Legal Implications
Control
Looking at a business activity, comparing to what is supposed to be happening, and addressing any problems that are found.
Control
Controls give a manager ways to uncover and correct problems before they damage the business.
Controls can also provide the information necessary to improve business functions What activities in your life do you try to control?
Why Controls are Needed
Prevent CrisesStandardize outputsAppraise employee performanceUpdate plansProtect the organizations assets
Three Requirements for Control
Setting Standards Standard – outlines what is expected of the employee
or organizational unit. Monitoring PerformanceCorrecting Deviations
Three Requirements for Control
Monitoring Performance – gather data and detect problem areas. Should be monitored often enough that a problem will be caught quickly.
Fix the problem
Three Requirements for Control
Performance Deviations Faculty Planning Insufficient Communication Need for Training Lack of Motivation Unforeseen Forces
Correcting Deviations – Managers should address the cause of the problem rather than simply try to fix the symptoms
Assignment
Explain using the three requirements for control to explain how you can control your nine weeks and semester grade in this class Standard Monitor Performance Correct for Deviations
Types of Controls
Behavior Control – the monitoring of an employees behaviors through direct surveillance EX. Office internet use, monitoring of emails
Output Control – Monitoring based on the measurement of something that is produced by the employee or work unit
Timing of Control
Preliminary Control – designed to prevent problems from occurring
Concurrent Control – focused on thing that happen during the work process
Post-action control – detect problems after they occur
Tools for Control
BudgetsFinancial ControlsDirect ObservationsWritten ReportsAudits
Budgets
A numerical plan for allocating resources to specific activities.
Budgets can be used for a number of different areas or items. Expense Budget Profit Budget Cash Budget Capital Expenditure Budget Fixed Budget Variable Budget Incremental Budget
Types of Budgets
Profit Budget – used by separate units of an organization that combines revenue and expense to determine the units profit contribution
Cash Budget – forecasts how much cash an organization will have on hand and how much is needed to meet expenses
Types of Budgets
Expense Budget – lists the primary activities undertaken by a unit and allocates a dollar amount to each
Capital Expenditure Budget – forecasts investments in property, buildings, and major equipment
Types of Budgets
Fixed Budget – Assumes a fixed level of sales or production
Variable Budget – Takes into account those costs that vary with volume.
Approaches to Budgets
Incremental Budget – Allocates funds to departments according to previous period earnings
Zero-based Budget – Budget requests start from scratch regardless of previous appropriations
Zero-Based Budgeting
Some organizations use the same budget from the previous year, without considering changing circumstances.
Some circumstances to consider: Situation changes Cost reduction Decrease in demand Past year inefficiencies
Zero-Based Budgeting
Requires each Budget request be justified in detail.
Must show why the expense is necessaryEach activity must compete for a share of
available resourcesActivities:
Equipment upgrades Training for employees Employee compensation Raw materials
Zero-Based Budgeting
Advantages: Cost saving Elimination of unnecessary functions Ability to reevaluate projects each year
Disadvantages Difficulties in planning for multiyear projects Morale problems with agencies constantly fighting for
existence.
Budget Misuses
Budgets are an essential Business tool, but can be misused.
Problems to be discussed Inflexibility Budget being the primary goal Misplaced priorities
Inflexibility
Progress sometimes requires spending money.
On a budget, making $500 may be frowned upon due to the spending of $5 over budget.
Where in your life have you not spent money but lost the opportunity to make money?
Budget as Primary Goal
The budget should not be the primary goal of a business.
Each department should be primarily focused on its part in the organizations mission. Service to a group of customers or clients
Organizations should not exist only to get their paperwork to balance out at the end of the year.
Misplaced Priorities
Do not lose site of the main goals and objectives of the company itself.
Make the best decision for the success of the company in the long run rather than the numbers on a budget sheet.
Tools for Control
BudgetsFinancial ControlsDirect ObservationsWritten ReportsAudits
Financial Controls
Managers use Financial Info for control purposes Balance Sheets Income statements Financial ratios
Financial info is not meaningful out of context.
It must be compared to: Historical performance figures for a company Figures of another company
Usually will compare to an industry average
Financial Ratios
4 basic types of financial ratios:
Profitability Ratios Liquidity Ratios Debt Ratios Activity Ratios
Financial Ratios
Profitability ratio – indicates how efficiently the organization is being managed
Liquidity ratio – measures the ability to meet short term obligations. EX. Payroll, accounts payable
Financial Ratios
Debt ratio – indicates the ability to meet long term obligations
Activity ratio – measures how effectively the organization manages its basic operations
Tools for Control
BudgetsFinancial ControlsDirect ObservationsWritten ReportsAudits
Direct Observations
The observing of an employee by a manager with their own eyes and own opinions
Observation is necessary to get an accurate picture of an organization Can be time consuming Can be misinterpreted due to employees being on
their best behavior or the manager bringing a bias to the observation.
