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STRATEGIC MANAGEMENT & BUSINESS POLICY10TH EDITION

THOMAS L. WHEELEN J. DAVID HUNGER

CHAPTER 11 Evaluation & Control

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Evaluation and Control

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Evaluation and Control

Evaluation and Control Information –

–Performance data –Activity reports

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Evaluation and Control

Measuring performance –

–The end result of activity

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Evaluation and Control

Types of Controls –

–Behavior controls•How something is done through policies, procedures, rules, SOP’s

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Evaluation and Control

Types of Controls –

–Output controls•What is to be accomplished; focus on end result through performance targets

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Evaluation and Control

Types of Controls –

–Input controls•Resources – skills, abilities, values, motives

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Evaluation and Control

Types of Controls –

–Behavior controls•ISO 9000 Standards Series•ISO 14000 Standards Series

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Evaluation and Control

Types of Controls –

–Activity Based Costing (ABC)•Allocation of indirect and fixed costs to individual products or product lines•Based on value-added activities•More accurate charge of costs

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Evaluation and Control

Types of Controls –

–Enterprise Risk Management (ERM)•Identify risks•Rank risks•Measure risks

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Evaluation and Control

Primary Measures of Performance –

–Traditional Financial Measures•Return on investment (ROI)•Earnings per share (EPS)•Return on equity (ROE)•Operating cash flow•Free cash flow

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Evaluation and Control

Primary Measures of Performance –

–Shareholder•Shareholder value•Economic value added (EVA)•Market value added (MVA)

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Evaluation and Control

Primary Measures of Performance –

–Balanced Scorecard Approach•Financial•Customer•Internal business perspective•Innovation and learning

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Evaluation and Control

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Evaluation and Control

Evaluating Top Management & Board –

–Chairman-CEO Feedback Instrument–Management Audit–Strategic Audit

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Evaluation and Control

Divisional & Functional Performance –

–Responsibility Centers•Standard cost centers•Revenue centers•Expense centers profit centers•Investment centers

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Evaluation and Control

Using Benchmarking –

–Continual process of measuring products, service, and practices against the toughest competitors or those companies recognized as industry leaders

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Evaluation and Control

International Measurement Issues –

–International transfer pricing–Repatriation of profit–piracy

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Evaluation and Control

Strategic Information Systems –

–Enterprise Resource Planning (ERP)–Divisional and functional IS support

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Evaluation and Control

Problems in Measuring Performance –

–Short-term orientation–Goal displacement

•Behavior substitution•Suboptimization

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Evaluation and Control

Guidelines for Proper Control –

–Minimum amount of information necessary–Meaningful activities and results–Timely –Long and short-term–Pinpointing exceptions–Meeting/exceeding standards

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Evaluation and Control

Strategic Incentive Management –

–Weighted-factor method–Long-term evaluation method–Strategic funds method