• Productivity
o Outputs divided by inputs where:
Outputs are the goods & services produced
Inputs are labor, capital, materials, & energy
Control
• Monitoring performance, comparing it with goals. & taking corrective action as needed
• Why is it needed?
o Adapt to change & uncertainty
o Discover irregularities & errors
o Reduce costs, increase productivity, or add value
o Detect opportunities
o Deal with complexity
o Decentralize decision making & facilitate teamwork
Control Process
• Establish standards – desired performance level for given goal
• Measure performance – written/oral reports, personal observations
• Compare performance to standards
• Take corrective action if necessary
Balanced Scorecard
• Gives top managers fast but comprehensive view of org via indicators
o Customer satisfaction
o Internal processes
o Innovation & improvement activities
o Financial measures
• Perspectives
o Financial – profitability, growth, shareholder value
o Customer – priority is taking care of the customer
o Internal business – quality, employee skills, & productivity
o Innovation & learning – learning & growth of employees
• Strategy map
Why Measured-Managed Firms Succeed
• Top execs agree on strategy
• Communication is clear
• Better focus & alignment
• Org culture emphasizes teamwork & allows risk taking
Module 16: Productivity & Control
Productivity
Barriers to Effective Measurement
• Objectives are fuzzy
• Managers put too much trust in informal feedback systems
• Employees resist new measurement systems
• Companies focus too much on measuring activities instead of results
Financial Tools for Control
• Budget – formal financial projection
• Incremental budgeting – allocates increased/decreased funds to a department by using
the last budget period as reference point
Keys to Successful Control Systems
• Strategic & results oriented
• Timely, accurate, & objective
• Realistic, positive, understandable, & encourage self-control
• Flexible
Barriers to Control Success
• Too much control
• Too little employee participation
• Overemphasis on means instead of ends
• Overemphasis on paperwork
• Overemphasis on one instead of multiple approaches
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