Chapter 16 - Control

Chapter 16 - Control

1. L01 The Control Process

   • Standards a basis of comparison for measuring the extent to which various kinds of organizational performance are satisfactory or unsatisfactory
   • Standards
     • a basis of comparison for measuring the extent to which various kinds of organizational performance are satisfactory or unsatisfactory
     • -the process of determining how well other companies (and not just competitors) are performing business functions or tasks. - the process of determining other companies’ standards 1)determine what to benchmark, cycle time (how fast) to quality (how well) to price (how much) 2)identify the companies against which to benchmark your standards 3)collect data to determine other companies’ performance standards
     • Comparison to standards
       • Comparison to standards
       • Corrective Action
         • -identify performance deviations, analyze those deviations, then develop and implement programs to correct them
         • Dynamic Cybernetic Process
           • -the ongoing process of monitoring standards, deviations, and corrections -daily, weekly, monthly assessment of performance levels
           • Feedback, Concurrent, and Feedforward Control
             • Feedback control - a mechanism for gathering information about performance deficiencies after they occur
             • Concurrent control - addresses the problems inherent in feedback control by gathering information about performance deficiencies as they occur
             • -Feedforward control - a mechanism for gathering information about performance deficiencies before they occur -provides information about performance deficiencies by monitoring inputs, not outputs
             • Control Not Always Worthwhile or Possible
               • Control loss - occurs when behaviour and work procedures do not conform to standards
               • Implementing controls isn't always worthwhile or feasible Regulation costs - the costs associated with implementing or maintaining control  
               • Cybernetic feasibility - the extent to which it is possible to implement each of the three steps in the control process -if one or more steps cannot be implemented, then maintaining effective control may be difficult or impossible

2. L02 Control Methods

   • Bureaucratic control
     • Bureaucratic control - the use of hierarchical authority to influence employee behaviour by rewarding or punishing employees for compliance or noncompliance with organizational policies, rules, and procedures -incorrect implementation can have negative effect i.e. - overly focused on punishment, abuse of authority -stringent adherence to rules and procedures make bureaucratically controlled companies resistant to change
     • Objective Control
       • objective control - evolved from bureaucratic control, objective control is the use of observable measures of employee behaviour or output to assess performance and influence behaviour two types of objective control:  behavioural and output control
       • Behaviour control - regulating behaviours and actions that people perform on the job -desired behaviour should lead to goal achievement- managers are responsible for monitoring and rewarding employees for exhibiting desired behaviours and helping people overcome undesired behaviours
       • Output control - the regulation of employees’ results or outputs through rewards and incentives three preconditions to output control: 1)  output control measures must be reliable, fair, and accurate 2) employees and managers must believe they can produce the desired results 3) rewards or incentives tied to output control measures must truly depend on achieving established standards of performance
       • Normative Control
         • Normative control - the regulation of employees’ behaviour and decisions through widely shared organizational values and beliefs
         • - companies that use normative controls are very careful about whom they hire - normatively controlled companies not only screen applicants on the basis of their abilities but are just as likely to screen them for their attitudes and values - managers and employees learn normative standards by observing experienced employees and by listening to the stories they tell about the company
         • Concertive Control
           • Concertive control - the regulation of employees’ behaviour and decisions through work group values and beliefs
           • -autonomy is granted to groups who are responsible to meet objectives - autonomous groups exercise connective control by doing their own hiring and firing, worker discipline, work schedules, materials ordering, budget making and meeting, and decision making
           • first phase of concertive control - group members learn to work with one another, supervise one another’s work, and develop the values and beliefs that will guide and control their behaviour. And because they develop these values and beliefs themselves, work group members feel strongly about following them
           • second phase  of concertive control - the emergence and formalization of objective rules to guide and control behaviour. The beliefs and values developed in the first into more objective rules as new members join teams. The clearer those rules, the easier it becomes for new members to figure out how and how not to behave.
           • concertive control may lead to even higher expectations on employees than bureaucratic control. Under bureaucratic control, most employees only have to worry about pleasing the boss. But with concertive control, their behaviour has to satisfy the rest of the team.
           • Self Control
             • Self control(self management) - a control system in which managers and employees control their own behaviour by setting their own goals, monitoring their own progress, and rewarding themselves for goal achievement
             • -leaders and managers provide employees with clear boundaries within which they may guide and control their own goals and behaviours -leaders and managers also contribute to self-control by teaching others the skills they need to maximize and monitor their own work effectiveness.  -individuals who manage and lead themselves establish self-control by setting their own goals, monitoring their own progress, rewarding or punishing themselves for achieving or for not achieving their self-set goals, and constructing positive thought patterns that remind them of the importance of their goals and their ability to accomplish them

