Transcript for:
Understanding Managerial Controlling Functions

hello students and welcome to chapter number 18 so this chapter talks about an important managerial functions and that is the last managerial function on our list which is controlling whether we had a set of managerial functions and these were planning organizing leading and controlling so we have gone through all of the previous ones and this is an entire chapter that is dedicated only to discussing the function of controlling activities and operations so what is controlling and why is controlling a very important function that managers need to undertake controlling is basically monitoring comparing and correcting performance so regardless of how big the unit is and even if you know as a manager you Martine and your department or your unit is functioning well and is achieving its goals and targets without having a good process of controlling without monitoring and comparing actual performance against desired performers you will never know you know whether or not you are achieving all of your targets and whether or not you are being efficient and effective in achieving those targets of yours so the whole concept here is that we need to have a way of evaluating what's going on so that we can judge so that we can assess whether or not we are moving in the right direction and whether or not we are you know getting closer to achieving our targets and attaining our goals so to answer the question why is control so important we need to think of all the efforts that the organization and the leaders and the managers put forth in order to plan what's going on for the business and what's going on in the workplace so there is budgeting that's going on an organizational structure is being created to facilitate performance manage are trying to motivate their workers and a lot of other things are taking place to ensure that you know the business is achieving its targets however without proper controls without a proper way of assessing evaluating and reviewing whether or not performance was effective you will never know whether all those things that you have that you have undertaken are actually getting you closer to your targets so you are planning that you spend a lot of time and effort and money on is not going to be fruitful unless you have proper controls in place and the second reason is employee empowerment so we have talked about this concept before so empowering employees meaning giving them the power we have discussed how many managers are reluctant are not very much you know motivated to give employees their employees the authority to make some decisions why is that the case because they are afraid that they are going to do mistakes and the managers are the ones who are going to be held responsible for those mistakes but when you know for proper control we you know we do need to relinquish some of this control and some of this decision-making to employees because they are the ones who are you know in the field and when we we have seen in the chapter of motivation how when we involve people in decision making when we let them feel that their input is valuable they would be more accepting of you know of the of the targets and they would be more motivated to work towards attaining them and the last thing is that you know planning is important because excuse me control is important because managers are responsible for protecting the workplace protecting the workplace against so many things against financial scandals against you know violence against ten national disasters against terrorist attacks from all types of dangers they they are the ones who need to have policies in place they need to have you know procedures for risk management and crisis management and this is all part of their function as managers which is under the umbrella of control and monitoring without having proper procedures like these then you know employees are not going to be protected and the entire organization is in jeopardy so this is an exhibit that summarizes all you know the managerial functions planning organizing leading and controlling remember in Chapter number two for example when we talked about the process of decision making how we you know just because we have made a decision it doesn't mean that the process or the cycle ends there we have to go back and evaluate so this is exactly what's happening over here this is controlling we don't stop once we are done we have to go back and you know evaluate and assess and measure whether or not everything is being done correctly and if things are going well then why are they going well how can we improve them even further and if they are not going well what are the reasons and how can we avoid these problems in the future so this is why controlling is very important and here is a description of the control process so what the control process is all about it's a three-step process where we begin with measuring actual performance so evaluating what's actually happening on the field for example and then we compare that performance that we just measured against you know standards that are already in place so what our targets are so this is where we compare actual performance against and then finally we take corrective actions so in case there are any problems in case there are any deviations from our plans then we take actions to rectify this situation so this is how important the process of controlling is all about it this is how managers know whether or not they are you know making the right decisions and whether or not those decisions are actually right so the control process also assumes that there are standards in place because we are going to compare we are going to compare actual performance against some existing standards so those standards could be the targets that we are working towards achieving so this assumption is actually correct because we always have targets that we want to achieve but you know whether or not those targets you know are clear and and you know timely and realistic this is an entirely different process an entirely different issue but the control process is all about measuring what's going on comparing it against what we want it to look like and then finally taking corrective actions so this is a good illustration of you know what the control process is all about and what does it consist of it consists of those three steps so what is at the center of all of those steps achieving you know the goals and objectives of the organization or the division or the department or even individual goals and objectives so why are we taking all of those steps why are we measuring actual performance comparing and then taking corrective managerial actions this the whole point behind this is that we want to ensure that the goals and targets and objectives are being achieved and are being accomplished according to our timeframe let us begin our discussion of each and every step so when we measure actual performance we have a couple of things that we need to keep in mind so the first one is how we measure so what kind of methods do we use as managers and as people who will work later on as professionals in order to measure exactly what kind of you know methodologies are we going to use there are plenty of you know methods available typically for our most common for managers specifically the first one could be personal observations so this is what managers you know observe what's going on in the field by themselves the second one could be statistical reports so statistical analyses of what's going on so this is when you get lots of numbers and by you know bar charts and pie charts to see what's going on in you know statistically then we have oral reports so this is during meetings for example when workers come from different