Effective Organization Management
Chapter 1: Organizational Tensions to be Managed
Effective managers rely on performance measurement and control systems to set direction, make strategic decisions, and achieve desired goals
Performance measurement and control systems:
1.
2.
3.
4.
Purpose: to convey information
Represent formal routines and procedures
Designed specifically to be used by managers
Used to maintain or alter patterns in organizational activities
Foundation for performance measurement and control – profit planning systems = summary of future financial inflows and outflows for a specified future accounting period
Why plan? In order to:
1. Determine quantity and type of resources that should be committed to a business
2. Estimate the resources that will be provided by the business
Involves: analysing past trends, making assumptions
(cause and effect) and predicting expected outcomes
Profit plans are supported by planning systems – recurring procedures to routinely disseminate planning assumptions, gather market information, provide details about relevant analyses and prompt managers to estimate resource needs and performance goals and milestones
Business strategy: how a company creates value for customers and differentiates itself from competitors – cost leadership, product differentiation
Performance measurement systems: tracking the implementation of business strategy by comparing actual result against strategic goals and objectives
Types of decisions must be made by designer of performance measurement: design features, how to use Five major tensions to be balanced:
Balancing profit, growth, and control
Balancing short term results against long term capabilities and growth opportunities
How to? By serving following objectives:
1. Communicating to the organization the strategic goals of the business and the performance drivers critical to achieving those goals
2. Providing a framework for ensuring that adequate resources are
Effective managers rely on performance measurement and control systems to set direction, make strategic decisions, and achieve desired goals
Performance measurement and control systems:
1.
2.
3.
4.
Purpose: to convey information
Represent formal routines and procedures
Designed specifically to be used by managers
Used to maintain or alter patterns in organizational activities
Foundation for performance measurement and control – profit planning systems = summary of future financial inflows and outflows for a specified future accounting period
Why plan? In order to:
1. Determine quantity and type of resources that should be committed to a business
2. Estimate the resources that will be provided by the business
Involves: analysing past trends, making assumptions
(cause and effect) and predicting expected outcomes
Profit plans are supported by planning systems – recurring procedures to routinely disseminate planning assumptions, gather market information, provide details about relevant analyses and prompt managers to estimate resource needs and performance goals and milestones
Business strategy: how a company creates value for customers and differentiates itself from competitors – cost leadership, product differentiation
Performance measurement systems: tracking the implementation of business strategy by comparing actual result against strategic goals and objectives
Types of decisions must be made by designer of performance measurement: design features, how to use Five major tensions to be balanced:
Balancing profit, growth, and control
Balancing short term results against long term capabilities and growth opportunities
How to? By serving following objectives:
1. Communicating to the organization the strategic goals of the business and the performance drivers critical to achieving those goals
2. Providing a framework for ensuring that adequate resources are