An organization cannot work effectively without controls. They determine the areas of weaknesses in the organization so that managers can take corrective action. Ratio analysis is a process that facilitates determination of key areas that the organization should monitor to check for deviations. Profitability, market, debt, and activity ratios assist management in its control function. Controls are important in determining motivation for employees and are essential across the board even with the most trustworthy workers. Preliminary, concurrent and feedback controls are organizational controls functioning within General Motors. They assist the company in improving performance through creativity and innovation. This article discusses the controlling function from different perspectives such as through ratio analysis, McGregor’s theory X and Y, and creativity and innovation. It also describes some of organizational controls functioning within General Motors.
Ratio analysis is an aspect of financial statements analysis used as a quick indicator of the financial performance of firms in several key areas. Data provided by financial statements is readily available and it facilitates ratio analysis. Firms differ in sizes and thus ratio analysis assists in comparing these firms. A firm calculates ratios from using current year data and then the firm performs trend analysis using ratios calculated from previous years. Firms also use ratio analysis to compare their financial performance with the industry’s averages and determine areas of weaknesses (Certo, 2009). Ratio analysis uses historical data, which limits the effectiveness of the analysis. Inflation and historical cost accounting affects data and it may cause distortions in ratio analysis. Therefore, managers should only use ratio analysis as a quick indicator of the firm’s financial performance and for identifying areas that need immediate attention.
There are several most valuable ratios to managers in General Motors Company. Among these ratios are the profitability ratios. “Profitability ratios measure the company’s use of its assets and control of its expenses to generate an acceptable rate of return” (Anbuvalen, 2007, p.121). The major objective of any company is to make profits and thus, these ratios assist in ensuring that the company continues to generate returns. Another valuable ratio for managers in this company would be activity ratios. These ratios measure the effectiveness of the firm in utilizing its assets and other resources. Resources are usually scarce in a company and it is vital to use them effectively. Additionally, debt ratios would assist managers to determine the ability of the company in repaying its debts. Finally, markets ratios would be valuable for managers in this company to determine the performance of shareholder’s investments. These investments should yield favorable returns for shareholders.
McGregor’s theory X and Y
McGregor’s theory X and theory Y indicate contrasting behavior of employees at work. According to theory X, people are untrustworthy, dislike work, responsibility, and prefer coercion in order to perform. Therefore, these people require controls and motivation in terms of financial rewards, which only satisfies their lower needs. On the contrary, theory Y suggests that people are trustworthy and will seek responsibility because creativity and ingenuity are their norm. Thus, controls would be unnecessary and counterproductive for these people as they readily accept work and responsibility.
In my opinion, controls are essential in the organization whether people are trustworthy or not. Controls assist in determining performance based on previous set standards. Therefore, these controls will facilitate motivation of employees in the workplace. For instance, if theory Y holds in an organization, it would be possible to enhance motivation of employees if they meet or exceed expectations. Motivation could be in terms of decentralization and delegation, which could improve performance because of increased responsibility in employees (Griffin, 2007). Job enlargement can also increase trust and add responsibilities for the employee. Controls would also be essential in performance appraisal under theory Y.
It is true that some people prefer coercion, tight controls, and close supervision in order to work. Therefore, in my opinion, controls would be productive and crucial in dealing with these people. Managers should be responsible in organizing the productive resources of an organization and ensuring employees utilize them efficiently. Managers should reward, coerce, control, and punish employees to ensure achievement of the organization’s goals.
Positive and negative issues of automation
Automation refers to the use of machines to perform jobs without interference from human beings. With the increase in technology, most organizations have embraced automation to ease their processes and increase efficiency in the organization. Automation has influenced the society positively and negatively. Among the positive issues of automation in the society is the improved productivity in organization (Griffin, 2007). For instance, since banks introduced ATM machines, they are able to serve many clients at the same time and within very short periods. Operations in the banking industry have drastically changed for the better since introduction of machines that perform duties previously done by humans. Additionally, automation has assisted in reducing costs for the company and society. Machines increase efficiency in performance of jobs and reduce the number of employees that can perform a certain task. Most of the organizations that have embraced automation do not incur many costs. For instance, machines have eased milking in large-scale farms thus transforming society.
