Part 5: controlling

PART 5: CONTROLLING

After reading this chapter students should be able to:

1. 
   Explain the nature and importance of control.
   
2. 
   Describe the three steps in the control process.
   
3. 
   Discuss the types of controls organizations and managers use.
   
4. 
   Discuss contemporary issues in control.
   

Terminal 5 (T5), built by British Airways for $8.6 billion, is London Heathrow Airport’s newest state-of-the art facility. Made of glass, concrete, and steel, it’s the largest free-standing building in the United Kingdom and has over 10 miles of belts for moving luggage. After two decades in planning and 100 million hours in manpower, opening day didn’t work out as planned. Endless lines and major baggage handling delays led to numerous flight cancellations stranding many irate passengers. Airport operators said the problems were triggered by glitches in the terminal’s high-tech baggage-handling system. With its massive automation features, T5 was planned to ease congestion at Heathrow and improve the flying experience for the 30 million passengers expected to pass through it annually. With 96 self-service check-in kiosks, over 90 fast check-in bag drops, 54 standard check-in desks, and over 10 miles in suitcase moving belts that were supposed to be able to process 12,000 bags per hour, the facility’s design seemed to support those goals.

1. 
   Why is the control stage so important?
   
2. 
   What went wrong?
   
3. 
   Were the goals accomplished?
   

1. WHAT IS CONTROL AND WHY IS IT IMPORTANT?

   1. Introduction

2. 
   Control is the management function involving the process of monitoring activities to ensure that they are being accomplished as planned and correcting any significant deviations.
   
   1. 
      An effective control system ensures that activities are completed in ways that lead to the attainment of the organization’s goals.
      
   2. 
      The effectiveness of a control system is determined by how well it facilitates goal achievement.
      

1. Why is Control Important?

1. 
   There is no assurance that activities are going as planned and that the goals managers are seeking are, in fact, being attained.
   
2. 
   Control is the final link in the functional chain of management.
   
3. 
   The value of control lies predominantly in its relation to planning and delegating activities.
   
   1. 
      Objectives give specific direction to managers.
      
   2. 
      The effective manager needs to follow up.
      

   3. The Control Process

4. 
   Three separate and distinct steps: (1) measuring actual performance, (2) comparing actual performance against a standard, and (3) taking managerial action to correct deviations or inadequate standards. (See Exhibit 13-1.)
   
5. 
   The control process assumes that standards of performance are created in the planning function.
   
   1. 
      Then objectives are set—tangible, verifiable, and measurable.
      
   2. 
      Objectives then are the standards against which progress is measured and compared.
      
   3. 
      Planning must precede control.
      

8. WHAT TAKES PLACE AS MANAGERS CONTROL?

   1. Introduction

9. 
   The control process is a three-step process of measuring actual performance, comparing actual performance against a standard, and taking managerial action to correct deviations or to address inadequate standards.
   
10. 
    See Exhibit 13-2.
    

    1. What Is Measuring?

11. 
    The first step in control.
    
12. 
    How do managers measure?
    
    1. 
       Four common sources of information frequently used by managers to measure actual performance are personal observation, statistical reports, oral reports, and written reports.
       
    2. 
       Personal observation provides firsthand, intimate knowledge of the actual activity.
       
       1. 
          It is not filtered by others.
          
       2. 
          It permits intensive coverage.
          
       3. 
          It provides opportunities for the manager to “read between the lines.”
          
       4. 
          Management by walking around (MBWA)—used to describe when a manager is out in the work area, interacting directly with employees, and exchanging information about what’s going on.
          
       5. 
          Personal observation is often considered an inferior information source.
          
          1. 
             It is subject to perceptual biases.
             
          2. 
             Personal observation also consumes a good deal of time.
             
          3. 
             It suffers from obtrusiveness.
             
    3. 
       Statistical reports (computer outputs, graphs, bar charts, etc.) provide managers information about actual performance.
       