units to report what's going on and to you know deliver presentations on the performance of their units and finally written reports so typically there are regular reports that are being provided to managers on a on a regular basis so things like weekly reports monthly reports quarterly reports annual or yearly reports and so on so based on these types of reports you know people and managers have you know these different methods of measuring what's going on in their units divisions or the entire organization even the second point that we need to keep in mind is what is being measured so how it's about the methods that we use so we have all of those different types of reports and of course each and every one has its own you know advantages and disadvantages but what is actually even more important is what we measure what is being measured because sometimes when we select the wrong criteria we end up making the wrong decision and we have seen that in Chapter number two when we talked about the process of decision making you know selecting a good criteria is definitely the you know the cornerstone of ensuring that all these things are are being effective and this is why managers need to be very careful when it comes to selecting the criteria that they use for you know measuring actual performance typically speaking they will try their best to select objective criteria so numbers and you know and indicators of what's going on you have probably heard this term a lot of times already in this course or in other courses something that is referred to as KPIs key performance indicators so these are numbers or you know the statistics that reflects certain measures so this is an objective type of criteria where it just reflects the reality of the situation however sometimes when these are unavailable or difficult to develop then managers would also use subjective criteria so even though they have their limitations subjective criteria meaning that their interpretation is diff from one person to another still having subjective criteria is better than having no criteria at all so these are the four methods of you know the methods that managers can use for measuring actual performance so we have personal observations statistical reports and then oral and written reports so as we mentioned each and every one has its own advantages and disadvantages they have their own pros and cons so in order to be most effective managers use a combination so they don't just focus on one type of method they use a combination of all those four different types of reports so they would have regular meetings of those are oral reports they would have also requests their employees and different divisions and units to submit written reports they will also have statistical reports and they would you know go to the field themselves and observe what's going on the concept here is that there are different methods to be used the important aspect is that we need to use a combination so that we get a better angle a better view of what's happening so the second step in the control process was comparing actual performance against the standard so in this process what we are doing is that we are we have already selected the methods we have already selected the criteria that we are going to use and now we are going to compare the numbers compare the numbers of what's actually happening and what should happen what we like things to be so this is why the concept of you know ensuring and you know determining an acceptable parameter of variance between the two is very critical because when can we say that this is considered okay and this is considered not okay let's take an example so we have for example determined that the target that we want to achieve in our company is that we want to produce 50 mobile phones per hour we just consider this a target we want to produce 50 mobile phones per hour and now when we so this is our target or this is our standard so let's measure actual performance when we measure actual performance we find that we are producing 49 Mobile's per hour so it means that there is a difference so now we need to determine is this difference is this variation is this you know discrepancy is it considered okay an acceptable kind of difference or not when do we say that this is acceptable and this is not this is you know an important conversation that decision makers in the organization must make because they need to determine when can we say that this is still considered okay because you know no matter what variations will arise it is considered an inevitable and an inescapable type of situation that variations and differences in performance will exist but when can we say and when do we say that this is this variation and this difference is acceptable but that variation and that difference is not acceptable this is what is known as the range of variation this is an illustration of the concept that we just discussed so we will have variations of performance so either more or less of what we planned so in our previous example we said that the target the standard was 15 mobile phones per hour and now we are producing less 49 or 48 or 30 so this is you know lower than what we had already planned so is this considered acceptable or not this is what we are trying to determine and sometimes the variation is is about you know producing more so what if we are producing more 51:58 60-something is this considered acceptable up to which level do we say that this is still acceptable and now this is not acceptable if you are wondering so what if we are doing more doesn't that mean that we are you know actually more effective and we are doing very well not necessarily because this could happen on the expense of quality when you are producing a lot more than we then what you are what you had already planned it could mean that maybe you're not paying attention to detail and you are producing mobile phones that are defective so this is why you need to ensure that you know what's actually going on reflects a good range of variation step number three in our control process is taking managerial action so now that we have measured actual performance we have compared actual performance performance against the standards that are already established now it is time to make a decision so the decision that managers could take falls under one of two options one correcting actual performance and two is revising the standard so when it comes to correcting actual performance we also have a number of different you know options that managers have so they could decide on immediate corrective action what that means is that you know managers here are just going to correct the problem at once and they're their objective here is to get performance back on track so making sure that if you know all operations are resumed back to normal and that now we are working towards achieving our goal the second option is basic corrective action and in this case managers are trying to find the original source of the problem and they will fix the source of the issue so in here you there's a equality term known as root cause analysis finding out the actual source of the problem and going and you know correcting the source of the issue rather than you know the issue itself so going back to the origin and making sure that the you know the the actual cause of this issue is being addressed so this is one big option in this step witching which is correcting actual performance so this is one decision another decision is revising the standard so the decision that the decision here could be not correcting the performance but maybe the performance is fine what what is actually wrong is the standard itself so when we try to take actions to correct you know the problem one of the things that we can find is that