Chapter 16 - Managerial control. Learning objectives of this chapter include: Explain why companies develop control systems for employees, summarize how to design a basic bureaucratic control system, describe the purposes for using budgets as a control device, define basic types of financial statements and financial ratios used as controls,. | Managerial Control Chapter Sixteen Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 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. Managerial Control Control Any process that directs the activities of individuals toward the achievement of organizational goals The Control Process Figure 16- Bureaucratic Control Systems Clan control Control based on the norms, values, shared goals, and trust among group members. Management Audits Management audit An evaluation of the effectiveness and efficiency of various systems within an organization 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. Types of Budgets Accounting audits Procedures used to verify accounting reports and statements. How Dana Discovers What Its True Costs Are Figure 16- 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 Financial Controls Balance sheet A report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders’ equity. The Profit and Loss Statement Profit and loss statement An itemized financial statement of the income and expenses of a company’s operations Table * Financial Ratios Current ratio A liquidity ratio that indicates the extent to which short term assets can decline and still be adequate to pay short-term liabilities Using Financial Ratios Management myopia Focusing on short-term earnings and profits at the expense of longer-term strategic obligations. Examples of Market Control Figure 16- | Managerial Control Chapter Sixteen Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin 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. Managerial Control Control Any process that directs the activities of individuals toward the achievement of organizational goals The Control Process Figure 16- Bureaucratic Control Systems Clan control Control based on the norms, values, shared goals, and trust among group members. Management Audits Management audit An evaluation of the effectiveness .
