ManagerialControl

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ManagerialControlIntroduction

This lesson deals with the last of the four main functions of a manager control. An organization that plans well, organizes well and has placed individuals with excellent leadership skills over the affairs of the business will still experience problems if controls are not administered to make sure planned goals are met. This lesson details the scope of control that is needed from finance to manufacturing or service, from human resource issues to suppliers, from work teams to customers. In one way or another, control is included in every aspect of organizational performance. From the foundations of control, the lesson then delves into operations management, what it is and how it is applied. The lesson concludes by introducing the student to the concept and application of value chain management.

What is Control?

At this point, a reminder of the definition of control as it applies to this course is appropriate. Control, then is the process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations. In monitoring these activities, the manager must have some method of evaluation to determine if what is being done is in line with the standard outlined by the planning process that is, if activities performed meet goals that were set. Depending upon the type organization, different approaches to control are applied. There are three different approaches to designing control that have been identified by researchers:

Market control control that emphasizes the use of external market mechanisms to establish the standards used in the

MARKET CONTROL

PROFIT CENTER

control system. Bureaucratic control control that

emphasizes organizational authority and

relies on administrative rules, regulations,

procedures, and polices.

Clan control employee behaviors are regulated by the shared values, norms, traditions, rituals, beliefs, and other aspects of the organizations culture.

BUREAUCRATIC

CLAN CONTROL

Most organizations do not use just one of these methods but are usually combine either bureaucratic and market or clan and market approaches.

Why is Control Important?

ORGANIZATIONA L AUTHORITY

CULTURAL REGULATED

Control is important for at least three main reasons. First, it is a way to make sure that goals that have been set are being met. Great intentions are just that - great. But if intentions dont materialize into action, they are worthless. Control is important also because it allows employees to be empowered. When managers use control to train, provide information to employees and give them feedback, they are no longer tied down to do everything themselves and are freed up to see to work that is more in line with the position to which they have been appointed. Finally, managers use control to protect the organization, both its purpose and its physical location. Especially today, managers must be aware of threats to the organization from terrorists, foreign and domestic and financial scandals that could destroy an organization.

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ManagerialControl

The Control Process

The control process is defined as a three-step process including: measuring actual performance, comparing action performance against a standard, and taking managerial action to correct deviations or inadequate standards.

None of the three parts can be eliminated is the process is to accomplish its task that is to ensure that planned goals are achieved.

Measuring represents the first component of the control process because without measuring a performance, there is no evidence to support if standards were met or not. Measurement is done in any number of ways including personal observations, statistical reports, oral reports and written reports. There are advantages as well as disadvantages associated with each. For instance, oral reports provide rapid feedback but the information included is usually condensed. Written reports are comprehensive but they take more time. Most jobs can be measured but for

those that cant be measured in terms of tangibles, subjective measurement is appropriate. Although this type measurement may be difficult to do, it is important if the job being measured is important. How measurement is done is not as important as what is measured.

Managers take measurements on any number of different organizational functions. They measure budgets, employee behavior such as job satisfaction, turnovers and absenteeism and various aspects of service and production that are dependent on the type of organization.

Following measurement, managers compare the actual performance to the standard performance decided upon during the planning process. Performance that is

outside the standard is reviewed to determine what if any action is required. Managers are concerned about how much actual performance deviates from the norm or standard as well as what direction that variance is going. The planning process set an acceptable range of variation from the standard. The manager then proceeds to the next step in the control process or taking managerial action.

During this final step, managers will check the information on actual performance to make sure that it is correct. Once that is determined, the manager can do one of three things:

Take no action if variance is within an acceptable range, the manager does not have to take action or the manager for some other reason may decide to do nothing

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ManagerialControl Correct the actual performance either through an immediate corrective action or a basic

corrective action (determining the cause and then correcting it) Revise the standard sometimes the manager may feel that standards are too high or

too low and the manager will revise these standards

Controlling for Organizational Performance

Annual school plays are a must for parents to attend. Children either rehearse for these plays during or after school. A lot of activity goes into these productions making costumes, stage props, getting the lines right. But when parents see their children on stage in the final production, the performance was worth the effort. Generally speaking, performance is the end result of an activity. Organizational performance is defined similarly as it is the accumulated end results of all the organizations work processes and activities. Since the topic of this section is controlling organizational performance, obviously, this function can be measured, compared and corrected, if necessary. There are at least three organizational performance measures that are frequently used. They are

Organizational productivity Organizational effectiveness Industry rankings

The first instrument of measure for organizational performance, productivity, is the overall output of goods or services produced divided by the inputs needed to generate that output. Clearly, organizations want to maximize output and minimize input. Managers always want to see this ratio greater than one and in fact, it is a managers job to increase this ratio. The manager can either take a chance and raise selling prices or reduce the amount of input required to perform the production this amounts to efficiency.

Goals should reflect what the organization is trying to accomplish besides the obvious one of making profits. Organizational effectiveness is a measure of how appropriate organizational goals are and how well an organization is achieving those goals. There are other descriptions of what organizational effectiveness including

The systems resource model ability of organization to exploit its environment to acquire scarce and valued resources

The process model transformation and converting inputs into desired outputs

The multiple constituencies model several different measures should be used

The last measure, which is industry rankings, is supplied by magazines and consumer advocacy groups. Fortune has not less than ten different rankings of organizations while Business Week has only two. They rank businesses using varied criteria. Some use wealth as criteria while some use employee questionnaires to determine the best companies to work for. Some rank

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ManagerialControlcompanies according to organizational accomplishments and demonstrations of superior management skills. The American Customer Satisfaction Index measures customer satisfaction with quality of goods and services available.

Tools for Controlling Organizational Performance

Feedforward, concurrent and feedback - they sound like buttons on a DVD or CD player. In actuality, they are terms that are used to refer to the type of control tool that managers might use to control organizational performance. Managers can control a performance before it happens (feedforward), while it is occurring (concurrent) or after the fact (feedback).

Undoubtedly, managers would like to control an activity before it takes place (feedforward) since it will prevent problems from taking place. If managers can correct a situation before it causes any harm, it may keep them from releasing an inferior product or losing customers or revenue.

With concurrent control, managers are able to identify a potential problem, correct the activity and minimize cost to the organization. One such concurrent control is called management by walking around. In this type control, managers interface directly with the employees and oversee the work. Organizations also h