Organizational Control

Topics: Financial ratio, Investment, Financial ratios Pages: 4 (1401 words) Published: May 14, 2011
Organizational control is the systematic process through which managers regulate organizational activities to make them consistent with expectations established in plans, targets and standards of performance (Kuratko, 2001). These organizational expectations are a collection of goals and accountabilities represented in the budget, which help establish performance metrics, document actual performances, allow comparison between the estimated and actual performance, and allow for corrective actions (Jones-George-Hill, 2003). Measures of financial performance are those ratios against which actual performance can be meaningfully measured against the expectations of the budget. These measures are objective measures of performance, and a careful analysis of a combination of these ratios may help dis¬tinguish between firms that will eventually fail and those that will continue to survive, sometimes as early as five years before a firm fails trouble can be detected from the value of these financial ratios (Keating). These performance ratios measure profit, liquidity, leverage and activity and the combination tell a significant story as to the overall health of an organization. Profitability ratios demonstrate the efficiency of the use of resources to generate profits from organizational inputs of materials to value added activities (Jones-George-Hill, 2003). These are Return on investment and Gross Profit Margin. ROI, or “return on investment,” measures competitive advantage because it allows managers to compare performance against other similar organizations. Although firms will differ on how that calculation is reached internally and what activities are considered profit drivers. For instance, in her 2010 book Open Leadership, Charlene Li argues that a social media campaign goes beyond marketing in that it reduces other costs by not only building affinity but can reduce other costs using Ford Motor Company and Comcast as an example (Li, 2010). Gross Profit Margin...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • Types of Control in an Organization Essay
  • Essay on Management Control System
  • 1984: the Control of Reality for Control of the Masses Essay
  • Organizational Behaviour Essay
  • Inventory Control Research Paper
  • Budgetary Control Essay
  • Control Mechanisms Essay
  • Essay on Time and Its Control

Become a StudyMode Member

Sign Up - It's Free