Managing Quality and Performance: The Feedback Control Model

Organizational control is defined as the systematic process of regulating organizational activities to ensure they are consistent with the expectations established in plans, targets, and standards of performance.
The primary purpose of control is to align actual performance with the organization's strategic intentions.

Everything within the control process begins with strategic goals.
Strategic goals are broad objectives an organization aims to achieve, including:
- Increasing profits.
- Improving customer satisfaction.
- Reducing costs.
- Expanding market share.
Strategic goals provide the necessary direction for the organization; without defined goals, there is no basis for the control process.

Effective management of quality and performance relies on a specific four-step feedback control process.

Once strategic goals are set, managers must translate them into specific, measurable performance standards.
A standard is defined as a measurable target that provides the benchmark for evaluation.
Examples of performance standards include:
- Increasing sales by $10\%$ .
- Keeping customer wait times under $5$ minutes.
- Maintaining a defect rate below $2\%$ .
This step identifies precisely what the organization is trying to achieve.

Managers collect data to identify what is actually occurring within the organization.
Data collection methods may include:
- Reviewing sales reports.
- Analyzing customer feedback.
- Examining production data.
- Auditing financial statements.
This step answers the fundamental question: "What is really happening?"

This step involves a critical comparison between the actual performance data collected in Step 2 and the standards established in Step 1.
Managers evaluate whether actual performance meets the standard. There are two primary outcomes:
- If Performance is Adequate: If the performance meets or exceeds the target, managers may take no action or provide reinforcement (such as rewards or recognition) to help maintain that level of success.
- If Performance is Inadequate: If the performance falls below the established standard, managers must move to take corrective action.

Corrective action involves fixing identified problems to bring performance back in line with established standards.
Potential corrective actions include:
- Training employees to improve skills.
- Changing operational procedures.
- Hiring additional staff to handle workloads.
- Revising organizational strategies.
- Adjusting budgets to allocate resources more effectively.

To apply the feedback control process, managers must state the strategic goal, choose a clear target/standard, explain the control mechanism, and follow the four steps in order.

The strategic goal for ABC Hardware is to increase overall profitability and expand market share within the community.
To achieve this, management focuses on a sub-goal: increasing monthly sales revenue.

Management sets a specific, measurable target: monthly sales must increase by $15\%$ compared to the average monthly sales of the previous year.
Example: If the average monthly sales were previously $200,000, the new target is set at $230,000 per month ( $200,000 \times 1.15 = 230,000$ ).
This numerical value becomes the objective benchmark for evaluation.

The store utilizes a computerized point-of-sale (POS) system to generate monthly sales reports.
These reports include data on:
- Total revenue.
- Sales broken down by product category.
- Transaction volumes.
Managers review this data at the end of every month to determine actual revenue performance.

Management compares actual revenue to the $230,000$ target.
Outcome A: If actual revenue is $235,000$ , the standard is exceeded, and performance is satisfactory.
Outcome B: If actual revenue is $210,000$ , the store has failed to meet the $15\%$ increase, indicating a performance gap that requires investigation.

If sales fall below the target, management identifies the cause and may implement the following measures:
- Increasing promotional campaigns or advertising efforts.
- Offering limited-time discounts to drive traffic.
- Improving product displays to increase visibility.
- Training staff on upselling and customer service.
- Reviewing the product mix to ensure popular items are in stock.
If targets are met or exceeded, management reinforces successful strategies and continues monitoring.

Feedback control is not a one-time event; it is a continuous, dynamic process.
After corrective actions are taken, performance must be measured again and compared to the standards to ensure the fixes worked.
If performance remains below standard, further adjustments are made.
Feedback may also result in management revising the performance standards themselves or adjusting high-level strategic goals if market conditions change.
This ensures the organization remains constantly aligned with its strategic objectives.