maybe the standard that we set was either too easy or too difficult so in this case we need to revise the standard we need to review our goals and making sure that we are setting realistic goals we have often mentioned even in the chapter of motivation that goals need to be realistic at the same time they shouldn't be too easy otherwise they will not be motivating enough for people to work towards achieving why are they not motivating enough because they're not you know challenging enough and without you know a proper amount of challenge people are not going to feel satisfied why because they're not going to feel that what they did was an actual achievement because everyone could have done it so we need to be careful when it comes to reviewing our standards we need to see what's the target - hi was it too low there's an important word of caution here - managers then they need to be very careful when it comes to revising standard downward because it might send a negative message to employees what we mean by this is that when you tell your employees that okay do not produce 50 mobile phones per hour anymore just produce 30 now maybe employees will think that oh we have been doing a great job and they could start you know slacking off so you need to communicate why you need to communicate a very good message on how and why these standards are reviewed so to take a step back let's review the different varieties of managerial decisions in control so in step number three what are the options that are available to managers what can they do after they have measured actual performance and compared it against a standard so now they find that there is a variation and an unacceptable variation so their options are the following they can do nothing you can do nothing maybe they find that no everything is actually going well the second option is that they can correct the performance and we have seen that this can be either immediate or basic and then finally they could actually review the standard itself maybe they have said an unrealistic standard or an unchallenging one so these are the different options available to managers each and every one has its own you know pros and cons managers need to be very careful and they need to study why you know why each decision and where each decision should be applied in under which circumstances and here is an very helpful a very helpful process flowchart or a work flow chart for managerial decisions in the control process so we begin at the left-hand side with the objectives so we have our objectives we have determined them then we have also determined our standards and then we go to step number one and that is measuring actual performance and then we go upward we follow the flow and then we compare actual performance against the standard and then we ask ourselves all of these questions if the standard is being attained if the goals are being achieved then we can do nothing and then we go back and start the cycle all over again if no the standards are not being achieved then we need to determine is the range of variation acceptable or not if yes then we don't have a problem and the cycle goes back and start all over again but if the variance is not acceptable then we need to see is the standard acceptable is the standard effective is it too high is it too low if the standard is acceptable and you know it's not being met then we need to identify the cause we need to find out what's happening and correct the performance if no then if the standard is not acceptable then we need to revise the standard itself so and the process and the cycle starts all over again we measure actual performance again we compare it against the standard and we ask ourselves all of these questions all over again so it's a continuing it's an ongoing process so this is a nice helpful process flow chart that you know managers can use as a guiding map for making decisions in the control process so we have mentioned the term performance so many times already throughout there this chapter but when we said for example measuring actual performance so what is performance performance is the end result of an activity so an activity on the job could be you know undertaking job responsibilities as effectively effectively as possible so what is the end result of that you know what have you delivered so this is your performance in that context organizational performance is the accumulated the ad gated result of all of the organization's work activities so what did unit a do what did unit B do what did what did you know that Department do what did that individual do and then we accumulate we put all of those performances together and we have the performance of the entire organization and this is where we can say and measure that the performance of the entire organization was it successful was it effective was it efficient or was it not so to measure organizational performance we have a number of parameters that we can use and one of them is productivity and productivity is basically you know is basically output over input so what do we mean by output so output is things like the goods or services that you are providing so the goods that you sell or the services that you provide and you divide that by the amount of input that you require to generate to produce this output well let's take an example so when we talk about output let's talk about for example mobile phones if you are a company that manufactures mobile phones so your productivity can be measured as follows how many mobile phones do you sell how many mobile phones do you sell or do you manufacture do you produce you divide that by the amount of input that you require to produce these mobile phones so things like how many hours have you worked in order to produce that many mobile phones how much money did you spend on you know producing those mobile phones so this is how you measure your productivity you you can have different numbers here so things like the number of goods sold you could have the revenue generated by selling these units so when we say revenue we mean you know what is the price per unit for example and you multiply that price per unit all times all the units that you sell so this is the amount of money that you generated and you divide the amount of money that you received on the amount of money that you spend that you spent and then you get your productivity for example another parameter is what is known as organizational effectiveness this is an extremely important parameter that managers use to determine you know the effectiveness of their organization in general in general and what that means is that they determine using this parameter they determine how appropriate the goals were and I like how well those goals are being achieved remember when we differentiate between effectiveness and efficiency so remember those definitions so how good are we in meeting our objectives so even though we are we could be meeting our objectives we could maybe we are spending a lot of time or a lot of money than than planned so we for example set a budget of one hundred million dollars so this is the amount of money that we want to spend on producing for example 1 billion mobile phones and then we produced 1 billion mobile phones but we exceeded our budget by so much can we say oh we achieve the target then we are effective and we are productive and everything is well we cannot say that because we even though we achieved the target we weren't effective we weren't effective in achieving that target we weren't very efficient meaning we have exceeded the budget by so much so productivity is a very important parameter that managers it's the amount of output divided by the amount of input and organizational effectiveness is how good were you in achieving those objectives