Measurement and Accountability

1. Measurement and Accountability Module 15 LIS 580: Spring 2006 Instructor- Michael Crandall

2. Roadmap • Control systems • Diagnostic systems • Financial control- the budget • Financial ratios • Other systems • Boundary control systems • Interactive control systems • Commitment-based control systems • Issues in control systems LIS580- Spring 2006

3. What is Control? • The process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations • An effective control system ensures that activities are completed in ways that lead to the attainment of the organization’s goals Prentice Hall, 2002 LIS580- Spring 2006

4. The Fundamentals Of An Effective Control System • Control • The task of ensuring that planned activities are getting the desired results. • All control systems try to influence behavior. • Controlling involves setting a target (planning), measuring performance (evaluation), and taking corrective action. • Control also applies to monitoring every task—large and small—that is delegated. G.Dessler, 2003 LIS580- Spring 2006

5. Management and the Control Process FIGURE 14–1 G.Dessler, 2003 LIS580- Spring 2006

6. Characteristics of ThreeApproaches to Control Systems • Market • Uses external market mechanisms, such as price competition and relative market share, to establish standards used in system to gain competitive advantage • Bureaucratic • Emphasizes organizational authority of administrative and hierarchical mechanisms to ensure appropriate employee behaviors and to meet performance standards • Clan • Regulates employee behavior by the shared values, norms, traditions, rituals, beliefs, and other aspects of the organization’s culture Prentice Hall, 2002 LIS580- Spring 2006

7. Types of Control Prentice Hall, 2002 LIS580- Spring 2006

8. Steps in the Control Process • Measuring actual performance • Personal observation, statistical reports, oral reports, and written reports • Management by walking around (MBWA) • Comparing actual performance against a standard • Comparison to objective measures: budgets, standards, goals • Range of variation Prentice Hall, 2002 LIS580- Spring 2006

9. Defining an Acceptable Range of Variation Prentice Hall, 2002 LIS580- Spring 2006

10. Steps in the Control Process(cont’d) • Taking managerial action to correct deviations or inadequate standards • Immediate corrective action • Correcting a problem at once to get performance back on track • Basic corrective action • Determining how and why performance has deviated and then correcting the source of deviation • Revising the standard • Adjusting the performance standard to reflect current and predicted future performance capabilities Prentice Hall, 2002 LIS580- Spring 2006

11. The Control Process Prentice Hall, 2002 LIS580- Spring 2006

12. Qualities of an EffectiveControl System Prentice Hall, 2002 LIS580- Spring 2006

13. Approaches To Maintaining Control • The Traditional Control Process • Step 1: Set a standard, target, or goal. • Step 2: Measure actual performance against standards (observation and timing). • Step 3: Take corrective action. • The Commitment-Based Control Process • Encouraging all employees to exercise ethical self-control (as they initiate process improvements and new ways of responding to customers’ needs. G.Dessler, 2003 LIS580- Spring 2006

14. Two Basic Categories of Control Systems FIGURE 14–4 G.Dessler, 2003 LIS580- Spring 2006

15. Types of Traditional Control Systems • Diagnostic controls • A control method, such as a budget, that ensures that standards are being met and that variances are diagnosed and explained. • Boundary Controls • Policies, such as codes of conduct, that establish rules and identify the actions and pitfalls that employees must avoid. • Personal/Interactive Controls • Control methods that involve direct, face-to-face interaction with employees so as to monitor rapidly changing information and respond proactively to changing conditions. G.Dessler, 2003 LIS580- Spring 2006

16. Examples of Control Standards FIGURE 14–3 G.Dessler, 2003 LIS580- Spring 2006

17. The Basic Management Control System • Budget • Formal financial expression of a manager’s plans. • Capital Budget • Shows the expenses for equipment with a life longer than one year. • Operating Budget • Shows the expected sales and/or expenses for each of the company’s departments for the planning period in question. G.Dessler, 2003 LIS580- Spring 2006

18. University of Alberta Library • How does this budget present options for different funding levels? • What do they use to support their arguments for increased funding levels? • On the positive side? • On the negative side? • What is going to be the hardest thing to get approval for in this budget? • How does the budget explain the request for changes in their operating expenses? LIS580- Spring 2006

19. Example of a Budget LIS580- Spring 2006

20. Example of a Budget LIS580- Spring 2006

21. Performance Reporting • Variances • Differences between budgeted and actual amounts. • Audit • A systematic process of objectively obtaining and evaluating evidence of the firm’s performance, judging the accuracy and validity of the data, and communicating the results to interested users. • Financial Ratio • An arithmetic comparison of one financial measure to another, generally used to monitor and control financial performance. G.Dessler, 2003 LIS580- Spring 2006