Direct Observation
What can a manager do to ensure that his or her visits are interpreted positively?
Make visits a common event Give notice to employees Engage employees in discussion of their work to make
it seem like the observation is not an inspection
Tools for Control
BudgetsFinancial ControlsDirect ObservationsWritten ReportsAudits
Written Reports
Management controls that may be prepared on a periodic or “necessary” basis.
Two basic types of written reports Informational Analytical
Written Reports
Informational Reports – Presents a series of facts
Analytical Reports – provides an interpretation of the facts they present.
Written Reports
Preparing a report is a multistep process: Planning what is to be done Collecting the facts Organizing the facts Interpreting the facts Writing the report
Reports should be prepared for the benefit of the reader, not the writer.
Tools for Control
BudgetsFinancial ControlsDirect ObservationsWritten ReportsAudits
Audits
A detailed look at an organizations financial or other practices
They see if accounting methods are: Fair Consistent In accordance with regulations and customary
practices
Audits
Audits can be external or internal
External audits are performed by outside accountants who examine a companies financial records
Internal audits are performed by members of an organization itself
Audits
Management audits look at areas other than finance and accounting Personnel procedures to ensure equal opportunity
laws
Mgt audits may be external or internal Internal is less expensive but have a greater risk of
bias
Workers and the Law
In the early twentieth century, companies had tremendous power over employees
Companies could Pay workers as little as they wanted Make them work under dangerous conditions Refuse to hire minorities Pay women less than men at the same job
Workers and the Law
In 1930’s, Congress and state legislatures wanted to help the average worker.
To protect and provide benefits to employees, and provide a better power balance between companies and workers, Employment Laws were formed.
Employment Laws
Regulates the relationship between companies and their workers. Gives workers significant rights and benefits Including working in a safe environment
There are strict penalties for companies who violate these laws Fines Loss of government contracts
Employment Laws
Companies must comply with 5 major employment laws:1. Equal Employment Opportunity Laws2. Occupational safety and health laws3. Wage-hour laws4. Benefits laws5. Labor relations laws
Employment Laws
In 1938, the Fair Labors Standards Act initially provided for a minimum wage of $0.25 per hour and a maximum work week of 44 hours. What are the total wages a person would earn in one week if they worked maximum hours?
Minimum wage now is $7.25 per hour. How much do you make in minimum work week? Maximum?
Do workers work harder now or in the past?
Equal Employment Opportunity laws
Prohibit companies from discriminating against workers.
1960’s was the height of the Civil Rights Movement
Civil Rights leaders spoke out about discrimination against African Americans and other minorities
Equal Employment Opportunity laws
Congress listened to civil rights leaders and passed 3 major EEO laws that protect workers from discrimination by companies:
Title VII of the Civil Rights Act of 1964 Age Discrimination in Employment Act Americans with Disabilities Act
Equal Employment Opportunity laws
Title VII of the Civil Rights Act of 1964 States companies cannot discriminate against an
employee because of race, color, religion, sex or national origin.
To enforce this act, they formed the Equal Employment Opportunity Commission (EEOC) EEOC can sue a company that discriminates against
an employee The employee may also take the company to court
Equal Employment Opportunity Laws
Title VII of the Civil Rights Act of 1964
In 1999, a California Superior Court awarded a supervisor at a public transit company $5.7 million because the company had discriminated against him on the basis of his national origin.
What examples can you think of where this may take place?
Equal Employment Opportunity Laws
Age Discrimination in Employment Act States companies cannot discriminate against
employees because of their age. Cannot discriminate against workers due to age in:
Hiring Promotions Retirement
Workers may sue employers for discrimination based on age
Equal Employment Opportunity Laws
In 1998, a 61-year old senior manager at Goodyear Tire and Rubber Company successfully sued the company for $2.1 million for age discrimination when it tried to force him to accept an early retirement.
In your opinion, Right or Wrong?
Equal Employment Opportunity Laws
Age Discrimination in Employment ActDiscussion
A writer for a popular TV program about young adults lied about her age because the producers did not want to hire any writers over 30
What do you think of this hiring practice? Legal or Illegal?
Equal Employment Opportunity Laws
Americans with Disabilities Act States companies cannot discriminate against any person with a
disability Companies cannot fire or refuse to hire people based on
disabilities or illness. Companies must also accommodate a workers disability
Disabilities include: Spinal cord injuries
Loss of limbsMultiple SclerosisMuscular DystrophyCerebral PalsyHearing, Speech, Visual, and Learning impairmentsHead injuriesPsychiatric disordersDiabetesAIDS
Equal Employment Opportunity Laws
Americans with Disabilities Act In 1998, a court ruled that a supermarket could not
make a worker with a bad back lift or carry heavy boxes and had to find him less strenuous work.