when we talk about employee performance in the context of controlling managers have to take sometimes the hard decision of implementing a disciplinary action and what that means is that you know sometimes managers have to enforce the standards and the regulations of the organization even if that means that certain employees must be punished or must you know suffer some sort of consequence for for their actions and and this falls under the concept of feedback we have talked about feedback in previous chapters we have discussed how feedback is important because without feedback as an employee you will not know how well you were doing and whether or not you need actually to do something to you know correct your performance and this is the whole idea of controlling is it's all about correcting performance but if the manager is not talking with you about your performance and is not giving you feedback is not giving you information on whether or not you did well that you will never know if what you are working towards is actually what the manager wants so sometimes managers have to ensure that the regulations of the organization and of work standards are being met and if they are not being met they have to take corrective actions and these are referred to as disciplinary actions you know ensuring that and enforcing those standards even on employees another you know more contemporary type of concept is what is known as progressive disciplinary and this is a concept that says that the minimum penalty appropriate to the offense is imposed so making sure progressive disciplinary action is about making sure that the minimum punishment the minimum penalty is actually being implemented that you know no deviation and no offense no violation is being unpunished no violation is being on addressed this is what progressive disciplinary action is all about that at least the minimum punishment at least the minimum penalty is being imposed so here are some of the you know types of problems that we are talking about that managers sometimes need to address so problems of performance for example so let's talk about attendance so an example of some of those problems that arise on the part of employees are things like absenteeism so basically when people do not show up for work or tardiness meaning being late for the abuse of sick leaves when they basically falsify sick leaves and pretend that they are sick and they do not show up for work so this is a problem this is a deviation from actual from standards that we need to impose so in case employees do this then managers must take disciplinary action they must punish this type of behavior and when we say punish it's not let's not only focus on the negative aspect of it it's it's not punishing you know for personal reasons it's you know it's correcting a performance the point of imposing a penalty or imposing a punishment in the context of organizations is it's all about making sure that the standards are being followed that the regulations and the policies and the rules of the company are being followed we need to send a message to everyone in the company that these standards are in fact being imposed and are in fact being followed and are in fact being focused on by management so as a manager you need to ensure that you know you are following the policies as well so you cannot just punish someone for being as absent you need to go back to the procedures and the regulations of the company in case someone is being absent so what is the procedure here you need to go back to the procedure of the company other examples include things like on-the-job behavior so things like insubordination so when employees this obey and basically do not follow the instructions of their managers so this is a problem how do we punish it how do we punish it we go back to the procedures of the company what does the company say about this or things like failure to use safety devices things like you know consuming alcohol or drugs on the location of the company how do we punish this of course we this is something that must be addressed otherwise this is not going to create a safe culture for our employees remember that one of the points one of the reasons for controlling is that we need to create a safe work environment so we need to protect our employees and our workers against threats like this another problem is dishonesty for example so theft and lying and falsifying important information when employees are being dishonest and you know showing these types of behaviors what can we do so this is not that judgment that Sabino supervisors and managers must you know take arbitrarily they need to go back to that book of regulations and review the policies of the company this is what controlling is all about and finally things like outside activities so criminal activities outside of the company working for a competing organization in case you know this is something in their contract if employees violate if employees violate these agreements between them and the company what first of all this is something that must not go on addressed and then we need to go back and see how can we enforce the regulations of the company in a good way in a good way meaning in a way that improves performance so within the idea of feedback we have different types of controls that could take place in relation to feedback so the first type of variety is what is known as feed forward control so feed forward control is control that takes place before an activity is done so the goal here is to prevent a problem before it happens so this is when managers correct performance or correct standards before the activity is completed before the performance is before the performance is done and the the the advantage here is that we stop the problem from happening before it even occurs so that we avoid any loss we avoid any damage for you know for example in our products or the services that are offered so that's why feed forward control is sometimes preferred because it prevents the problem before it even happens the second option is concurrent control and as the name implies concurrent means that two things are taking place so the performance is actually happening right now and then control is oh is also happening at the same time so this is when managers are directly observing what's going on and they give immediate feedback on what's happened to their employees on their performance and they correct the performance right there on the field another term for this here's what is known as MWA or management by walking around so this is what managers are you know cruising in the work area and they are interacting directly with their employees they are observing their performance and they are giving them advice and you know feedback immediately on their performance and they are correcting any issues right there on the field of course advantages is that you know before a problem gets bigger we correct it and you know well we stopped the problem for from becoming something that goes beyond our control the final type of option is feedback control so this is one control takes place after the activity is done so after the employees have delivered their performance we give them feedback we evaluate their performance so we have of course this this is probably the most common type of feedback because things like the annual performance appraisal is an example of this so this is when the performance was already completed when the performance has taken place and then we evaluate it and we give feedback on it so this provides us with lots of good benefits one of them is it shows managers and it tells them whether or not their planning efforts were actually on target what that means is the following so before our employees perform their jobs we have given them