       1. 
          It is easy to visualize and effective for showing relationships.
          
       2. 
          It provides limited information about an activity and generally only reports on a few key areas.
          
    4. 
       Information can also be acquired through oral reports—that is, through conferences, meetings, one-on-one conversations, or telephone calls.
       
       1. 
          The advantages and disadvantages are similar to those of personal observation.
          
       2. 
          The information is filtered.
          
       3. 
          It is fast and allows for feedback.
          
       4. 
          It permits expression and tone of voice, as well as words themselves to convey meaning.
          
       5. 
          One of the major drawbacks of oral reports has been the problem of documenting information for later references—technological capabilities to efficiently tape and provide permanent record overcomes this drawback.
          
    5. 
       Actual performance may also be measured by written reports.
       
       1. 
          They are slower yet more formal.
          
       2. 
          Formality gives them greater comprehensiveness and conciseness.
          
       3. 
          Written reports are usually easy to catalog and reference.
          
    6. 
       Comprehensive control efforts by managers should use all four measurement techniques.
       

13. What do Managers Measure?

    1. 
       What is measured is more critical to the control process than how it is measured.
       
    2. 
       The selection of the wrong criteria can result in serious dysfunctional consequences.
       
    3. 
       What is measured determines what people in the organization will attempt to excel at.
       
    4. 
       Some control criteria are applicable to any management situation.
       
       1. 
          Criteria such as employee satisfaction or turnover and absenteeism rates can be measured.
          
       2. 
          Most managers have budgets for their area of responsibility set in monetary units and keeping costs within budget can be measured.
          
    5. 
       Any comprehensive control system needs to recognize the diversity of activities among managers.
       
    6. 
       Some activities are more difficult to measure in quantifiable terms.
       
       1. 
          But most activities can be broken down into objective segments that allow for measurement.
          
       2. 
          The manager needs to determine what value a person, department, or unit contributes to the organization and then convert the contribution into standards.
          
    7. 
       Most jobs and activities can be expressed in tangible and measurable terms.
       
    8. 
       When a performance indicator cannot be stated in quantifiable terms, managers should look for and use subjective measures.
       
    9. 
       Certainly, subjective measures have significant limitations.
       
    10. 
        Any analysis or decisions made on the basis of subjective criteria should recognize the limitations of the data.
        

    11. How do managers compare actual performance to planned goals?

14. 
    The comparing step determines the degree of discrepancy between actual performance and the standard.
    
15. 
    It is critical to determine the acceptable range of variation. (See Exhibit 13-3.)
    
    1. 
       In the comparison stage, managers are particularly concerned with the size and direction of the variation.
       
16. 
    Becky Simmons is the sales manager for South Atlantic Distributors, example.
    
17. 
    Exhibit 13-4 presents the standard and actual sales figures for June.
    
18. 
    Both over-variance and under-variance require managerial attention.
    

1. What Managerial Action Can Be Taken?

1. 
   The third and final step in the control process is taking managerial action.
   
2. 
   Managers can choose among three courses of action: they can do nothing; they can correct the actual performance; or they can revise the standard.
   
   1. 
      Doing nothing is fairly self-explanatory.
      
3. 
   Correct actual performance.
   
   1. 
      If the source of the variation has been deficient performance, the manager will want to take corrective action.
      
      1. 
         Make another decision; take immediate or basic corrective action?
         
      2. 
         Immediate corrective action corrects problems at once and gets performance back on track.
         
      3. 
         Basic corrective action asks how and why performance has deviated and then proceeds to correct the source of deviation.
         
      4. 
         It is not unusual for managers to rationalize that they do not have the time to take basic corrective action and therefore must be content to perpetually put out fires with immediate corrective action.
         
      5. 
         Effective managers analyze deviations, and when the benefits justify it, take the time to permanently correct significant variances between standard and actual performance.
         
