MGMT 3000 1st edition Lecture 30 Outline of Last Lecture I Controlling II Steps of control Process III ENRON IV Control Methods Outline of Current Lecture I Balanced Scorecard Current Lecture What do managers need to control The Costs Gross profit Net profit Gross revenues Quality of the product or customer satisfaction Balanced Scorecard 1 Balanced Scorecard is a measurement of organizational performance in four equally important areas finances customers internal operations and innovation and learning a Minimizes chances of sub optimization occurs when performance improves in one area at the expense of another b S c Look at 4 areas i Customer perspective Answering the question how do customers see us 1 Monitor customer defections identify which customers are leaving company and measuring the rate at which they are leaving 2 Obtaining a new customer is 5X more expensive as keeping a current one 3 Customers who left are likely to tell you what you are doing wrong 4 Understanding why a customer leaves can help fix problems ii Internal perspective Controlling quality at what must we excel 1 Measures of quality a Excellence Managers must try to make a product of unsurpassed performance and features b Value customer perception that the product quality is excellent for the price offered These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute c Conformance to specifications employees must base decisions on whether services and products measure up to a standard specification iii Innovation and learning perspective Controlling waste and pollution 1 Can we continue to improve and create value 2 Strategies a Good housekeeping regularly scheduled preventive maintenance for offices plants and equipment b Material product substitution Replacing toxic or hazardous material with less harmful materials c Process modification changing steps or procedure to eliminate or reduce waste iv Financial Perspective Focus on accounting tools 1 Cash flow analysis predicts how changes in business will affect ability to take in more cash than paying gout 2 Balance sheets provide snapshot of company s financial position 3 Income statements show what has happened to organization s income over time 4 Financial ratios track liquidity and profitability 5 Budgets used to project costs and revenues and prioritize and control spending 6 Economic value added Amount by which company profits exceed cost of capital in a given year a Costs of capital long term bank loans interest paid to bond holders dividends and growth in stock value b Shows whether business is paying for itself c Makes managers at all levels pay closer attention to their segment d Encourages managers and workers to be creative in improving EVA
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