instructions we have you know planned a lot of a lot of things we have set budgets we have determined how work is going to be distributed so we let them do the job when they do it if they did it very well that it means that our planning and our instructions were actually very good so that's one great benefits of feedback control and then another benefit of feedback control is that people like to be appreciated and people like to hear you know praise and they they like their efforts to be recognized and this can happen at this stage so once they have completed their performance and now we can measure and if they did a good job we our knowledge that and we tell them you have done great you are the best worker in this unit and so on so this acts as a motivating type of process for employees so feed-forward this is when we stop the problem from even happening in the first place concurrent control or management by walking around is when we observe the performance and correct it on the spot and then feedback control is when the performance is done and then we give information on it to summarize the types of control that we just discussed here here is a nice looking exhibit and illustration of what that means so their feed forward control it's all about preventing control preventing problems before they occur so we focus here on the input so on the input part of production so before something happens and then concurrent controls and it's all about correcting problems as they happen so immediately you know we correct the problem and we focus here on the processes and finally feedback control it's it's about the output so we we look at the output and we give feedback to our employees on their performance so for each and every one of those controls there are definitely benefits there are definitely you know sometimes cons depending on how early on you want to detect the problem the whole idea here is that controls are important and they can be used during each and every step of the way an essential type of control in any business is of course financial control the ultimate goal of any business is to become profitable is to make money so we need to measure those standards and we need to have some controls to see whether or not our business our organization our unit is actually performing well financially so in this context we use different types of ratios things like liquidity profitability leverage and so on you will study those in detail in future courses hopefully like financial management but the whole idea that you need to learn here is that we need to employ these types of financial controls and ratios to measure the effectiveness of our business financially to see whether we are achieving those financial targets of ours to see whether or not you know we are making enough money to pay our expenses and to even have some profits to make sure that our debt levels you know the loans that we take or debt levels are not too high so this is why these financial ratios are important because they reflect the performance of the financial aspect of the business another aspect here is the budget we all the organization's have budgets each and every unit has its own budget so we use budget in both planning and in also controlling budgets are a planning tool because you know we in why we determine this budget why we work on this budget we identify the important work activities we determine the significant contributions that each and every unit is going to make so this is the planning part of or the planning use of the budget it's also a controlling tool because we use it to see you know to compare actual performance against the standard so the budget provides us with a good way of measuring performance and making sure that we are not deviating too far from the budget and whether or not you know expenses are too high and these high expenses are not generating enough revenue so this is an important function and important aspect for managers to learn they need to be able to interpret the finance the financial data and they need to be able to conduct some sort of analysis to really you know capture the the picture of what's going on financially in their business some of the most commonly used financial ratios are the ones that you can see here on this table so liquidity leverage activity and profitability these are all you know important financial ratios that managers must learn even if those managers are engineers even if those managers are you know they work in marketing they don't they do not have to be people who specialized in finance or who work in the accounting department to know these things that managers from all types of fields from different backgrounds they must have a good understanding of these financial ratios because they are the ones in charge of taking corrective actions and they are the ones in charge of you know explaining these information to their bosses so they must know some sort of information about you know reading those financial statements I mean here's a nice explanation of what those mean for you as freshmen students you just need to take a good idea of you know why financial ratios are important what are some of the things that they reflect I'm sure that you are going to study these in greater details in your future courses control is is all about collecting information and using this information to make decisions so for managers and for organizations and mis is being used and I know that many of you my students are you know students who are studying a bachelor's degree in management information system so what is a management information system it's a system that provides management that provide decision-makers with the needed information on a regular basis so we mentioned that managers they need information on a regular basis they need information every day they need information every week every month every quarter every year to you know review the performance of their units and of the entire organization so the the the word system or the term system over here we're not necessarily talking about I'm talking about a computer software we're just talking about an ordered type of you know procedure that generates this information and take note that we are talking about information not raw data you will study this I'm sure in other courses in information technology or principles of Mis so the difference and the you know distinction between data and information data are raw they are you know mere numbers they need to be processed they need to be analyzed so that they mean something once they once that is done then we can call them information what managers need our information what managers need is information they need to you know have something of value that they can use and interpret to make decisions so generally speaking this system this Mis this management information system most of the companies nowadays it is definitely a computer based system some companies have developed their own in-house systems some have used some of the most you know commercially popular ones the the what you need to keep in mind here is that there there must be some sort of systematic way an organized way of collecting data from different sources on a regular basis analyzing this data and producing information that management can use to understand what's you know going on in the organization and base their decisions upon them we have talked about financial controls and we have said that financial controls are definitely important and that managers must use and understand these financial controls so that they can make good decisions regarding you know the effectiveness of their of their units but what happens sometimes is that managers get too invested in these financial ratios in these financial information that they overlook