Managerial Control Chapter Sixteen Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written.

Managerial Control

Chapter Sixteen

Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.

Learning Objectives

LO 1 Explain why companies develop control systems for employees.

LO 2 Summarize how to design a basic bureaucratic control system.

LO 3 Describe the purposes for using budgets as a control device.

LO 4 Define basic types of financial statements and financial ratios used as controls.

LO 5 List procedures for implementing effective control systems.LO 6 Identify ways in which organizations use market control

mechanisms.LO 7 Discuss the use of clan control in an empowered

organization.16-2

Managerial Control

Control Any process that directs the activities of

individuals toward the achievement of organizational goals

16-3

Characteristics of Control

16-4

Table 16.2

The Control Process

16-5

Figure 16.1

After-action review

After-action review A frank and open-minded discussion of four basic

questions aimed at continuous improvement.

16-6

Approaches to Bureaucratic Control

Feedforward control The control process used before operations

begin, including policies, procedures, and rules designed to ensure that planned activities are carried out properly.

16-7

Management Audits

Management audit An evaluation of the

effectiveness and efficiency of various systems within an organization

16-8

Budgetary Controls

Budgeting The process of investigating what is being done

and comparing the results with the corresponding budget data to verify accomplishments or remedy differences

also called budgetary controlling.

16-9

A Sales-Expense Budget

16-10

Table 16.4

Activity-Based Costing

Activity-based costing (ABC) A method of cost accounting designed to identify

streams of activity and then to allocate costs across particular business processes according to the amount of time employees devote to particular activities

16-11

Activity-Based CostingExample: ABC Medical Clinic

16-12

Figure 16.3

The Profit and Loss Statement

Profit and loss statement An itemized financial

statement of the income and expenses of a company’s operations

16-13

Table 16.6

Using Financial Ratios

Management myopia Focusing on short-

term earnings and profits at the expense of longer-term strategic obligations.

16-14

Examples of Market Control

16-15

Figure 16.4