4. 
   Revise the standard.
   
   1. 
      It is also possible that the variance was a result of an unrealistic standard—that is, the goal may have been too high or too low.
      
      1. 
         The standard needs corrective attention, not the performance.
         
      2. 
         The more troublesome problem is the revising of a performance standard downward.
         
      3. 
         It may be true that standards are too high.
         
      4. 
         But keep in mind that if employees or managers don’t meet the standard, the first thing they are likely to do is to attack the standard itself.
         
   2. 
      If you believe that the standard is realistic, hold your ground.
      
      1. 
         Explain your position, reaffirm to the employee or manager that you expect future performance to improve, and then take the necessary corrective action to turn that expectation into reality.
         

23. WHAT SHOULD MANAGERS CONTROL?

    1. See Exhibit 13-5.

    2. What Is Feedforward Control?

24. 
    The most desirable type of control—feedforward control—prevents anticipated problems.
    
    1. 
       It takes place in advance of the actual activity.
       
    2. 
       It’s future-directed.
       
    3. 
       The key to feedforward control is taking managerial action before a problem occurs.
       
25. 
    Feedforward controls allow management to prevent problems rather than having to cure them.
    
    1. 
       These controls require timely and accurate information that is often difficult to develop.
       

    2. When Is Concurrent Control Used?

26. 
    It takes place while an activity is in progress.
    
27. 
    Management can correct problems before they become too costly.
    
28. 
    The best-known form of concurrent control is direct supervision.
    
    1. 
       Technical equipment can be designed to include concurrent controls.
       

    2. Why Is Feedback Control So Popular?

29. 
    The most popular type of control relies on feedback.
    
    1. 
       The control takes place after the action.
       
30. 
    The major drawback of this type of control is that by the time the manager has the information, the damage has already been done.
    
    1. 
       It’s analogous to locking the barn door after the horse has been stolen.
       
31. 
    Feedback has two advantages over feedforward and concurrent control.
    
    1. 
       First, feedback provides managers with meaningful information on how effective their planning efforts were.
       
    2. 
       Second, feedback control can enhance employee motivation.
       
32. 
    See Developing Your Performance Feedback Skill
    

In this chapter, we introduced several suggestions for providing feedback. One of the more critical feedback sessions will occur when you, as a manager, are using feedback control to address performance issues.

1. 
   Schedule the feedback session in advance and be prepared.
   
2. 
   Put the employee at ease.
   
3. 
   Make sure the employee knows the purpose of this feedback session.
   
4. 
   Focus on specific rather than general work behaviors.
   
5. 
   Keep comments impersonal and job-related.
   
6. 
   Support feedback with hard data.
   
7. 
   Direct the negative feedback toward work-related behavior that the employee controls.
   
8. 
   Let the employee speak.
   
9. 
   Ensure that the employee has a clear and full understanding of the feedback.
   
10. 
    Detail a future plan of action.
    

Think of a skill you would like to acquire or improve, or a habit you would like to break. For the purpose of this exercise, assume you have three months to start and all the necessary funds. Draft a plan of action that outlines what you need to do and when you need to do it, and how you will know that you have successfully completed each step of your plan. Be realistic, but don’t set your sights too low either.

Review your plan. What outside help or resources will you require? How will you get them? Add these to your plan.

Could someone else follow the steps you’ve outlined to achieve the goal you set? What modifications would you have to make, if any?

Use the instructions above (for “Practicing the Skill”) as standards for the exercise. Share that they (the students) should

• 
  Be realistic.
  
• 
  Set goals that will stretch them.
  
• 
  Review the plan weekly.
  
• 
  Think about resources and how they will acquire them.
  

Students should keep the plan created in this exercise to less than one page in length.

