MGMT 3000 1st edition Lecture 30Outline of Last Lecture I. ControllingII. Steps of control Process III. ENRONIV. Control Methods Outline of Current Lecture I. Balanced Scorecard Current LectureWhat 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 learninga. Minimizes chances of sub-optimization: occurs when performance improves in one area at the expense of another b. Sc. 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 leaving2. 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 wrong4. 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 toa 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 itselfc. Makes managers at all levels pay closer attention to their segment d. Encourages managers and workers to be creative in improving
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