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Differentiate Between Preliminary, Concurrent, and Post-Action Controls

The fundamental nature of control entails actions that adjust the predetermined standards of a process and can place emphasis on events occurring before, during and after the process (Robbins & Coulter, 2007). The three categories of control include preliminary, concurrent and post-action control. Preliminary control has the main objective of identifying and preventing deviation prior to their occurrence. Preliminary control places emphasis on material, financial and human resources flowing into the firm. The purpose of preliminary control is to guarantee high input quality in order to avoid problems in the course of organizational operations. Preliminary controls are evident in the case of selection and hiring of new employees. Examples include inspection of raw materials, pre-employment drug testing, and hiring skilled employees.

Concurrent control involves monitoring the ongoing employee activity in order to make sure that they are consistent with the established quality standards. Concurrent control involves an assessment of the current activities, significantly depends on the formulated performance standards and entails rules and regulations that guide employee behavior and duties. The objective of concurrent control is to make sure that organizational activities lead to correct results through detection of problems as they occur (Robbins & Coulter, 2007). Examples include total quality management, adaptive culture and employee self-control. For instance, an organization may adopt appropriate measures to evaluate the quality of produced items with the established standards.

Post-action control places emphasis on the firms’ output, especially the product and service quality. Post-action control has the primary objective of solving problems after their occurrence. Examples include intense final quality inspection, customer surveys and analysis of sales per employee.

Summarize the Sarbanes-Oxley Act of 2002

The enactment of Sarbanes-Oxley Act of 2002 had the primary objective of protecting investors through improving the correctness and trustworthiness of corporate disclosures made prior to the securities law. The law considerably tightens the accountability standards applicable to corporate governance, auditing, securities analysis and legal counsel. This aimed at boosting public confidence on the capital markets and imposing new duties and penalties associated with non-observance of the accountability standards by executives of public companies, directors, auditors, legal representatives and securities analysts (Robbins & Coulter, 2007). The Sarbanes-Oxley Act established new corporate accountability standards and changed the manner in which corporate boards and executives should interact with each other and the corporate auditors. The Act places emphasis on the accountability and accuracy of financial statements by CEOs and CFOs. In addition, The Act outlines new financial reporting obligations, including observance of new internal controls and practices established to guarantee the validity of financial statements. The Act needs all financial records to incorporate an internal control report designed with the primary objective of reinforcing the accuracy of financial data and ensuring that the firm has confidence in the financial data because sufficient controls are established to protect financial reports. In addition, Year-end financial statements should have an evaluation of the effectiveness of internal controls attested by the issuer’s auditing firm. Non-compliance with the provisions of the Act leads to penalties ranging from the company losing its exchange listing, vast monetary fines, imprisonment and loss of D&O insurance. These penalties serve to enhance investor confidence in the financial reports (Robbins & Coulter, 2007).

Discuss Common Errors Made in Performance Appraisals

Despite the availability of many systematic methodologies and approaches are applicable in performance appraisals, the process cannot be completely devoid of the aspect of subjectivity because human judgment is imperfect. The common errors during performance appraisals include the halo effect, recency bias, contrast effect, personal bias, and strictness, leniency and central tendency bias (Shepard, 2005).

The halo effect takes place when a single performance variable receives too much significance, and similar ratings are applied to other performance components. The outcome of such an approach is that a single performance factor influences the entire performance appraisal process. Such an approach usually undermines the significance of other components and results in an unbalanced performance appraisal of the individual.

Recency bias takes place when performance appraisals base on tasks performed most recently. Performance appraisals usually take place periodically although an individual’s performance may not be uniform throughout the period. Therefore, it is imperative to review the performance throughout the entire period being taken into consideration. In most cases, however, recent occurrences tend to outshine the entire performance (Sandler & Keefe, 2003). Therefore, an individual who has demonstrated high performance in the entire year, but for some unavoidable reasons had witnessed performance issues in the last weeks may receive a poor appraisal from a supervisor demonstrating recency bias.

Leniency involves the grouping of ratings at the positive end of the performance range, rather than spreading them equally throughout the performance scale. An example of leniency bias involves the use of liberal rating, which results in average performers appearing like top performers and achieving high performance scores. Central tendency takes place when the statistics of performance appraisal show that the similar evaluation of employees reveal that they are average or above average.

Outline Desirable Preconditions for Implementing a Merit Pay Program

The first precondition for the implementation of an effective pay-for-performance program is the ability to pay; this means that a merit portion of the salary increase budget must be adequate to address the attention of the employees. The second precondition is a flexible reward schedule, which means that it is relatively easier to formulate a credible pay-for-performance program in case no employees get the pay adjustments on the same date. The third precondition is a precise distinction between merit, seniority and the cost of living. This means that, in the nonexistence of strong evidence to the contrary, the natural assumption by employees is that a pay increase indicates an increase in cost of living or seniority (Sandler & Keefe, 2003). The fourth precondition is a well-communicated total pay policy, implying that employees should have a precise understanding of how the merit pay integrates into the total pay framework. Other preconditions for the implementation of an effective pay-for-performance program include skilled managers, effective measurement systems, trust in the management process, and lack of performance constraints.

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