Management: Chapter 17 - Monitoring and Controlling
Learning Outcomes
Explain the nature and importance of control.
Describe the three steps in the control process.
Discuss different types of control.
Examine contemporary issues in control.
What Is Controlling, and Why Is It Important?
Definition of Controlling
Controlling: The systematic process of monitoring organizational activities, comparing actual performance against established standards, correcting any significant deviations that may arise, and where necessary, making modifications to the original plans to ensure that goals are achieved efficiently and effectively.
Importance of Control
Control plays a crucial role as it:
Serves as the final and critical link in the four interdependent management functions (planning, organizing, leading, controlling). It closes the loop by assessing whether plans are being actualized.
Provides managers with the ability to know precisely whether organizational goals, set during the planning phase, are being met. If deviations occur, control helps managers to understand the underlying reasons, allowing for informed decision-making and corrective action.
Facilitates employee empowerment by providing clear performance expectations and feedback mechanisms.
Protects the organization and its assets through vigilant oversight of resources and activities.
The Control Process
Overview of the Control Process
The control process is a dynamic and continuous cycle comprising three interlocking steps:
Measuring Performance
Comparing Actual Performance Against Standard
Taking Managerial Action
Step 1: Measuring Performance
Methods of measuring performance are diverse and should be chosen based on the specific activity and desired outcome:
Personal Observations: Involves direct supervision and 'Management by Walking Around' (MBWA), providing firsthand qualitative information about work processes, employee engagement, and potential issues that might not be captured in reports. It allows for immediate feedback.
Statistical Reports: Utilizes quantitative data analytics to track key performance indicators (KPIs) such as sales figures, production output, quality defect rates, budget variances, and customer satisfaction scores. These reports offer precise, objective measurements.
Oral Reports: Gathers verbal information through meetings, one-on-one discussions, and progress updates. These can provide quick, informal feedback and allow for clarification and discussion.
Written Reports: Involves documented information such as financial statements, performance appraisals, project status reports, and audit reports. These provide a formal, verifiable, and comprehensive summary of performance over a period.
Importance of Measurement:
What is measured is often more significant than how it is measured. The selected measurement criteria must directly align with organizational goals.
Choosing the wrong criteria, or focusing on easily measurable but irrelevant aspects, can produce dysfunctional consequences, including skewed performance evaluations, misallocation of resources, and the encouragement of undesirable employee behaviors.
Step 2: Comparing Performance Against a Standard
In this step, actual measured performance is critically compared to a predetermined standard or benchmark to ascertain the degree of variation. This comparison helps identify gaps or excesses.
Acceptable Range of Variation: Refers to a predefined threshold or tolerance limit within which performance can fluctuate without necessitating immediate corrective action. This range is established based on historical data, industry benchmarks, forecasting, budgets, and strategic objectives. Performance outside this range signals a need for attention.
Significance of Variation is influenced by:
The acceptable range: A smaller acceptable range means even minor deviations are considered significant, while a wider range tolerates more fluctuation.
The size (large or small) and direction (over or under) of the variation. For instance, being significantly under budget might indicate efficiency, while being significantly over budget suggests problems.
Visual Representation
Exhibit 17.4: Defining the Acceptable Range of Variation - Illustrates graphically how actual performance data points can fall within a predetermined upper and lower control limit over a specific time period. Points outside these limits signal out-of-control conditions.
Step 3: Taking Managerial Action
This final stage outlines three distinct proactive or reactive responses to performance evaluations, depending on the nature and significance of the deviation:
Doing Nothing: This action is appropriate only when deviations are considered insignificant, fall within the acceptable range of variation, or are temporary, self-correcting fluctuations that do not impact overall goals.
Correcting Actual Performance: When performance deviates significantly, corrective action should not be delayed. This involves:
Immediate corrective action: Addressing symptoms to get performance back on track quickly (e.g., reassigning tasks to meet a deadline).
Basic corrective action: Investigating and addressing the root causes of the deviation to prevent recurrence (e.g., retraining employees, redesigning a faulty process, modifying a product).