Right or Wrong? What if you worked with this person?
Occupational Safety and Health Laws
Require employers and employees to comply with safety and health standards established by federal, state, and local governments.
Enforced by the U.S. Department of Labor’s: Occupational Safety and Health Administration OSHA
Occupational Safety and Health Laws
Sets standards for keeping workplaces clean and free of hazards Unsafe machinery Dangerous chemicals
Business must keep records of employee illness, injuries, and deaths and submit them to the U.S. Department of Labor
Occupational Safety and Health Laws
OSHA inspectors visit many workplaces each year to ensure they comply with regulations.
Employees may request OSHA visits the workplace if they feel it is not meeting regulations.
OSHA may issue Citations Written warnings Shutdown of the working environment until regulations are
met.
Occupational Safety and Health Laws
In 1999, utility workers in Florida bombarded OSHA with complaints following an explosion at Tampa Electric Company. OSHA responded by investigating these complaint. Companies are not allowed to retaliate against
workers who request an OSHA visitHelena laboratories in Beaumont, Texas had
to pay $137,100 in 1999 due to an employee requested visit that found workers being exposed to blood-related products without adequate protection.
Wage-Hour Laws
In 1938, Congress passed the Fair Labor Standards Act (FLSA).
Also Known as the Wage-Hour Law
Established minimum wage, overtime, and child labor standards for employees.
Wage-Hour Laws
Fair Labor Standards Act (FLSA) protects workers in three ways: Sets the minimum wage companies can pay their
workers Sets the number of hours per week workers can work
without receiving overtime pay Prohibits companies from employing children under
the age of 14 years old.
Wage-Hour Laws
Minimum Wage currently is $7.25 per hour
Overtime Pay is the regular amount someone is paid per hour plus half of that total added together. Time and a half.
Workers under the age of 18 must be off work by 10 p.m. to allow for the opportunity for attending school.
Benefits Laws
Guarantee that workers will receive certain benefits regardless of what happens to them on the job.
Benefits include: Vacation Sick leave Pensions Tuition assistance
Benefits Laws
Companies must comply with five different benefits laws: Social Security Act Employee Retirement Income Security Act (ERISA) Unemployment Insurance Laws Workers Compensation Laws Family and Medical Leave Act (FMLA)
Benefits Laws
Social Security Act The SS act of 1935 was designed to provide workers
and their families with income after retirement
Social security funds also support disabled workers and the federal Medicare programs Medicare provides health insurance for senior citizens
Benefits Laws
Social security (SS) defined: Workers and Employers share the cost of SS taxes
while the worker is employed. Every employee and employer must pay SS
When they retire, they receive a pension based on their lifetime earnings.
The spouse, children, and other dependents of a worker who dies can receive a portion of the benefits
Benefits Laws
Employee Retirement Income Security Act (ERISA) Protects the money put into an employee’s retirement
fund by companies and workers
Benefits Laws
Unemployment Insurance Laws
Both the SS act and the Federal Unemployment Tax Act provide workers with assistance during times of unemployment
Benefits Laws
Unemployment Insurance Laws To be eligible, workers must meet two requirements:
Must have lost their jobs through no fault of their own Must have worked a certain length of time
Employers must pay a certain amount into the unemployment fund for each worker The amt a worker receives is based on:
Length of Employment Salary
Benefits Laws
Workers Compensation Laws that insure workers against injury, illness, or
death because of job conditions
Each state has these laws Some state have employers pay into a special fund Some buy insurance from private companies
Benefits Laws
Workers Compensation Laws Employers are responsible for an employee’s on-the-
job injury, no matter how the injury or illness occurs Workers comp covers accidents even if it is the
workers fault
Payment will depend on a passed drug test If failed, all workers comp will be lost.
Benefits Laws
Family and Medical Leave Act (FMLA) Requires companies to allow up to 12 weeks of leave
to care for a child, spouse, or parent. The law only affects companies with 50 or more
employees Companies don’t have to pay salary during leave, but
must give them the job back upon return with no penalties.
Employers must also maintain health insurance during leave.
Why is there a need for this act?
Labor Relations Laws
Protects the right of employees to organize into unions to bargain collectively for better wages and working conditions.
Most important labor relation law is the: National Labor Relations Act (NLRA)
Labor Relations Laws
Union – Groups of workers who collectively bargain for rights such as higher wages and better working conditions.
Companies must bargain in “Good Faith”
Companies must at least listen to what unions have to say. They cannot dismiss the bargaining without at least making a counteroffer.
Labor Relations Laws
Things unions might bargain for: Wages Hours Conditions of Employment – safety
Things managers might bargain with: Sick leave Work rules Drug testing Layoffs Overtime Holiday bonuses Disciplinary procedures
Labor Relations Laws
Unions can be effective due to the right to STRIKE – stop working to get demands
A strike is a last resort when they see no other alternative