Control Chapter 8

The Control Process Controlling: Process of measuring performance and taking action to ensure desired results Has a positive and necessary role in the management process Ensures right things happen, in the right way, at the right time

Steps in the Control Process 1. Set Objectives and Standards 2. Measure Actual Performance 3. Compare Results with Objectives and Standards 4. Take Corrective Action as Needed

1. Establish Objectives & Standards Output Standards Measure performance results in terms of quantity, quality, cost or time Examples: number of customers served/products produced in a time period Percentage error rate Input Standards Measure effort in terms of amount of work done in task performance Efficiency in use of resources Work attendance or punctuality

2. Measuring Actual Performance An accurate measure of actual results on output and/or input standards is needed Effective control requires accurate measurement

3. Compare Results with Objectives and Standards Need for action = Desired performance – Actual performance Comparison can be made on a historical basis (past years), relative basis (compare to benchmarks), engineering basis (scientific / mathematical standards)

4. Take Corrective Action Take action when discrepancies exist between desired and actual performance

Types of Controls Feedforward Concurrent Feedback

Feedforward Controls Used before the work activity begins Ensure that: Objectives are clear Proper directions are established Right resources are available Focuses on quality of resources Example: Feedforward controls at McDonalds Ensure suppliers provide product meeting strict specifications, e.g., bun texture, uniformity of colour, etc.

Concurrent Controls Used while the work activity is taking place Monitor operations to ensure work is done according to plan Can reduce waste in unacceptable finished products or services Example: Concurrent controls at McDonalds Supervisors trained to take action when something is done right or when problem occurs

Feedback Controls Used after work is completed Focus on quality of end result Provide useful information for improving future operations Example: Feedback at McDonalds Provide a survey to customers to complete regarding their experience

Internal and External Control Allows motivated individuals and groups to exercise self-discipline in fulfilling job expectations Comes from within the person/employee External Occurs through personal supervision and use of formal administrative systems Managers direct behaviour of others

Internal & External Control Effective control is combination of internal and external control People are more likely to exercise internal control when: They are involved in setting goals They have clear sense of mission and expectations They have resources necessary to do their job well Everyone treats each other with respect

Role of Compensation & Benefits Attractive and competitive base compensation results in: Attracting and keeping a qualified workforce Having capable, motivated workers who exercise self-control Unattractive and competitive base compensation results in: Attracting a less qualified workforce Greater need for external control

Role of Compensation & Benefits Attracting and keeping qualified employees who exercise self-control can be helped or hindered by: Merit pay incentives Pay-for-performance incentives Fringe benefits

Management by Objectives (MBO) A structured process of regular communication Supervisor/team leader and worker jointly set worker’s performance objectives. Supervisor/team leader and worker jointly review results.

Management by Objectives (MBO) MBO involves a formal agreement specifying Worker’s performance objectives for a specific time period. Plans through which they will be accomplished. Standards for measuring results. Procedures for reviewing results.

Management by Objectives (MBO) Jointly plan Set goals, standards and actions together Individually act Subordinate performs tasks Supervisor provides support Jointly control Reviewing results together Discuss implications Renew the MBO cycle How does this increase control? What kind of control? Does MBO apply to all jobs?

Management by Objectives (MBO) Types of MBO performance objectives Improvement Personal development Maintenance Criteria for effective performance objectives Specific Time defined Challenging Measurable

Management by Objectives (MBO) Pitfalls using MBO Tying MBO to pay. Focusing on easily quantifiable objectives. Requiring excessive paperwork. Having managers tell workers their objectives. Advantages of MBO Focuses worker’s efforts on most important tasks and objectives. Focuses supervisor’s efforts on important areas of support. Builds relationships. Opportunity to participate in decision making.

Employee Discipline Systems the act of influencing behaviour through reprimand Progressive discipline: Ties reprimands to the severity and frequency of the employee’s infractions

“Hot Stove Rules” of Employee Discipline A reprimand should Be immediate; a hot stove burns the first time you touch it. Be directed toward someone’s actions, not the personality; a hot stove doesn’t hold grudges, doesn’t try to humiliate people, and doesn’t accept excuses. Be consistently applied; a hot stove burns anyone who touches it, and it does so every time. Be informative; a hot stove lets a person know what to do to avoid getting burned in the future—”don’t touch.” Occur in a supportive setting; a hot stove conveys warmth but with an inflexible rule—”don’t touch.” Support realistic rules; the don’t-touch-a-hot-stove rule isn’t a power play, a whim, or an emotion of the moment; it is a necessary rule of reason.

Profit Loss Dollar Costs & Revenues Unit Sales Total Sales = Revenue Break-even Point Revenues = Costs Profit Total Costs = Fixed+Variable Dollar Costs & Revenues Variable Costs Loss Fixed Costs Unit Sales Management Fundamentals - Schermerhorn & Wright Chapter 8