Revising the Standard: If the standard itself is found to be unrealistic, unachievable, or no longer relevant due to changed internal or external conditions (e.g., new technology, economic downturn, market shifts), then the standard rather than the performance needs evaluation and adjustment. This ensures goals remain challenging but attainable.
Types of Control
Overview of Control Types
Control mechanisms can be broadly categorized into three types based on the timing of their implementation relative to the activity:
Feed-Forward Control: This proactive type of control anticipates potential problems and is designed to prevent them before they occur. It focuses on inputs and processes. Examples include rigorous supplier selection, preventative equipment maintenance, pre-employment screening, and quality checks on raw materials.
Concurrent Control: This type of control happens during the performance of an activity. It monitors ongoing operations to correct problems as they arise. An example includes 'Management by Walking Around' (MBWA), where managers directly observe and interact with employees and processes in real-time. Other examples include real-time dashboards, direct supervision, continuous feedback systems, and in-process quality checks.
Feedback Control: This reactive control mechanism takes place after an activity is completed. It provides managers with valuable insights into the efficacy of past planning efforts and operations. By reviewing outcomes, managers can learn from successes and failures, which enhances future planning and decision-making. It also enhances employee motivation by reflecting on performance results, clarifying expectations, and linking rewards to outcomes.
Benefits of Feedback Control
Feedback control is critically important as it informs managers about the effectiveness of their previous planning, organizing, and leading efforts. It allows them to identify what worked well and what did not, thereby improving future managerial actions and strategic alignment. Furthermore, it significantly aids in motivating employees by providing clear, measurable performance outcomes, which can be linked to recognition and rewards.
Contemporary Issues in Control
Overview of Issues in Control
Control remains an indispensable management function in a rapidly changing environment. Contemporary managers, however, face several complex control issues that require careful attention and balanced approaches:
Workplace Privacy: The challenge of balancing an organization's need to monitor employee activities with individual employee rights to privacy.
Employee Theft: The pervasive problem of unauthorized removal or misuse of company property or resources by employees.
Workplace Violence: Incidents of aggression, rage, or physical harm that can significantly disrupt productivity and create a hostile work environment.
Detailed Examination of Contemporary Issues
Workplace Privacy:
With advancements in technology, monitoring tools for emails, computer usage (including keystroke tracking and website visits), online behavior, and even location tracking are widely available. These tools help organizations protect themselves from a hostile work environment, prevent leaks of confidential information, ensure compliance with regulations, maintain data security, and monitor productivity. However, this raises significant ethical and legal questions regarding employee rights and trust. Organizations must establish clear policies, communicate them to employees, and ensure monitoring is conducted legally and ethically.
Employee Theft:
Defined as the unauthorized taking, use, or misuse of company property (physical assets, intellectual property, time, or information) for personal advantage. This can range from minor pilferage to large-scale fraud. Its impact includes financial losses, damage to reputation, and lowered employee morale. Control measures from all three types can be applied:
Feed-forward: Thorough background checks and clear ethical policies during hiring.
Concurrent: Regular inventory checks, security cameras, access controls, and direct supervision.
Feedback: Regular audits, financial reviews, anonymous reporting hotlines, and clear disciplinary actions for violations.
Workplace Violence:
Refers to any aggressive behavior, including verbal abuse, intimidation, harassment, physical assaults, or threats, that occurs in the workplace and significantly affects employee efficiency, safety, and morale. Understanding and applying control types can provide comprehensive strategies for mitigation:
Feed-forward: Pre-employment screening for individuals with a history of violence, clear anti-violence policies, and training on conflict resolution and stress management.
Concurrent: Prompt intervention in conflicts, providing employee assistance programs (EAPs), security personnel, and visible deterrents.
Feedback: Post-incident reviews to identify causative factors, counseling for affected employees, and implementation of enhanced security measures or policy revisions based on lessons learned.
Summary / Review
What is control?
Why is control important?
What are the steps in the control process?
What are the three types of control?