Place Slide Title Text Here

JOHN R. SCHERMERHORN, JR.

MANAGEMENT
12 Edition
th

Chapter 9

Control Processes
and Systems
©2013 John Wiley & Sons, Inc. All rights reserved. 9-1
Planning
Place Ahead
Slide — Chapter
Title Text Here 9 Study Questions

1. Why and how do managers exercise control?

2. What are the steps in the control process?
3. What are the common control tools and
techniques?

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Place Slide Title Text Here
Figure 9.1 The role of controlling in the management
process

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 Takeaway
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Title Text Here Control

• Controlling
– The process of measuring performance and taking action to
ensure desired results
– Has a positive and necessary role in the management process
– Ensures that the right things happen, in the right way, at the
right time
– After-action review is a systematic assessment of lessons
learned and results accomplished in a completed project

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 Takeaway
Place Slide 1: Here
Title Text Types of Control
Figure 9.2 Feedforward, concurrent, and feedback
controls.

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 Takeaway
Place Slide 1: Managerial
Title Text Here Control

• Internal and external control

– Internal control:
• Self-control: occurs through self-discipline in fulfilling
work and personal goals and responsibilities
– External control: occurs through personal
supervision and the use of formal administrative
systems
• Bureaucratic control
• Clan control
• Market control

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 Takeaway
Place Slide 1: Managerial
Title Text Here Control
• Bureaucratic control
– Influences behavior through authority, policies,
procedures, job descriptions, budgets, and day-to-day
supervision
• Clan control
– Influences behavior through norms and expectations set
by the organizational culture
• Market Control
– Influence of market competition on the behavior of
organizations : product adjustment, process improvement

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 Takeaway
Place Slide 2: The
Title Text Control Process
Here
Figure 9.3 Four steps in the control process

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 Takeaway
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Title Text Control Process
Here

• Step 1 — establishing objectives and

standards
– Output standards
• Measure performance results in terms of quantity,
quality, cost, or time
– Input standards
• Measure effort in terms of amount of work expended
in task performance

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 Takeaway
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Title Text Control Process
Here

• Step 2 — measuring actual performance

– Goal is accurate measurement of actual
performance results and/or performance efforts
– Must identify significant differences between
actual results and original plan
– Effective control requires measurement

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 Takeaway
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Title Text Control Process
Here

• Step 3 — comparing results with objectives

and standards
– Need for action = Desired Performance –
Actual Performance
– Comparison methods:
• Historical comparison
• Relative comparison
• Engineering comparison

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 Takeaway
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Title Text Control Process
Here

• Step 4 — taking corrective action

– Taking action when a discrepancy exists between
desired and actual performance to correct problems or
make improvements
– Management by exception
• Giving attention to situations showing the greatest need for
action, focusing attention on high-priority areas.
• Types of exceptions
– Problem situation: actual performance is less than desired
– Opportunity situation: actual performance turns out higher
than desired

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 Takeaway
Place 3: Control
Slide Title Tools and Techniques
Text Here

• Project Management
– Overall planning, supervision, and control
of projects
• Projects – unique one-time events that occur within a
defined time period
• Gantt chart – graphic display of scheduled tasks
required to complete a project
• CPM/PERT – combination of the critical path method
and program evaluation and review technique

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Place SlideTakeaway
Title Text 3: Gantt Chart
Here

• The visual overview of what needs to be done on a project allows for

easy progress checks to be made at different time intervals.
• It helps with event or activity sequencing to make sure that things get
accomplished in time for later work to build upon them.
• One problem is when delays in early activities create problems for later
ones.

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 Takeaway
Place Slide 3: CPM/PERT
Title Text Here Chart
• Chart breaks a project into a series of small sub-activities that have clear
beginning and end points. The full diagram shows all the
interrelationships and order that must be coordinated for the entire
project to be completed.
• CPM/PERT technique helps project managers track activities to make
sure they happen in the right sequence and on time.

