A.What is controlling?
Controlling- the process of monitoring, comparing, and correcting work performance.
Purpose of control- to ensure that activities are completed in ways that lead to the attainment of goals.
B.Why is control important?
Planning: Controls inform managers about whether organizational goals are being achieved, and if not, the reason why.
Empowering employees: Control systems can offer information and feedback on employee performance and minimize the chance of potential problems.
Protecting the workplace: Controls enhance physical security (assets) and help reduce workplace interruptions.
C. The Control Process
1.Definition of Control Process
The control process is 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.
Step 1. Measuring Actual Performance
To determine what actual performance is a manager must first get information about it. Thus, the first step in control is measuring.
HOW WE MEASURE. 4 approaches used by managers to measure and report actual performance are personal observations, statistical reports, oral reports, and written reports.
Exhibit 18-3 summarizes the advantages and drawbacks of each approach. Most managers use a combination of these approaches.
WHAT WE MEASURE. What is measured is probably more critical to the control process than how it’s measured. Because selecting the wrong criteria can create serious problems Besides, what is measured often determines what employees will do.
Some control criteria can be used for any management situation: employee satisfaction or turnover and absenteeism rates. Keeping costs, output, sales within budget is also a fairly common control measure.
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 (see Exhibit 17-4)
Significance of variation is determined by:
The acceptable range of variation from the standard (forecast or budget).
The size (large or small) and direction (over or under) of the variation from the standard (forecast or budget).
Step 3. Taking Managerial Action
Managers can choose among three possible courses of action: do nothing, correct the actual performance, or revise the standards.
Courses of Action
“Doing nothing”
• Only if deviation is judged to be insignificant.
Correcting actual (current) performance
• Immediate corrective action to correct the problem at once.
• Basic corrective action to locate and to correct the source of the deviation.
• Corrective Actions
Change strategy, structure, compensation scheme, or training programs; redesign jobs; or fire employees
Revising the standard
• Examining the standard to ascertain whether or not the standard is realistic, fair, and achievable.
Upholding the validity of the standard.
Resetting goals that were initially set too low or too high.
Part 3: Types of Control
Feedforward Control: A control that prevents anticipated problems before actual occurrences of the problem.
Example: A manager who conducts employee training using the coaching method.When the trainee is performing the task, the manager observes him closely by standing on his side. The objective is to discover if any deviations from the intended processes take place.
Concurrent Control: A control that takes place while the monitored activity is in progress.
Example: The development by companies of job descriptions and job specifications. It may be recalled that job description identifies the job that has to be done, thus clarifying working relationships, responsibility areas, and authority relationships. It thus assists in preventing unnecessary duplication of effort and potential organisational conflict.
Feedback Control: A control that takes place after an activity is done.
*Advantages:
• Provide managers with information on the effectiveness of their planning efforts.
• Enhance employee motivation by providing them with information on how well they are doing.
Example: At the end of an accounting year, the manager should carefully review the analysis of the budget control report.
Controlling for Organizational Performance
1.What Is Performance? The end result of an activity
2.What Is Organizational Performance? What can make high level Organization Performance?
The accumulated end results of all of the organization’s work processes and activities
• Designing strategies, work processes, and work activities.
• Coordinating the work of employees
Measures of Organizational Performance
Organization productivity
- Productivity: the overall output of goods and/or services divided by the inputs needed to generate that output
- Organizations and individual work units want to be productive. They want to produce the most goods and services using the least amount of inputs.
Output is measured by the sales revenue (selling price * number sold).
Input is measured by the costs of acquiring and transforming resources into outputs. (materials, labor expense, and facilities)
Ultimately, productivity is a measure of how efficiently employees do their work.
Organizational Effectiveness
- Measuring how appropriate organizational goals are and how well the organization is achieving its goals.
Note: That’s the bottom line for managers and it’s what guides managerial decisions in designing strategies and work activities and in coordinating the work of employees
Industry and Company Rankings
- Rankings give managers (and others) an indicator of how well their company performs in comparison to others