ControlChapter 8

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

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

Steps in the Control Process

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◦ Examples:

Efficiency in use of resources Work attendance or punctuality

1. Establish Objectives & Standards

An accurate measure of actual results on output and/or input standards is needed

Effective control requires accurate measurement

2. Measuring Actual Performance

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)

3. Compare Results with Objectives and Standards

Take action when discrepancies exist between desired and actual performance

4. Take Corrective Action

Feedforward

Concurrent

Feedback

Types of 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.

Feedforward 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

Concurrent 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

Feedback Controls

Internal◦ 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 and 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

Internal & External Control

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

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

Role of Compensation & Benefits

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)

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.

Discipline: ◦ the act of influencing behaviour through

reprimand

Progressive discipline:◦ Ties reprimands to the severity and frequency of

the employee’s infractions

Employee Discipline Systems

“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.

Chapter 8Management Fundamentals -

Schermerhorn & Wright

DollarCosts &Revenues

Unit Sales

Fixed Costs

Variable Costs

Total Costs =

Fixed+Variable

Total Sales = Revenue

Break-even PointRevenues = Costs

Loss

Profit