some of the other very important aspects of the process so in order to perform something in the organization in order for you to achieve your objectives yes you need a budget so this is a financial you know part of the the financial part of the process but you also need people so sometimes managers overlook this part so this is why this tool called the balanced card this is a very important tool that managers can use in order to make you know decisions that look at four different areas rather than merely focusing and only focusing on the financial perspective so the balanced scorecard encourages managers to focus on yes the financial part this is definitely a very big part of it but also the it you know pushes managers and decision-makers to evaluate the the people part so things like innovation and growth assets so to see whether or not you know we have the right people whether or not we need more people for example whether or not these people need to be trained so that's another area in the balanced scorecard the third area is the internal processes so the procedures that we have in place within the organization so whether or not you know the the work procedures that we have and the processes that we have internally are they supportive of achieving those financial ratios and achieving the you know overall targets of the company in general and the fourth aspect of the balanced scorecard is the customer so everything we you know we said that the ultimate goal of any business is to generate money who is going to pay us that money the customers of course so we need to evaluate the effect of our decisions on the customer and whether or not you know the controls that we put in place affect the customer positively and improve the improve the customer experience and you know gets us more share in the market so the balanced scorecard focuses on four different areas and he pushes managers to not only focus on the financial perspective but to also look and consider other important aspects as well we cannot talk about controls without mentioning benchmarking so benchmarking is an important performance measurement tool and it looks at more than that just than just a financial perspective so when we when we say benchmarking we mean that we make a comparison a comparison between us between our organization and the best practices in the field the best organizations in the field so we are trying to come up with benchmarks when we say benchmarks we mean standards of excellence that we will use to compare to use for measurement and comparison so let's say that you know we are a petrochemical company and maybe the best in the field is Saavik so let's compare what we do against what SABIC does so what do we compare exactly those are the standards those are the benchmarks that we need to select those are the standards of excellence so sabic is excellent in terms of what in terms of how they train their employees for example in terms of how they you know do their planning and budgeting activities so these are the standards that we will use and we will compare ourselves against Saavik in terms of those excellence standards this is why benchmarking is important because it pushes you to improve and it shows you you know how and why other organizations are successful while it's a very good idea to you know compare your organization against other organizations meaning against external parties it's also a very good idea to do some internal analysis to look at what's going on very well within your organization your organization consists of different divisions different units different departments different shows different teams so each and every organization has its each and every one of those units has its own way of doing things okay so it might be a very good idea to do some comparison between the different units within the organization and find out the best practices within your company inside your organization so here are some suggestions for what is called internal book marking so this is when you compare you know best practices but not outside actually inside the organization for example you can try to connect best practices to strategies and goals so everything stems from the company's mission and vision and goals and values so how you know how people and how units should you know work within the company should be linked ultimately to the strategies and the goals of the organization so try to establish that connection then in number two try to identify best practices throughout the organization so look at all of the different units all the different divisions and see which or you know which unit particularly stands out what do they do very well there are you know different processes and functions that are shared and common across all the different units so look at which unit is doing something very well and try to you know encourage other units to follow their lead develop best practices practices reward and recognition systems so you encourage your units and your teams to use to go the extra mile and to do something very well and when they know that these efforts are going to be rewarded and recognized they are going to be more motivated and they are going to feel that this is you know something of value to them communicate those best practices throughout the organization so this is when organizations let their units know about the work of a certain unit so this is when they say that you know the human resources department for example is one of the best units within our company why because they do these things very well so they share this information with the other parts of the company create a best practice knowledge sharing system so have a systematic way have a formal mechanism where you know members of the organization where employees are sharing those information are sharing those experiences so that you encourage them to talk to each other not just in a friendly and social manner it should be something systematic and finally you know foster and nurture best practices on an ongoing basis so encourage your employees to do something to do those types of things on a regular basis not a one-shot mentality it's none of you know yearly event this is something that should be going on on a kana kaanum on a regular basis and you create a culture this way where you foster learning and knowledge sharing in the field of business we always talk about globalization and how organizations nowadays are infiltrating the global market and we have seen how you know moving across cultures is a very challenging process for managers because what is considered acceptable in a certain place is not necessarily considered that acceptable in others but the you know the mere point of the milk you know fact that you are you have operations in different parts of the world definitely creates a challenge for managers in terms of controlling the the idea that you know the fact that there is a great distance this creates the need for more formalized controls like reports the fact that you know SABIC for exam who has operations in Vietnam so how can the manager at Saudi Arabia here in sabic control and monitor what's going on in the plant in Vietnam it means that he or she is going to rely on the reports that are submitted by the team in Vietnam so because of the distance this is maybe the only option available he cannot go you know himself or herself and you know directly observe what's going on so they would rely more and more on formalized controls the impact of technology is something that is definitely you know takes place in in the process of controlling across cultures so in more technologically advanced countries people you know managers are going to rely on those reports that are submitted electronically they are going to you know they will have the