Control Process PDF

596 Part 6 Controlling WHAT is controlling and why is it important? A press operator at the Denver Mint noticed a flaw—an extra LO18...

596 Part 6 Controlling WHAT is controlling and why is it important? A press operator at the Denver Mint noticed a flaw—an extra LO18.1 up leaf or an extra down leaf—on Wisconsin state quarters being pressed at one of his five press machines. He stopped the machine and left for a meal break. When he returned, he saw the machine running and assumed that someone had changed the die in the machine. However, after a routine inspection, the machine operator realized the die had not been changed. The faulty press had likely been running for over an hour and thousands of the flawed coins were now commingled with unblemished quarters. As many as 50,000 of the faulty coins entered circulation, setting off a coin collector buying frenzy.2 The U.S. Social Security Administration mistakenly paid 740 deceased beneficiaries approximately $17 million in retirement benefits.3 An airport security screening audit revealed a startling statistic: Auditors were able to move fake explosives and weapons past security screeners 95 percent of the time.4 After a number of negatively publicized incidents on its cruise ships, Carnival Corporation accelerated its schedule of maintenance and other renovations.5 A technical error on Delta Airlines’ website mistakenly listed $6.90 round-trip airfares to Hawaii, and American Airlines’ website published business class tickets to Beijing for free.6 An Oregon couple was shocked when Verizon charged them $2.1 million in error for monthly service.7 More than 5,000 applicants to the University of Buffalo mistakenly received acceptance letters.8 No fast-food chain wants its employees doing gross stuff behind the scenes, but social media photos and videos of a Taco Bell employee licking a stack of taco shells, a Wendy’s employee bending down under a Frosty machine with mouth wide open gobbling the treat, and a Domino’s Pizza employee performing vulgar and unsanitary actions while preparing food have all shown up online.9 Yikes! Can you see why controlling is such an important managerial function? controlling What is controlling? It’s the process of monitoring, comparing, and correcting Management function that involves work performance. All managers should control even if their units are performing monitoring, comparing, and correcting as planned because they can’t really know that unless they’ve evaluated what activi- work performance ties have been done and compared actual performance against the desired standard.10 Effective controls ensure that activities are completed in ways that lead to the attain- ment of goals. Whether controls are effective, then, is determined by how well they help employees and managers achieve their goals.11 In David Lee Roth’s autobiography (yes, that David Lee Roth, the former front man for Van Halen), he tells the story of how he had a clause (article 126) in his touring con- tract asking for a bowl of M&Ms backstage, but no brown ones.12 Now, you might think that is just typical demanding rock star behavior, but instead it was a well-planned effort by Roth to see whether the venue management had paid attention. With the technical complexity of his show, he figured if they couldn’t get the M&Ms right, he needed to demand a line check of the entire production to ensure that no technical errors would occur during a performance. Now that’s how managers should use control! Why is control so important? Planning can be done, an organizational structure created to facilitate efficient achievement of goals, and employees motivated through effective leadership. But there’s no assurance that activities are going as planned and that the goals employees and managers are working toward are, in fact, being attained. Control is important, therefore, because it’s the only way that managers know whether organizational goals are being met and, if not, the reasons why. The value of the con- trol function can be seen in three specific areas: planning, empowering employees, and protecting the workplace. In Chapter 8, we described goals, which provide specific direction to employees and managers, as the foundation of planning. However, just stating goals or having M18_ROBB7604_14_SE_CH18_pp594-pp627.indd 596 03/10/16 5:55 PM  Chapter 18 Monitoring and Controlling 597 Planning Exhibit 18-1 Planning-Controlling Link Goals Objectives Strategies Plans Controlling Organizing Standards Structure Measurements Human Resource Comparison Management Actions Leading Motivation Leadership Communication Individual and Group Behavior employees accept goals doesn’t guarantee that the necessary actions to accomplish those goals have been taken. As the old saying goes, “The best-laid plans often go awry.” The effective manager follows up to ensure that what employees are supposed to do is, in fact, being done and goals are being achieved. Controlling provides a criti- cal link back to planning. (See Exhibit 18-1.) If managers didn’t control, they’d have no way of knowing whether their goals and plans were being achieved and what future actions to take. The second reason controlling is important is because of employee empowerment. Many managers are reluctant to empower their employees because they fear some- thing will go wrong for which they would be held responsible. But an effective control system can provide information and feedback on employee performance and minimize the chance of potential problems. The final reason why managers control is to protect the organization and its assets.13 Today’s environment brings heightened