices or
    redesign jobs.
  • Revise the standard of performance or the
    objectives set.
  • Source of deviation is from the unrealistic or
    inappropriate objectives

14
Tools for controlling organisational performance
  • Major control tool by timing
  • Feedforward control (preliminary or preventative
    control) Regulation of inputs to ensure they
    meet standards, ex McDonald in Russia help
    farmers to grow high-quality potatoes and bakers
    to bake high quality bread.
  • What actions of feedforward control should a
    marine insurance company take to prevent or
    reduce claims?
  • Concurrent controlRegulation of activities to
    ensure they conform to standards, ex budgetary
    control, quality control
  • Feedback controlRegulation of completed product
    to ensure standards are met
  • Ex financial reports (financial control)

15
  • Control types by timing

Feedback control Correcting problems
after product/service is produced
Feed-forward control Anticipating problems
Concurrent control Attending to problems as they
occur
16
Managerial Approaches To Implementing Controls
  • How control is exercised? What are mechanisms to
    put controls in place?
  • Three approaches are used.
  • Bureaucratic control
  • Clan control
  • Market control

17
Managerial Approaches To Implementing Controls
  • Bureaucratic control
  • Managerial approach relying on regulation
    through rules, policies, supervision, budgets,
    schedules, reward systems and other
    administrative mechanisms aimed at ensuring
    employees exhibit appropriate behaviours and meet
    performance standards.
  • It is do by the book or process control.

18
Managerial Approaches To Implementing Controls
  • Clan control
  • Managerial approach relying on values, beliefs,
    traditions, corporate culture, shared norms and
    informal relationships to regulate employee
    behaviours and facilitate reaching of
    organisational goals.

19
Managerial Approaches To Implementing Controls
  • Market control
  • An approach to control that emphasises the use
    of external mechanisms such as price competition
    and relative market share to establish the
    standards used in the control system.
  • -it is typically used by organisations in which
    the firms products or services are clearly
    specified and distinct and in which there is
    considerable marketplace competition.

20
Assessing Control Systems
  • Good or poor designed control system?
  • A reliable and effective control system should
    be designed and tailored to meet the requirements
    and uniqueness of each organisation.

21
Assessing Control Systems
  • Overcontrol versus undercontrol
  • Overcontrol
  • Cutting job autonomy to the point where it
    seriously inhibits effective job performance.
  • Undercontrol
  • Granting autonomy to an employee to the point
    where the organisation loses its ability to
    direct individual effort towards achieving
    organisational goals.
  • Thinking question.
  • What is the basis of a successful leadership and
    control process?

22
Assessing Control Systems
  • Characteristics of effective control systems
  • Future-oriented
  • Multidimensional (ex quality and quantity)
  • Cost-effective benefit of control should
    outweigh its costs
  • Accurate control data
  • Realistic control system should have realistic
    views about what is achievable.

23
Assessing Control Systems
  • Characteristics of effective control systems
    (cont.)
  • Timely control systems give production cycle or
    process data at a specific time, for example, a
    monthly sales report.
  • Monitorable control systems must be designed for
    monitoring ease to ensure expected performance
  • Acceptable to organisation members
  • Flexible organisations must be flexible to
    changing environments, so control systems must be
    able to meet new revised needs because

24
Major control systems (supplement)
  • Managerial level
  • Financial control
  • Budgetary control
  • Total quality management
  • Inventory control
  • Operational level
  • Computer-based information systems

25
TOTAL QUALITY MANAGEMENT
  • Management system integral to an organisations
    strategy and aimed at continually improving
    product and service quality so as to achieve high
    levels of customer satisfaction and build strong
    customer loyalty.

26
TOTAL QUALITY MANAGEMENT
  • TQM Philosophy
  • Good quality costs less than poor quality
  • Employees try to improve quality if supported
  • Quality improvement needs cross-functional efforts

27
TOTAL QUALITY MANAGEMENT
  • TQM change principles
  • Focus on work processes
  • Analyse and understand variability
  • Manage by fact
  • Emphasise continuous learning/improvement
  • TQM intervention techniques
  • Quality improvement teams
  • Benchmarking
  • Statistical process control

28
FINANCIAL CONTROL
  • Financial statements
  • Balance sheet
  • Income statement
  • Ratio analysis
  • Liquidity ratios
  • Asset management ratios
  • Debt management ratios
  • Profitability ratios
  • Comparative financial analysis

29
BUDGETARY CONTROL
  • Responsibility centres
  • Standard cost centres
  • Discretionary expense centres
  • Revenue centres
  • Profit centres
  • Investment centres
  • Uses of responsibility centres
  • Budget types
  • Operating budgets
  • Capital expenditures budgets

30
INVENTORY CONTROL
  • Raw materials inventory
  • Work-in-process inventory
  • Finished-goods inventory
  • Significance of inventory
  • Inventory costs
  • Economic order quantity
  • Just-in-time inventory control

31
OPERATIONS MANAGEMENT
  • Defining operations management
  • Productivityoperations management linkage
  • Manufacturing versus service organisations
  • Operations management process

32
OPERATIONS MANAGEMENT
  • Developing and implementing operating systems
  • Forecasting
  • Capacity planning
  • Aggregate-production planning
  • Scheduling
  • Materials-requirements planning
  • Purchasing
  • The service delivery system

33
BSC
  • Balanced Scorecard (good for implementing and
    measuring strategies)
  • This concept was developed by Kaplan and Norton
    (1992) at Harvard Business School.
  • It is a framework that translates an
    organisations strategy into a coherent set of
    initiatives and performance measures.

34
Balanced Scorecard
  • Balanced Scorecard
  • Evaluate strategies from 4 perspectives
  • 1. Financial performance how do we appear to
    shareholders?
  • 2. Customer knowledge how do customers view us?
  • 3. Internal business processes what must excel
    us?
  • 4. Learning growth Can we continue to improve
    and create value?
  • Besides, performance of people and performance
    according to stakeholders can be added.

35
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