opportunity for example for direct observation you know using different online systems but in less technologically advanced countries and cultures managers are going to face a challenge and they would rely on different types of controls now local laws also have an important role to play here sometimes you know the laws in a certain country prohibits prohibits and prevents companies from bringing in a management team from outside in certain countries the managerial levels are preserved for nationals only so this is why here controls can be you know something's a bit of a challenge and then comparability issues could also arise when we say comparability so we had you know the extent to which the data that we collect across the two locations can actually be compared labor cost for example in China are so different from labor cost in Saudi Arabia so if we have a plant here and a plant there his does this you know a piece of data is this something that is comparable across the two locations you know how is labor cost calculated in Saudi Arabia how is labor cost calculated in China this is what we mean by comparability sometimes the two do not matter cannot be compared and then finally you know you need to be prepared for any emergencies for any disasters for any turmoil for any disturbances it you mean the fact that you are operating in different locations across the globe means that you are being more exposed to different types of risks so you need to have proper procedures proper controls in place and you need to plan very rigorously when it comes to how you are going to respond in the case of an emergency in the case of a problem of a disaster so managing and and controlling cross-cultural differences is definitely a big challenge for managers and they must take that into consideration when developing their controls and their standards the issue of workplace privacy is being more and more discussed because employees sometimes feel that their privacy is being violated but at the at the other hand employers and organizations they have also their reasons for monitoring what you consider private property so employers and managers have the right to read your email and the right to listen to your phone calls and have the right to store and review your computer files and why is that the case why do managers have this right and why do organizations do all of these things well they want to monitor your productivity they want to see how much time you are actually spending working and how much time you are spending on Facebook and YouTube this is their right you are here from seven o'clock to four o'clock and you are being paid to perform work activities not we are not paying you to spend time reading newspapers and updating your Facebook status and companies also have concerns about offensive and inappropriate material it has been you know a case a number of times in different organizations where employees misuse the internet for example where they you know find further you know offensive material online using the company the company's internet connection this is definitely a big issue for organizations they need to ensure that employees are not misusing the resources available to them and then finally organizations monitor all of those things they monitor your email and your phone calls because they want to protect their secrets they want to protect their confidential information sometimes when employees are not being careful they could you know leak very sensitive information that could result in a big loss for the organization so this is why sometimes companies monitor phone calls monitor emails to ensure that you know company's secrets and confidential data are being protected remember we are still talking about control so we have talked about financial controls we have talked about privacy we have talked about you know benchmarking so we also must talk about employee theft this is a big problem in all in all types of organizations and this is something that needs to be monitored and controlled and this is why this term is mentioned in this particular chapter so let's first determine what we mean by employee theft employee theft is any unauthorized taking of company property and using it for personal reasons what we mean by this you know this could range from embezzlement from basically stealing money from the organization and this is very obvious very straightforward but other forms of theft also exist and people sometimes you know become a little bit lenient when it comes to thinking about them when you use the company's printer to you know print personal photos this is considered employee theft why because you are using the company property not for work reasons but for personal reasons so this is what we mean you know this is what we mean by saying that employee theft is a big issue because it takes so many forms the reason why you are here in the company in the company you know location you are here being paid you know some money from 7 o'clock to 4 o'clock to do work for the company you are not here to read the newspaper you are not here to you know watch youtube videos and you are not here to use the company's phone to talk to your friends and family and you are definitely not here to steal office supplies when people take you know papers and pens and pencils back to their homes this is employee theft because this is not your property this is the company's property and you were given these supplies to do some work activities so managers and decision makers must you know educate themselves and their employees about employee theft and they must have procedures in place to prevent this problem so here are some suggestions of what managers and decision-makers and organizations can do to control employee theft remember we have discussed three types of controls for feed-forward this is before the problem occurs when we are trying to prevent it even from happening and then concurrent controls this is as the problem occurs and then feedback controls this is after the issue has taken place and we are trying to take two interactions so in the problem of employee theft something that we can do before it even happens is that we can use better hiring criteria so the people that we select when they must be honest people and people who are trustworthy and also we need to establish policies defining theft and disciplining procedures as well and we need to communicate this to employees openly we need to also involve employees in writing those policies so that we educate them so that we raise their awareness about the issue and then we need to you know educate employees and train them about these policies so that they really understand what they mean and why they have been put in place and what are the effects of employee theft conde you know on the organization and then we need to have a professional review of our security controls meaning we need to have a regular type of you know activity where we are going ly revise our procedures now in the in terms of concurrent controls we need to treat employees with respect and dignity first so that they don't you know we they don't try to punish us by stealing from the organization we need to communicate openly with them about the costs of stealing we need to let employees know on a regular basis about you know their success in preventing theft and fraud we need to tell them that because of your efforts we have you have saved the company a lot of money these things also need to be rewarded we need to use video surveillance of equipment if conditions are you know permissive permissible meaning this is why you will see in all types of stores if you go to Burger King if you go to jail you will you will find that you know sign that CCTV is being used meaning that you know everything is being