22. Example of a Performance Report FIGURE 14–6 G.Dessler, 2003 LIS580- Spring 2006

23. Widely Used Financial Ratios FIGURE 14–7a G.Dessler, 2003 LIS580- Spring 2006

24. Widely Used Financial Ratios (cont’d) FIGURE 14–7b G.Dessler, 2003 LIS580- Spring 2006

25. Widely Used Financial Ratios (cont’d) FIGURE 14–7c G.Dessler, 2003 LIS580- Spring 2006

26. Widely Used Financial Ratios (cont’d) FIGURE 14–7d G.Dessler, 2003 LIS580- Spring 2006

27. Ratio Analysis: Factors Affecting Return on Investment FIGURE 14–8 G.Dessler, 2003 LIS580- Spring 2006

28. Financial Responsibility Centers • Financial Responsibility Centers • Individuals or groups who are assigned the responsibility for a particular set of financial outputs and/or inputs. • Profit centers • Responsibility centers whose managers are held accountable for profit. • Revenue centers • Responsibility centers whose managers are held accountable for generating revenues, which is a financial measure of output. • Cost centers • Groups which are supported through internal taxes on other groups; overhead functions. G.Dessler, 2003 LIS580- Spring 2006

29. Other Diagnostic Financial and Managerial Controls • Activity-Based Costing (ABC) • A method for allocating costs to products and services that takes all the product’s cost drivers into account when calculating the actual cost of each product or service. G.Dessler, 2003 LIS580- Spring 2006

30. Other Diagnostic Financial and Managerial Controls (cont’d) • Balanced Scorecard • A management tool, usually a computerized model, that traces a multitude of performance measures simultaneously and shows their interactions. • Enterprise Resource Planning System • A companywide integrated computer system that gives managers real-time, instantaneous information regarding the costs and status of every activity and project in the business. G.Dessler, 2003 LIS580- Spring 2006

31. Balanced Scorecard LIS580- Spring 2006

32. Boundary Control Systems • Boundary Control Systems • Define the ethical rules for proper conduct in the organization and specify which actions and pitfalls that employees must avoid. • Include ethics standards, codes of conduct, and strategic policies. • Steps in establishing boundary controls: • Emphasize top management’s commitment. • Publish a code. • Establish compliance mechanisms. • Measure results. G.Dessler, 2003 LIS580- Spring 2006

33. Personal/Interactive Control Systems • Interactive Control • Maintaining control by personally monitoring how everyone is doing is interactive control. • Electronic Performance Monitoring (EPM) • Monitoring the work activities of employees through electronic means. G.Dessler, 2003 LIS580- Spring 2006

34. MotivationTechniques BeliefSystems Commitment-Based Control System Commitment-Building Systems Implementing Commitment-based Control Systems G.Dessler, 2003 LIS580- Spring 2006

35. Using Commitment-Building Systems to Foster Self-Control • Foster People-First Values • Guarantee Organizational Justice • Build a Sense of Shared Fate and Community • Use Value-based Hiring • Financial Rewards and Profit Sharing • Communicate Your Vision • Encourage Personal Development and Self-Actualization G.Dessler, 2003 LIS580- Spring 2006

36. Contingency Factors inControl System Design • Size of the organization • The job/function’s position in the organization’s hierarchy • Degree of organizational decentralization • Type of organizational culture • Relative importance of the control activity to the organization’s success Prentice Hall, 2002 LIS580- Spring 2006

37. Controls and CulturalDifferences • Methods of controlling employee behavior and operations can be quite different in different countries • Distance creates a tendency for formalized controls in the form of extensive, formal reports • In less technologically advanced countries, direct supervision and highly centralized decision making are the basic means of control • Local laws may constrain the corrective actions that managers can take in foreign countries Prentice Hall, 2002 LIS580- Spring 2006

38. The Dysfunctional Side ofControl • Unfocused controls • Failure to achieve desired or intended results occur when control measures lack specificity • Incomplete control measures • Individuals or organizational units attempt to look good exclusively on control measures • Inflexible or unreasonable control standards • Controls and organizational goals will be ignored or manipulated Prentice Hall, 2002 LIS580- Spring 2006

39. Controls Behavioral Displacement Games-manship Operating Delays Negative Attitudes Behavioral Consequences of Controls G.Dessler, 2003 LIS580- Spring 2006

40. Contemporary Issues In Control • The right to personal privacy in the workplace versus: • Employer’s monitoring of employee activities in the workplace • Employer’s liability for employees creating a hostile environment • Employer’s need to protect intellectual property The computer on the desk typically belongs to the organization Prentice Hall, 2002 LIS580- Spring 2006

41. Next Time • Managing world-class operations • Read Chapter 15 and the assigned articles • Before lecture discussion group questions (Group E): • What impact does the streamlining of operations have on employees? • What process do you think SPL used to decide on their operations changes? • What measures could SPL institute to decide whether their changes are improving value? • What lessons do companies like UPS have for service organizations like libraries? LIS580- Spring 2006

42. Next Time • After lecture discussion group questions (Group F): • Does a library director need to have an MLS? • Is subject matter expertise more important than management expertise in managerial positions? • What arguments would you make for or against your choice? • How well do you think our library schools are doing in educating library managers? • What steps would you take to provide better management education for MLIS graduates? LIS580- Spring 2006