However, automation has increased the level of unemployment in the society. Machines have replaced employees in most departments in the organization, which has caused these people to remain jobless (Certo, 2009). Thus, the level of crime has increased because majority of people do not have any source of income. Besides, machines used may not always be reliable because they can fail anytime causing work to stop unceremoniously. For instance, in a hospital some of the machines used to facilitate operations could fail costing the patients their lives. In addition, malicious people hack most of the machines used in companies thus, distorting information. Computers are the most vulnerable to hackers and this hacking has cost most organizations and individuals large sums of money.
Control focuses on events that occur before, during and after a process. Organization controls refers to those processes that an organization uses to influence its employees to behave in ways that lead to achievement of objectives and goals. General Motors uses several controls in ensuring achievement of its organizational goals. Among these controls are the preventive or preliminary controls. These controls attempt to identify and prevent errors in the standards before their occurrence. For General Motors, these controls ensure thorough inspection of new cars to identify deviations in the expected standards. These controls also ensure that General Motors selects sales employees cautiously to ensure profitable sales in the company.
“Concurrent controls monitor ongoing employee activity to ensure consistency with quality standards” (Schermerhorn, 2011). General Motors utilize these controls in their current operations to ensure that work activities produce the desirable results. For example, General Motors monitors the interactions of sales persons with customers during the sales process to determine their effectiveness in achieving the sales target. To guide employee behavior, these controls depend on performance standards and regulations.
General Motors also uses feedback controls to determine if actual results meet the set standards. The company liaises with customers to receive feedback from them and know if the company met their needs. The company gets feedback about the operations of the company by for instance, counting the number of new units sold during the week and calling buyers to determine their satisfaction with the sales. These controls assist the company in determining if it is making profits by analyzing sales trends within a month or over the year.
Creativity and Innovation
“Creativity is the process by which individuals or groups generate or conceive new ideas, or adapt existing concepts into new principles” (Bundy, 2002, p.87). Whatever counts as new could be perceived differently by an individual, society or the environment where one is. Innovation, on the other hand, refers to the application of the created new ideas towards meeting organizational goals and customer needs effectively. Innovation entails creating value in the new process, product, or system.
Creativity precedes the innovation process although during the innovation process creativity is used at several stages. Thus, creativity is important for innovation because without an initial idea, it may not be possible to develop a process. The better the idea generated during the creativity stage, the better will be the innovation process. While creativity involves invention, innovation deals with improvements and researching new methods of producing and improving the creativity (Bundy, 2002). Creativity can transform the organization because it provides a pool of original ideas that an organization can implement to gain a competitive edge. Innovation can change the organization because managers can implement an idea that becomes successful to the benefit of the organization.
An example of creativity and innovation involves the car production in Japan. Henry Ford was the pioneer of the assembly line for car production. However, the Japanese car manufacturing industry perfected Ford’s idea and introduced their unique improvements/innovations. Currently, Japan is a market leader in car assembly because of Ford’s creative concept.
Among the basic management functions is controlling. It involves establishing standards, measuring actual performance and taking corrective actions in case of deviations. Ratio analysis assists managers in establishing controls within the organization because managers are able to compare performance over time. Controls are essential in the organization even though people are trustworthy and readily accept work. They assist in appraising performance and motivating employees. General Motors utilizes feedback, preliminary and concurrent organizational controls to ensure effectiveness in their operations. Overall, to establish effective controls, creativity and innovation are essential concepts that an organization should embrace.
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Schermerhorn, J.R. (2011). Organizational Behavior. Hoboken, NJ: John Wiley & Sons, Inc.