monitored using cameras because when employees know that they are being monitored they will be less encouraged to commit any theft and then feedback control so this is after the problem has happened this is when we need to you know impose penalties and punishments this is when we need sometimes to look back at our control measures and see whether or not we need to revise them and this is when we need to also make sure that you know that you know we we set good examples for our employees first so managers act as role models and they need to show this this type of honest behavior so that people our employees can imitate them and follow their lead another important thing that must be rigorously controlled is workplace violence so it's a it's a huge problem for organizations because it threatens the safety and the well-being of its employees and we mentioned that the one of the reasons for control and one of the reasons why control is very important is that we need to protect our employees against any possible threat so workplace violence is an increasing problem unfortunately in today's businesses and even though what you see right now in the slide hat is relevant to the u.s. it's it's a common problem across the world so and violence takes a number of different forms it doesn't necessarily always have to be physical violence where people are just throwing punches at each other or screaming at each other violence can be emotional as well violence can be psychological things like bullying this is also considered violence so procedures must be in place to protect employees from such a problem we go back to our feed-forward current and feedback control so we need to set places to set procedures in place to prevent it from happening that's number one and then as the problem occurs we need to you know address it strongly and then after the bye you know that the problem has taken place we need to punish those who have committed this violation so violence is a big problem it needs to be addressed strongly because we need to we are responsible and we need to protect the safety and well-being of our employees so here are some suggestions for how managers can control workplace violence now of course we need to you know understand what are some of the reasons you know that violence occurs violence occurs unfortunately because of employee stress when employees sometimes feel that they are being pushed beyond their limits when you know long working hours when they feel that they are being treated unfairly by their employers and so on when there are any you know good conflict resolution procedures in place so you let some of these problems get bigger and when you do not address them seriously it could manifest in the form of violence so again to address any issue can use feed-forward concurrent and feedback controls so lots of things that can go on using MW mbw a management by working around so you can identify potential problems observe how employees treat each other and how supervisors in particular treat their supervisees and we need to have also careful pre hiring screening so that we try to detect before we hire someone is this you know someone who can work well and get along with others how can we detect that this is a person who can commit such violations and lots of other things that take place as the problem occurs and after the problem has happened violence need to be addressed strongly and seriously and it must be punished in a way that you know sends a message to the rest of the company that the safety and well-being of our employees come first so how can managers measure the relationship between the goals and the outcomes when it comes to customers remember customers were part of the balanced scorecard so we have discussed people we have discussed financial ratios we have discussed internal processes so let's talk a little about customers so we have goals you know in terms of customers and then we have you know outcomes that we want to achieve so how how do we how do we establish that relationship inaudible can we control for this aspect for these interactions particularly you know we depend when it comes to our profits we depends on our customers these are the ones who are going to pay us money there are the ones that we need so that we can make money so that we can make profits so this is where the concept of service profit chain comes into play so service profit chain is the service sequence from employees to customers to profit let's break it down so this concert says - you know how productive our employees are going to be when it comes to serving our customers depend on the company's strategy depend on the company's delivery system and so on and based on these types of things employees are going to be more effective you know they are going to perform better when it comes to serving these customers and interacting very well with them and as a result of that the outcome of that is going to be more profits generated so service profit chain from the name itself it's a chain it's a sequence of related activities it starts you know from the employees and then it shifts to the customers and until finally we generate profits so customers are in power an important aspect of you know of organizations and organizations depend on customers for generating profits and to you know to keep those customers satisfied and to keep them happy and to even you know gain more customers our employees who work in customer service who you know deliver the services to our customers and deliver those goods to our customers they need to be they need to be effective they need to perform well this performance of them is impacted is influenced by the company's strategy delivery system and so on the last concept that we will discuss in today's chapter is corporate governance corporate governance so it's a system that governs corporations so what does that mean so what's a corporation it's the business it's a firm it's the it's the company so we need to have a system in place that controls the entire organization for which purpose so that the interests of the owners of the shareholders are protected so this is this is the reality of the situation in a company like Sabbath we have owners people who own shares and stocks in SABIC and then we have managers and people who run the day-to-day operations the owners of Saavik they do not work at Saavik meaning that they are trusting these managers trusting these decision-makers to actually make the right decisions and to make decisions that are going to be in the best interests of the owners unfortunately sometimes there are conflicts between the interests of the managers and the interests of the owners sometimes managers want to spend more money because this is going to improve their reputation or they want to you know make more expenses in terms of salaries but this is not in the best interest of the owners or the shareholders so this is why we needed some sort of system that controls this issue that you know governs the relationship between the owners of the business there are shareholders of the business and the people who actually run it on a day-to-day basis and you know lots of countries have now developed laws and regulations about corporate governance and it's a very big field at the moment and none it has become a national requirement here at Saudi Arabia that each and every organisation specially publicly traded ones ones that have you know stocks and shares in the market they must have a corporate governance system in place so this was our chapter for today thank you so much for listening it was an interesting chapter and I hope that you know it has provided you with a good understanding now of the managerial function of controlling thank you very much and I'll see you on future chapters