Chapter 7 Controlling - To Ensure Results Planning Ahead How do controls work in organizations? Plan metrics and measurements use feedback How do organizational systems assist in control? See model of control process How can operations management improve control? Economic Order Quantity How can planning and controlling be integrated? MBO Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 How Controls Work Steps in the Control Process Establish objectives and standards(metrics) Use your past performance metrics Use metrics from competitors Use benchmark companies to measure against Measure actual performance (measures) Compare results with objectives and standards Take corrective action as needed Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 How Controls Work Step 1: Establishing Objectives and Standards Types of Standards output measure results in terms of performance criteria Output is more important, for instance on tests doing well regardless of how much time you study input measure effort in terms of amount of work (inputs versus outputs is efficiency) You measure inputs to control costs. Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 How Controls Work Step2: Measuring Actual Performance goal is accurate measurement of output and/or input standards Are you giving your customers what they want, the quality of products and the service. Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 How Controls Work Step 3: Comparing Results with Objectives and Standards Need for action x desired performance - actual performance Historical Comparison (e. g. Your financial ratios against your past performance) Relative Comparison (e.g. Your ratios against others in industry Engineering Comparison IS0 9000 can tell you how much each piece of work should be from time and motion studies and past history of those processes. Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 How Controls Work Step 4: Taking Corrective Action Management by exception problem situation opportunity situation Note we are Trying to overcome problems or exploit opportunities Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 How Controls Work Characteristics of Effective Controls strategic and results oriented understandable (for those that use controls) encourage self-control timely (quick enough to avoid defective work) exception oriented positive in nature fair and objective Flexible ( for emergencies) Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 Types of Controls Feedforward (Preliminary) Controls ensure that objectives are clear proper directions are established right resources are available focus on conditions before a work activity begins (Process engineering) Many in quality management believe employees rarely do a poor job if you have engineered the job correctly Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 Types of Controls Concurrent (Steering) Controls monitor ongoing operations to make sure they are being done according to plan focus on quality of task activities during work process In Six Sigma quality control, we want to monitor what is going on so well that a few times in a million a product/service is not correctly accomplished. Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 Types of Controls Feedback (Post action) Controls take place after work is completed focus on quality of end results recently we also focus on speed Quick Response is a strategy for some companies. Schermerhorn - Chapter 7

Schermerhorn - Chapter 7 Types of Controls Internal Versus External Control Internal allows motivated individuals to exercise self-discipline in fulfilling job expectations. You get the feedback before management has to correct your work. Most people rather control themselves and are not called out by management External personal supervision formal administrative systems (HRM discipline) progressively sanctions increase Schermerhorn - Chapter 7

Organizational Control Systems Employee Discipline Systems progressive discipline achieve compliance with organizational expectations use least extreme amount of reprimand possible Negative control systems are real iffy Schermerhorn - Chapter 7

Organizational Control Systems Management Process Controls to Measure strategy and objectives policies and procedures selection and training performance appraisal job design and work structures performance modeling performance norms organizational culture Don’t over control Schermerhorn - Chapter 7

Organizational Control Systems Information and Financial Controls ( are Comprehensive Controls) liquidity leverage asset management profitability Schermerhorn - Chapter 7

Operations Management and Control Purchasing Control leverage buying power– looking for quantity discounts small number of suppliers– looking for control over products and services of suppliers supplier-purchaser partnerships – we are likely to have cross-functional teams with our suppliers to control processes up and down the value chain across businesses Schermerhorn - Chapter 7

Operations Management and Control Inventory Control Economic Order Quantity (EOQ) minimize two costs ordering carrying just-in-time scheduling JIT Inventory reduces total carrying costs, losses due to lack of products, goods getting old Schermerhorn - Chapter 7

Operations Management and Control Quality Control Involves checking processes, materials, products, and services to ensure that they meet high standards. Statistical quality control involves: Taking samples of work Measuring quality in the samples Determining the acceptability of results Our processes engineering, training ect should be so good we almost never have a reject. Schermerhorn - Chapter 7

Management by Objectives (MBO) structured process of regular communication supervisor and worker jointly set performance objectives jointly review results Schermerhorn - Chapter 7

Management by Objectives (MBO) Formal agreement worker’s performance objectives for a specific time period plans through which they will be accomplished standards for measuring results procedures for reviewing results Schermerhorn - Chapter 7

Management by Objectives (MBO) Advantages clearly focuses employee work efforts clearly focuses manager’s work efforts on areas of support relationship building between manager and employee employee participates in decisions that affect work Schermerhorn - Chapter 7

Management by Objectives (MBO) Performance objectives improvement personal development maintenance Schermerhorn - Chapter 7

Management by Objectives (MBO) Performance objective criteria specific time defined challenging measurable Schermerhorn - Chapter 7

Management by Objectives (MBO) How to make MBO work hire best people work with them to set challenging performance objectives give best possible support hold employee accountable Schermerhorn - Chapter 7

Management by Objectives (MBO) Pitfalls to avoid tying MBO to pay focusing too much attention on easily quantifiable objectives requiring excessive paperwork have managers tell workers objectives Employee learns how to work system and sets goals low so they can easily make them. Schermerhorn - Chapter 7