Adobe Systems Controlling Lecture 10 Adobe Systems Agenda for today §What Is Control and Why Is It Important? §The Control Process §Controlling Organizational Performance §Controlling Tools and Techniques §Selected Contemporary Issues of Control Adobe Systems Where are we? Adobe Systems What Is Control? The three control systems The Purpose of Control To ensure that activities are completed in ways that lead to accomplishment of organizational goals. Controlling The process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations. ̶ Market Control Emphasizes the use of external market mechanisms to establish the standards used in the control system. External measures: price competition and relative market share Bureaucratic Control Emphasizes organizational authority and relies on rules, regulations, procedures, and policies. Clan Control Regulates behavior by shared values, norms, traditions, rituals, and beliefs of the firm’s culture. ̶ Characteristics of Three Approaches to Control Systems Type of Control Characteristics Market Uses external market mechanisms, such as price competition and relative market share, to establish standards used in system. Typically used by organizations whose products or services are clearly specified and distinct and that face considerable marketplace competition. Bureaucratic Emphasizes organizational authority. Relies on administrative and hierarchical mechanisms, such as rules, regulations, procedures, policies, standardization of activities, well-defined job descriptions, and budgets to ensure that employees exhibit appropriate behaviors and meet performance standards. Clan Regulates employee behavior by the shared values, norms, traditions, rituals, beliefs, and other aspects of the organization’s culture. Often used by organizations in which teams are common and technology is changing rapidly. Adobe Systems Why Is Control Important? The Planning–Controlling Link As the final link in management functions: Planning Controls let managers know whether their goals and plans are on target and what future actions to take. ̶ Empowering employees Control systems provide managers with information and feedback on employee performance. ̶ Protecting the workplace Controls enhance physical security and help minimize workplace disruptions. Adobe Systems The Control Process 1.Measuring actual performance. 2.Comparing actual performance against a standard. 3.Taking action to correct deviations or inadequate standards. Measuring Sources of Information (How) Personal observation Statistical reports Oral reports Written reports Control Criteria (What) Employees Budgets Satisfaction Costs Turnover Output Absenteeism Sales Adobe Systems Comparing = determining the degree of variation between actual performance and the standard (e.g. planned value). Significance of variation is determined by: •The acceptable range of variation from the standard (forecast or budget). •The size (large or small) and direction (over or under) of the variation from the standard (forecast or budget). ̶ Taking Managerial Action “Doing nothing” §Only if deviation is judged to be insignificant. § Correcting actual (current) performance §Immediate corrective action to correct the problem at once. §Basic corrective action to locate and to correct the source of the deviation. §Corrective Actions üchange strategy, structure, compensation scheme, or training programs üredesign jobs üfire / hire employees ü Revising the standard §Examining the standard to ascertain whether or not the standard is realistic, fair, and achievable. => Upholding the validity of the standard. => Resetting goals that were initially set too low or too high. Managerial Decisions in the Control Process Adobe Systems (Organizational) performance defined Controlling for Organizational Performance Performance measures What Is Performance? The end result of an activity ORGANIZATIONAL Performance The accumulated end results of all of the organization’s work processes and activities Organizational Effectiveness Measuring how appropriate organizational goals are and how well the organization is achieving its goals. Systems resource model The ability of the organization to exploit its environment in acquiring scarce and valued resources. The process model The efficiency of an organization’s transformation process in converting inputs to outputs. The multiple constituencies model The effectiveness of the organization in meeting each constituencies’ needs. Organizational Productivity Productivity: the overall output of goods and/or services divided by the inputs needed to generate that output. Output: sales revenues Inputs: costs of resources Ultimately, productivity is a measure of how efficiently employees do their work. ̶ Types of control Feedforward Control = a control that prevents anticipated problems before actual occurrences of the problem. Building in quality through design. Requiring suppliers conform to ISO 9002. Concurrent Control = a control that takes place while the monitored activity is in progress. Direct supervision: management by walking around. Feedback Control = a control that takes place after an activity is done. Corrective action is after-the-fact, when the problem has already occurred. Advantages of feedback controls: Provide managers with information on the effectiveness of their planning efforts. Enhance employee motivation by providing them with information on how well they are doing. Adobe Systems Management Information Systems (MIS) Selected Tools and Techniques Benchmarking (of Best Practices) A system used to provide management with needed information on a regular basis. Data: an unorganized collection of raw, unanalyzed facts (e.g., unsorted list of customer names). Information: data that has been analyzed and organized such that it has value and relevance to managers. Benchmark The standard of excellence against which to measure and compare. Benchmarking Is the search for the best practices among competitors or noncompetitors that lead to their superior performance. Is a control tool for identifying and measuring specific performance gaps and areas for improvement. ̶ Implementing an Internal Benchmarking Best Practices Program 1.Connect best practices to strategies and goals. 2.Identify best practices throughout the organization. 3.Develop best practices reward and recognition systems. 4.Communicate best practices throughout the organization. 5.Create a best practices knowledge-sharing system. 6.Nurture best practices on an ongoing basis. Adobe Systems Cross-Cultural Issues Contemporary Issues in Control (1/2) Workplace Concerns ̶The use of technology to increase direct corporate control of local operations ̶Legal constraints on corrective actions in foreign countries ̶Difficulty with the comparability of data collected from operations in different countries ̶Workplace privacy versus workplace monitoring: E-mail, telephone, computer, and Internet usage Productivity, harassment, security, confidentiality, intellectual property protection ̶Employee theft The unauthorized taking of company property by employees for their personal use. ̶Workplace violence Anger, rage, and violence in the workplace is affecting employee productivity. ̶ Control Measures for Employee Theft / Fraud Sources: Based on A.H. Bell and D.M. Smith. “Protecting the Company Against Theft and Fraud,” Workforce Online (www.workforce.com) December 3, 2000; J.D. Hansen. “To Catch a Thief,” Journal of Accountancy, March 2000, pp. 43–46; and J. Greenberg, “The Cognitive Geometry of Employee Theft,” in Dysfunctional Behavior in Organizations: Nonviolent and Deviant Behavior, eds. S.B. Bacharach, A. O’Leary-Kelly, J.M. Collins, and R.W. Griffin (Stamford, CT: JAI Press, 1998), pp. 147–93. Control Measures for Deterring or Reducing Workplace Violence Sources: Based on M. Gorkin, “Five Strategies and Structures for Reducing Workplace Violence,” Workforce Online (www.workforce.com). December 3, 2000; “Investigating Workplace Violence: Where Do You Start?” Workforce Online (www.forceforce.com), December 3, 2000; “Ten Tips on Recognizing and Minimizing Violence,” Workforce Online (www.workforce.com), December 3, 2000; and “Points to Cover in a Workplace Violence Policy,” Workforce Online (www.workforce.com), December 3, 2000. Adobe Systems Customer Interactions Contemporary Issues in Control (2/2) Corporate Governance ̶Service profit chain Is the service sequence from employees to customers to profit. ̶Service capability affects service value which impacts on customer satisfaction that, in turn, leads to customer loyalty in the form of repeat business (profit). ̶The system used to govern a corporation so that the interests of the corporate owners are protected. Changes in the role of boards of directors Increased scrutiny of financial reporting (Sarbanes-Oxley Act of 2002) More disclosure and transparency of corporate financial information Certification of financial results by senior management ̶ Terms to Know controlling market control bureaucratic control clan control control process range of variation immediate corrective action basic corrective action performance organizational performance productivity organizational effectiveness feedforward control concurrent control management by walking around feedback control management information system (MIS) data information balanced scorecard benchmarking corporate governance