1. In What Areas Might Managers Need Controls?

1. 
   Every business wants to earn a profit and to achieve this goal, managers need financial controls.
   
2. 
   Traditional financial measures managers might use include ratio analysis and budget analysis.
   
3. 
   Exhibit 13-6 summarizes some of the most popular financial ratios that managers will analyze.
   
4. 
   Budgets are another type of financial control tool that are used for planning and controlling.
   

   1. How is an Organization's Information Controlled?

5. 
   Managers deal with information controls in two ways: (1) as a tool to help them control other organizational activities and (2) as an organizational area they need to control.
   
6. 
   A management information system (MIS) is a system used to provide managers with needed information on a regular basis.
   
   1. 
      The term system in MIS implies order, arrangement, and purpose.
      
   2. 
      An MIS focuses specifically on providing managers with information (processed and analyzed data), not merely data (raw, unanalyzed facts)
      
7. 
   Managers must have comprehensive and secure controls in place to protect that information.
   
8. 
   Equipment such as laptop computers and even RFID (radio-frequency identification) tags are vulnerable to viruses and hacking, so information controls should be monitored regularly to ensure that all possible precautions are in place to protect important information.
   

   1. What is the Balanced Scorecard Approach to Control?

9. 
   A balanced scorecard typically looks at four areas that contribute to a company’s performance: financial, customer, internal processes, and people/innovation/growth assets. According to this approach, managers should develop goals in each of the four areas and then measure whether the goals are being met.
   

42. DO CONTROLS NEED TO BE ADJUSTED FOR CULTURAL DIFFERENCES?

    1. Do Controls Need to be Adjusted for Cultural Differences?

43. 
    Methods of controlling employee behavior and operations can be quite different in foreign countries.
    
44. 
    The differences in organizational control systems of global organizations are primarily in the measurement and corrective action steps of the control process.
    
45. 
    Managers of foreign operations of global corporations tend not to be closely controlled by the home office.
    
    1. 
       Distance keeps managers from being able to observe work directly.
       
    2. 
       The home office of a global company often relies on extensive formal reports for control.
       
    3. 
       The global company may also use the power of information technology to control work activities.
       
46. 
    Technology’s impact on control is most evident in comparing technologically advanced nations with more primitive countries.
    
    1. 
       Organizations in technologically advanced nations use indirect control devices—particularly computer-related reports and analyses— in addition to standardized rules and direct supervision to ensure that activities are going as planned.
       
    2. 
       In less technologically advanced countries, direct supervision and highly centralized decision making are the basic means of control.
       
47. 
    Constraints on what corrective action managers can take may affect managers in foreign countries.
    
    1. 
       Laws in some countries do not allow managers the option of closing facilities, laying off employees, or bringing in a new management team from outside the country.
       
48. 
    Another challenge for global companies in collecting data is comparability.
    

1. What Challenges do Managers Face in Controlling the Workplace?

1. 
   Is my work computer really mine? Do you think you have a right to privacy at your workplace?
   
2. 
   Employers can, among other things: read your e-mail (even confidential messages), tap your work telephone, monitor your computer work.
   
   1. 
      Nearly 80 percent of all businesses surveyed by the American Management Association indicate they monitor employees.
      
3. 
   Managers feel they must monitor what employees are doing because employees are hired to work, not to surf the Web checking stock prices, placing bets at online casinos, or shopping for presents for family or friends.
   
   1. 
      Recreational on-the-job Web surfing has been said to cost a billion dollars in wasted computer resources and billions of dollars in lost work productivity annually.
      
   2. 
      A survey of U.S. employers said that 87 percent of employees look at non work-related Web sites while at work and more than half engage in personal Web site surfing every day.
      
4. 
   Managers don’t want to risk being sued for creating a hostile workplace environment because of an offensive message or inappropriate images displayed on a co-worker’s computer screen.
   
   1. 
      Federal law views a company’s e-mail no differently than if offensive materials were circulated on a company’s letterhead.
      