threats from natural disasters, finan- cial scandals, workplace violence, global supply chain disruptions, security breaches, and even possible terrorist attacks. Managers must protect organizational assets in the event that any of these things should happen. Comprehensive controls and back-up plans will help assure minimal work disruptions. THE control process Zebra. That’s the name of a company that manufactures tracking LO 18.2 devices. One of Zebra’s sensor tracking products is called MotionWorks that NASCAR’s Michael Waltrip Racing pit crew is clamoring over, although it’s not yet been approved for use in races. This RFID sensing technology will allow pit crews to track in real-time what they’ve only been able to do with videos and stopwatches. By controlling every movement and action, the team hopes to maximize speed in pit stops and prevent penalties. It would allow them to measure their performance in ways not available before.14 What a great example of managers using the control process to address issues both leading to and resolving problems and trying to be more efficient and effective. The control process is a three-step process of measuring actual performance, control process comparing actual performance against a standard, and taking managerial action to A three-step process of measuring correct deviations or to address inadequate standards. (See Exhibit 18-2.) The control actual performance, comparing actual performance against a standard, and process assumes that performance standards already exist, and they do. They’re the taking managerial action to correct specific goals created during the planning process. deviations or inadequate standards M18_ROBB7604_14_SE_CH18_pp594-pp627.indd 597 03/10/16 5:55 PM  598 Part 6 Controlling Exhibit 18-2 Measuring The Control Process Step 1 Actual Performance GOALS AND OBJECTIVES Comparing Actual Organizational Performance Step 2 Divisional Against Standard Departmental Individual Taking Step 3 Managerial Action Step 1: Measuring Actual Performance To determine what actual performance is, a manager must first get information about it. Thus, the first step in control is measuring. HOW WE MEASURE Four approaches used by managers to measure and report actual performance are personal observations, statistical reports, oral reports, and written reports. Exhibit 18-3 summarizes the advantages and drawbacks of each approach. Most managers use a combination of these approaches. WHAT WE MEASURE At GEICO, customer service representatives’ job perfor- mance is measured by metrics—such as selling more expensive insurance policies to customers. Measuring the number of new policies and added revenue makes sense to boost company profits. However, selling more expensive policies isn’t always in the best interests of the company. For instance, a customer called a GEICO representative to request a tow truck after becoming stranded. The representative dispatched the tow truck and proceeded to convince the customer that he needed a more expensive insur- ance policy.15 Shouldn’t the GEICO representative have focused on the customer’s well-being during a stressful time? And shouldn’t GEICO include customer care as a relevant job performance metric? Yes, what is measured is probably more critical to the control process than how it’s measured. Why? Because selecting the wrong criteria can create serious problems. Besides, what is measured often determines what employees will do.16 What control criteria might managers use? Some control criteria can be used for any management situation. For instance, all managers deal with people, so criteria such as employee satisfaction or turnover and Exhibit 18-3 Benefits Drawbacks Sources of Information for Personal Get firsthand knowledge Subject to personal biases Measuring Performance Observations Information isn’t filtered Time-consuming Intensive coverage of work Obtrusive activities Statistical Reports Easy to visualize Provide limited information Effective for showing Ignore subjective factors relationships Oral Reports Fast way to get information Information is filtered Allow for verbal and Information can’t be nonverbal feedback documented Written Reports Comprehensive Take more time to prepare Formal Easy to file and retrieve M18_ROBB7604_14_SE_CH18_pp594-pp627.indd 598 03/10/16 5:55 PM  Chapter 18 Monitoring and Controlling 599 Exhibit 18-4 Acceptable Range of Variation Measurement of Performance Acceptable Upper Limit Standard Acceptable Range of Variation Acceptable Lower Limit t t+1 t+2 t+3 t+4 t+5 Time Period (t ) absenteeism rates can be measured. Keeping costs within budget is also a fairly com- mon control measure. Other control criteria should recognize the different activities that managers supervise. For instance, a manager at a pizza delivery location might use measures such as number of pizzas delivered per day, average delivery time for phone orders versus online orders, or number of coupons redeemed. A manager in a governmental agency might use applications typed per day, client requests completed per hour, or average time to process paperwork. Most work activities can be expressed in quantifiable terms. However, managers should use subjective measures when necessary. Although such measures may have limitations, they’re better than having no standards at all and doing no controlling. Step 2: Comparing Actual Performance Against the Standard The comparing step determines the variation between actual performance and the standard. Although some variation in performance can be expected in all activities, it’s critical to determine an acceptable range of variation (see Exhibit 18-4). Deviations