I. What Is Controlling and Why Is It Important?
Controlling is the process of monitoring, comparing, and correcting work performance. Control is important, because it’s the only way that managers know whether organizational goals are being met and, if not, the reasons why. The value of the control function can be seen in three specific areas:
l Planning = If managers didn’t control, they’d have no way of knowing whether their goals and plans were being achieved and what future actions to take.
l Empowering employees = An effective control system can provide information and feedback on employee performance and minimize the chance of potential problems.
l Protecting the workplace = Managers must protect organizational assets in any kind of event and comprehensive controls and back-up plans will help assure minimal work disruptions.
II. The Control Process
A three-step process of measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or to address inadequate standards.
1. Step 1: Measuring Actual Performance
a. How We Measure
Four approaches used by managers to measure and report actual performance are personal observations, statistical reports, oral reports, and written reports.
b. What We Measure
What is measured is probably more critical to the control process than how it’s measured. Why? Because selecting the wrong criteria can create serious problems. Besides, what is measured often determines what employees will do.
2. Step 2: Comparing Actual Performance Against the Standard
The comparing step determines the variation between actual performance and the standard. Although some variation in performance can be expected in all activities, it’s critical to determine an acceptable range of variation, which is the acceptable parameters of variance between actual performance and the standard.
3. Step 3: Taking Managerial Action
a. Correct Actual Performance
Depending on what the problem is, a manager could take different corrective actions. One decision a manager must make is whether to take immediate corrective action, which corrects problems at once to get performance back on track, or to use basic corrective action, which looks at how and why performance deviated before correcting the source of deviation.
b. Revise The Standard
If performance consistently exceeds the goal, then a manager should look at whether the goal is too easy and needs to be raised. On the other hand, managers must be cautious about revising a standard downward.
4. Managerial Decisions in Controlling
Depending on the results, a manager’s decision is to do nothing, correct the performance, or revise the standard.
III. Controlling for Organizational and Employee Performance
1. What Is Organizational Performance?
Performance is the end result of an activity. Managers are concerned with organizational performance—the accumulated results of all the organization’s work activities. It’s a multifaceted concept, but managers need to understand the factors that contribute to organizational performance.
2. Measures of Organizational Performance
a. Organizational Productivity
Productivity is the amount of goods or services produced divided by the inputs needed to generate that output.
b. Organizational Effectiveness
Organizational effectiveness is a measure of how appropriate organizational goals are and how well those goals are met.
c. Industry and Company Rankings
Rankings are a popular way for managers to measure their organization’s performance. Rankings are determined by specific performance measures, which are different for each list.
3. Controlling for Employee Performance
It’s particularly important for managers to deliver effective performance feedback and to be prepared, if needed, to use disciplinary actions—actions taken by a manager to enforce the organization’s work standards and regulations.
a. Delivering Effective Performance Feedback
Managers need to provide their employees with feedback so that the employees know where they stand in terms of their work.
b. Using Disciplinary Actions
Discipline can be used to both control and correct employee performance, and managers must know how to discipline.
IV. Tools for Measuring Organizational Performance
1. Feedforward/Concurrent/Feedback Controls
a. Feedforward Control
The most desirable type of control prevents problems because it takes place before the actual activity.The key to feedforward controls is taking managerial action before a problem occurs. That way, problems can be prevented rather than having to correct them after any damage has already been done.
b. Concurrent Control
Concurrent control, as its name implies, takes place while a work activity is in progress. The best-known form of concurrent control is direct supervision. Another term for it is management by walking around, which is when a manager is in the work area interacting directly with employees.
c. Feedback Control
In feedback control, the control takes place after the activity is done. Feedback controls have two advantage. First, feedback gives managers meaningful information on how effective their planning efforts were. Second, feedback can enhance motivation.
2. Financial Controls
Managers might use traditional financial measures such as ratio analysis (liquidity, leverage, activity, and profitability) and budget analysis (quantitative standards and deviations).
3. Information Controls
a. How Is Information Used In Controlling?
A management information system (MIS) is a system used to provide managers with needed information on a regular basis. The term system in MIS implies order, arrangement, and purpose. Further, an MIS focuses specifically on providing managers with information (processed and analyzed data), not merely data (raw, unanalyzed facts).
b. Controlling Information
Because information is critically important to everything an organization does, managers must have comprehensive and secure controls in place to protect that information.
4. Balanced Scorecard
The balanced scorecard approach is a way to evaluate organizational performance from more than just the financial perspective. A balanced scorecard typically looks at four areas that contribute to a company’s performance: financial, customer, internal processes, and people/innovation/growth assets.
5. Benchmarking of Best Practices
Benchmarking, which is the search for the best practices among competitors or noncompetitors that lead to their superior performance. Benchmarking should identify various benchmarks, the standards of excellence against which to measure and compare.
V. Contemporary Issues in Control
1. Adjusting Controls for Cross-Cultural Differences and Global Turmoil
Control techniques can be quite different for different countries. The differences are primarily in the measurement and corrective action steps of the control process. Managers in foreign countries also need to be aware of constraints on investigating complaints and corrective actions they can take.
2. Workplace Concerns
a. Workplace Privacy
Because of the potentially serious costs and given the fact that many jobs now entail computers, many companies have workplace monitoring policies. Such policies should control employee behavior in a nondemeaning way, and employees should be informed about those policies.
b. Employee Theft
Any unauthorized taking of company property by employees for their personal use.
3. Workplace Violence
Employee stress are believed to contribute to workplace violence. The competitive demands of succeeding in a 24/7 global economy put pressure on organizations and employees in many ways.
4. Controlling Customer Interactions
A service profit chain is the service sequence from employees to customers to profit. According to this concept, the company’s strategy and service delivery system influence how employees deal with customers; that is, how productive they are in providing service and the quality of that service.
5. Corporate Governance
The system used to govern a corporation so that the interests of corporate owners are protected.
a. The Role of Boards of Directors
The original purpose of a board of directors was to have a group, independent from management, looking out for the interests of shareholders who were not involved in the day-to-day management of the organization.
b. Financial Reporting and the Audit Committee
Senior managers in the United States are now required to certify their companies’ financial results. Such changes have led to information that is more accurate and reflective of a company’s financial condition.
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