Control. Chapter 8. The Control Process. 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. Steps in the Control Process.
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Control Chapter 8
The Control Process • 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
Steps in 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
1. Establish Objectives & Standards • 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
2. Measuring Actual Performance • An accurate measure of actual results on output and/or input standards is needed • Effective control requires accurate measurement
3. Compare Results with Objectives and Standards • 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)
4. Take Corrective Action • Take action when discrepancies exist between desired and actual performance
Types of Controls • Feedforward • Concurrent • Feedback
Feedforward 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.
Concurrent 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
Feedback 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
Internal and External Control • 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 & 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
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
Role of Compensation & Benefits • Attracting and keeping qualified employees who exercise self-control can be helped or hindered by: • Merit pay incentives • Pay-for-performance incentives • Fringe benefits
Management by Objectives (MBO) • 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) 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.
Employee Discipline Systems • Discipline: • the act of influencing behaviour through reprimand • Progressive discipline: • Ties reprimands to the severity and frequency of the employee’s infractions
“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.
Total Sales = Revenue Break-even Point Revenues = Costs Profit Total Costs = Fixed+Variable Dollar Costs & Revenues Variable Costs Loss Fixed Costs Unit Sales Management Fundamentals - Schermerhorn & Wright