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 Takeaway
Place 3: Control
Slide Title Tools and Techniques
Text Here

• Inventory control
– Ensures that inventory is only big enough to meet
immediate needs
– Economic order quantity
• Places new orders when inventory levels fall to predetermined
points
– Just-in-time scheduling
• Routes materials to workstations just in time for use

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 Takeaway
Place Slide 3: Inventory
Title Text Here Control

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 Takeaway
Place 3: Control
Slide Title Tools and Techniques
Text Here

• Breakeven analysis: performs what-if calculations

under different revenue and cost conditions
– Breakeven point: occurs where revenues just equal costs

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 Takeaway
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Slide Title Tools and Techniques
Text Here

• The balance sheet shows assets and liabilities at a point in time. It is

displayed in an Assets = Liabilities format.
• The income statement shows profits or losses at a point in time. It is
displayed in a Sales - Expenses = Net Income format.

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 Takeaway
Place 3: Control
Slide Title Tools and Techniques
Text Here

• Basic Financial Ratios

– Liquidity: ability to generate cash to pay bills, measures ability
to meet short-term obligations
• Current Ratio = Current Assets/Current Liabilities
• Quick Ratio = Current Assets - Inventories/Current Liabilities
 Higher is better: You want more assets and fewer liabilities

– Leverage: ability to earn more in returns than the cost of debt,

measures use of debt
• Debt Ratio = Total Debts/Total Assets
 Lower is better: You want fewer debts and more assets

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 Takeaway
Place 3: Control
Slide Title Tools and Techniques
Text Here

– Asset Management: ability to use resources efficiently and

operate at minimum cost
• Asset Turnover = Sales/Total Assets
• Inventory Turnover = Sales/Average Inventory
 Higher is better: You want more sales relative to assets and inventory

– Profitability: measures ability to earn revenues greater than

costs
• Net Margin = Net Income/Sales
• Return on Assets (ROA) = Net Income/Total Assets
• Return on Equity (ROE) = Net Income/Owner’s Equity
 Higher is better: You want high net income relative to sales, assets,
and equity

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 Takeaway
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Slide Title Tools and Techniques
Text Here

• Balanced Scorecard: done by improving their communication

with employees about what is being accomplished, aligning
their day-to-day work with the main strategy, effectively
prioritizing projects, and using accurate measurement tools
to help monitor the progress being made toward the main
goals.
• Categories used to develop scorecard goals and
measures:
– Financial performance
– Customer satisfaction
– Internal process improvement
– Innovation and learning

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 Takeaway
Place 3: Control
Slide Title Tools and Techniques
Text Here

• Developing a balanced scorecard begins with a clarification of the

organization’s mission and vision: what it wants to be and how it wants
to be perceived by its key stakeholders.
• The following questions are used to develop specific scorecard goals and
measures:
– Financial Performance: “To succeed financially, how should we
appear to our shareholders?” Sample goals: survive, succeed,
prosper. Sample measures: cash flow, sales growth and operating
income, increased market share, and return on equity.
– Customer Satisfaction: “To achieve our vision, how should we appear
to our customers?” Sample goals: new products, responsive supply.
Sample measures: percentage sales from new products, percentage
on-time deliveries.

©2013 John Wiley & Sons, Inc. All rights reserved. 9-28
 Takeaway
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Slide Title Tools and Techniques
Text Here

• The following questions are used to develop specific scorecard goals and
measures:
– Internal Process Improvement: “To satisfy our customers and
shareholders, what internal business processes should we excel at?”
Sample goals: manufacturing excellence, design productivity, new
product introduction. Sample measures: cycle times, engineering
efficiency, new product time.
– Innovation and Learning: “To achieve our vision, how will we sustain
our ability to change and improve?” Sample goals: technology
leadership, time to market. Sample measures: time to develop new
technologies, new product introduction time versus competition.

©2013 John Wiley & Sons, Inc. All rights reserved. 9-29
 Takeaway
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Slide Title Tools and Techniques
Text Here

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 Takeaway
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Slide Title Tools and Techniques
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