5. 
   Managers want to ensure that company secrets aren’t being leaked.
   
6. 
   The consequences of inappropriate workplace computer usage can be serious for employees and companies.
   
   1. 
      Examples: New York Times, Xerox, Salomon Smith Barney, Lockheed Martin.
      

   2. Is Employee Theft on the Rise?

7. 
   Nearly 85 percent of all organizational theft and fraud is committed by employees—not outsiders.
   
8. 
   It’s estimated that U.S. companies lose about $29 billion annually from employee theft and fraud.
   
9. 
   Employee theft is defined as any unauthorized taking of company property by employees for their personal use.
   
   1. 
      It can range from embezzlement to fraudulent filing of expense reports to removing equipment, parts, software, and office supplies from company premises.
      
10. 
    A recent survey of U.S. businesses indicated that more than 35 percent of employees admitted to stealing from their employers.
    
11. 
    Why do employees steal?
    
    1. 
       The industrial security people propose that people steal because the opportunity presents itself through lax controls and favorable circumstances.
       
    2. 
       Criminologists say it’s because people have financial-based pressures (such as personal financial problems) or vice-based pressures (such as gambling debts).
       
    3. 
       Clinical psychologists suggest that people steal because they can rationalize whatever they’re doing as being correct and appropriate behavior (“everyone does it,” “they had it coming,” “this company makes enough money and they’ll never miss anything this small,” “I deserve this for all that I put up with,” and so forth).
       
12. 
    What can managers do?
    
    1. 
       Under certain circumstances as part of a theft investigation in the organization, an employer could require an employee to submit to a polygraph (lie detector test).
       
    2. 
       Look at some suggestions for managing employee theft. (See Exhibit 13-7.)
       

    3. What Can Managers do About Workplace Violence?

13. 
    The U.S. National Institute of Occupational Safety and Health says that each year, some 2 million American workers are victims of some form of workplace violence such as verbal abuse, yelling at coworkers, purposeful damage of machines or furniture, or assaulting coworkers.
    
14. 
    Anger, rage, and violence in the workplace are intimidating to coworkers and adversely affect their productivity.
    
15. 
    The annual cost to U.S. businesses is estimated to be between $20 billion and $35 billion.
    
16. 
    Dysfunctional work environments are characterized by:
    
    1. 
       Employee work driven by TNC (time, numbers, and crises).
       
    2. 
       Rapid and unpredictable change where instability and uncertainty plague employees.
       
    3. 
       Destructive communication style where managers communicate in excessively aggressive, condescending, explosive, or passive-aggressive styles; excessive workplace teasing or scapegoating.
       
    4. 
       Authoritarian leadership with a rigid, militaristic mind-set of managers versus employees; employees aren’t allowed to challenge ideas, participate in decision making, or engage in team-building efforts.
       
    5. 
       Defensive attitude where little or no performance feedback is given; only numbers count; and yelling, intimidation, or avoidance are the preferred ways of handling conflict.
       
    6. 
       Double standards in terms of policies, procedures, and training opportunities for managers and employees.
       
    7. 
       Unresolved grievances because there are no mechanisms or only adversarial ones in place for resolving them; dysfunctional individuals may be protected or ignored because of long-standing rules, union contract provisions, or reluctance to take care of problems.
       
    8. 
       Emotionally troubled employees and no attempt by managers to get help for these people.
       
    9. 
       Repetitive, boring work where there’s no chance for doing something else or for new people coming in.
       
    10. 
        Faulty or unsafe equipment or deficient training, which keeps employees from being able to work efficiently or effectively.
        
    11. 
        Hazardous work environment in terms of temperature, air quality, repetitive motions, overcrowded spaces, noise levels, excessive overtime, and so forth. To minimize costs, no additional employees are hired when workload becomes excessive leading to potentially dangerous work expectations and conditions.
        
    12. 
        Culture of violence where there’s a history of individual violence or abuse; violent or explosive role models; or tolerance of on-the-job alcohol or drug abuse.
        
17. 
    Exhibit 13-8 summarizes suggestions for managers to control workplace violence.