392 Part 5: Internal Factors and Design
Subsystem Content and Frequency
Budget, financial reports Financial, resource expenditure, profit and loss; monthly
Statistical reports Nonfinancial outputs; weekly or monthly, often computer-
based
Reward systems Evaluation of managers based on department goals and
performance, set rewards; yearly
Quality control systems Participation, benchmarking guidelines, Six Sigma goals;
Continuous
Source: Based on Richard L. Daft and Norman B. Macintosh. “The Nature and Use of Formal Control Systems for Management Control and Strategy Implementation.” Journal of Management 10 (1984). 43-66.
line item is listed as a part of the budget. Managers also rely on a variety of other financial reports. The balance sheet shows a firm's financial position with respect to assets and liabilities at a specific point in time. An income statement, sometimes called a profit and loss statement (P&L), summarizes the company’s financial per¬formance for a given time interval, such as for the week, month, or year. This state¬ment shows revenues coming into the organization from all sources and subtracts all expenses, such as cost of goods sold, interest, taxes, and depreciation. The bottom line indicates the net income—profit or loss—for the given time period.
Managers use periodic statistical reports to evaluate and monitor nonfinancial performance, such as customer satisfaction, employee performance, or rate of staff turnover. For e-commerce organizations, important measurements of nonfinancial performance include metrics such as stickiness (how much attention a site gets over time), the conversion rate, the ratio of buyers to site visitors, and site performance data, such as how long it takes to load a page or how long it takes to place an order.13 E-commerce managers regularly review reports on conversion rates, cus¬tomer drop-off, and other metrics to identify problems and improve their business. For all organizations, nonfinancial reports typically are computer based and may be available daily, weekly, or monthly. The online auction company eBay provides a good illustration of using both financial and nonfinancial statistical reports for feedback control.
When Meg Whitman was CEO of eBay, her guiding mantra was “If you can’t measure it, you can’t control it.” Whitman has moved on to other pursuits, but eBay is still a com¬pany that is obsessed with performance
measurement. Top executives monitor performance metrics such as number of site visitors, percentage of new users, and time spent on the site, as well as profit and loss statements and the ratio of eBay’s revenues to the value of goods traded. Managers throughout the company also monitor performance regularly. Category managers, for example, have clear standards of performance for their auction categories (such as sports memorabilia, jewelry and watches, health and beauty, etc.). They continuously measure, tweak, and promote their categories to meet or outperform their targets.