range of variation outside this range need attention. Let’s work through an example. The acceptable parameters of variance between actual performance and the Chris Tanner is a sales manager for Green Earth Gardening Supply, a distributor standard of specialty plants and seeds in the Pacific Northwest. Chris prepares a report dur- ing the first week of each month that describes sales for the previous month, classi- fied by product line. Exhibit 18-5 displays both the sales goals (standard) and actual sales figures for the month of June. After looking at the numbers, should Chris be concerned? Sales were a bit higher than originally targeted, but does that mean there were no significant deviations? That depends on what Chris thinks is significant; that Product Standard Actual Over (Under) Exhibit 18-5 Green Earth Gardening Supply— Vegetable plants 1,075 913 (162) June Sales Perennial flowers 630 634 4 Annual flowers 800 912 112 Herbs 160 140 (20) Flowering bulbs 170 286 116 Flowering bushes 225 220 (5) Heirloom seeds 540 672 132 Total 3,600 3,777 177 M18_ROBB7604_14_SE_CH18_pp594-pp627.indd 599 03/10/16 5:55 PM  600 Part 6 Controlling is, outside the acceptable range of variation. Even though overall performance was generally quite favorable, some product lines need closer scrutiny. For instance, if sales of heirloom seeds, flowering bulbs, and annual flowers continue to be over what was expected, Chris might need to order more product from nurseries to meet customer demand. Because sales of vegetable plants were 15 percent below goal, Chris may need to run a special on them. As this example shows, both overvariance and undervariance may require managerial attention, which is the third step in the control process. Step 3: Taking Managerial Action Managers can choose among three possible courses of action: do nothing, correct the actual performance, or revise the standards. Because “do nothing” is self-explanatory, let’s look at the other two. CORRECT ACTUAL PERFORMANCE Sports coaches understand the importance of correcting actual performance. During a game, they’ll often correct a player’s actions. But if the problem is recurring or encompasses more than one player, they’ll devote time during practice before the next game to correcting the actions.17 That’s what managers need to do as well. Depending on what the problem is, a manager could take different corrective actions. For instance, if unsatisfactory work is the reason for performance variations, the manager could correct it by things such as training programs, disciplinary action, changes in compensation practices, and so forth. One decision a manager must make immediate corrective action is whether to take immediate corrective action, which corrects problems at once Corrective action that corrects problems to get performance back on track, or to use basic corrective action, which looks at once to get performance back on at how and why performance deviated before correcting the source of deviation. It’s track not unusual for managers to rationalize that they don’t have time to find the source basic corrective action of a problem (basic corrective action) and continue to perpetually “put out fires” with Corrective action that looks at how immediate corrective action. Effective managers analyze deviations and, if the benefits and why performance deviated before justify it, take the time to pinpoint and correct the causes of variance. correcting the source of deviation REVISE THE STANDARD It’s possible that the variance was a result of an unrealistic standard—too low or too high a goal. In that situation, the standard needs the correc- tive action, not the performance. If performance consistently exceeds the goal, then a manager should look at whether the goal is too easy and needs to be raised. On the other hand, managers must be cautious about revising a standard downward. It’s natural to blame the goal when an employee or a team falls short. For instance, students who get a low score on a test often attack the grade cut-off standards as too high. Rather than accept the fact that their performance was inadequate, they will argue that the standards are unreasonable. Likewise, salespeople who don’t meet their monthly quota often want to blame what they think is an unrealistic quota. The point is that when performance isn’t up to par, don’t immediately blame the goal or standard. If you believe the standard is realistic, fair, and achievable, tell employees that you expect future work to improve, and then take the necessary corrective action to help make that happen. Managerial Decisions in Controlling Exhibit 18-6 summarizes the decisions a manager makes in controlling. The standards are goals developed during the planning process. These goals provide the basis for the control process, which involves measuring actual performance and comparing it against the standard. Depending on the results, a manager’s decision is to do nothing, correct the performance, or revise the standard. If your professor has assigned this, go to www.mymanagementlab.com to watch a video Watch It 1! titled: CH2MHill: Foundations of Control and to respond to questions. M18_ROBB7604_14_SE_CH18_pp594-pp627.indd 600 03/10/16 5:55 PM  Chapter 18 Monitoring and Controlling 601 Exhibit 18-6 Managerial Decisions in the Control Process Compare Is Yes actual standard being Do nothing performance with standard attained? No Is Yes variance Do nothing acceptable? Measure Objectives Standard actual performance No Is Yes Identify standard cause of acceptable? variation No Revise Correct standard performance M18_ROBB7604_14_SE_CH18_pp594-pp627.indd 601 03/10/16 5:55 PM