3. L03 What To Control

   • Balance Scorecard
     • Balanced Scorecard - measurement of organizational performance from four equally important perspectives: finances, customers, internal operations, and innovation and learning
     • Advantages -forces managers at each level of the company to set specific goals and measure performance in each of the four areas minimized suboptimization - performance improvement in one part of an organization at the expense of decreased performance in another part
     • Financial
       • Cash flow analysis - a type of analysis that predicts how changes in a business will affect its ability to take in more cash than it pays out
       • Balance sheets - accounting statements that provide a snapshot of a company’s financial position at a particular time
       • Income statements - accounting statements, also called “profit and loss statements,” that show what has happened to an organization’s income, expenses, and net profit over a period of time
       • Financial ratios - calculations used to track a business’s liquidity (cash), efficiency, and profitability over time compared to other businesses in its industry
       • Budgets - quantitative plans through which managers decide how to allocate available money to best accomplish company goals -project costs and revenues, prioritize and control spending, and ensure that expenses don’t exceed available funds and revenues
       • Economic value added (EVA) - the amount by which company profits (revenues, minus expenses, minus taxes) exceed the cost of capital in a given year Advantages  - includes capital costs - can be determined for divisions, regional office, departments - makes managers become more creative to make profit, take an entrepreneurial approach to increasing profit 
     • Customer
       • Customer defections - a performance assessment in which companies identify which customers are leaving and measure the rate at which they are leaving
       • Reasons to track customer defection -the cost of gaining a new customer is ten times higher than retaining current customers-customers who have left are much more likely than current customers to tell you what you were doing wrong -companies that understand why customers leave not only can take steps to fix ongoing problems, but also can identify which customers are likely to leave and make changes to prevent them from leaving
     • Internal
       • -relates to the processes, decisions, and actions that managers and employees make within the organization -leads managers to focus on quality -three measures of quality - excellence, value, and conformance to specifications
       • Excellence - managers must try to produce a product or service of unsurpassed performance and features
       • Value - customer perception that the product quality is excellent for the price offered - managers must simultaneously control excellence, price, durability, and other features of a product or service that customers strongly associate with value
       • Conformance to specification - employees must base their decisions and actions on whether the services and products they offer measure up to the standard -quality control in manufacturing and services
     • Innovation and Learning
       • -involves continuous improvement in ongoing products and services, relearning and redesigning the processes by which products and services are created, and waste and pollution minimization
       • 1)Waste Prevention and Reduction -good housekeeping, performing regularly scheduled maintenance on machinery and offices -material/product substitution - replacing harmful materials in production process -process modification - eliminating harmful steps and remaining geared toward waste reduction and elimination
       • 2)Recycke and Reuse -  wastes are reduced by reusing materials as long as possible or by collecting materials for recycling -design for disassembly, where products are designed from the start for easy disassembly, recycling, and reuse once they are no longer usable
       • 3)Waste treatment - companies use biological, chemical, and other processes to turn potentially harmful wastes into harmless compounds or useful byproducts
       • 4)Waste disposal - wastes that cannot be prevented, reduced, recycled, reused, or treated should be safely disposed of in processing plants or in environmentally secure landfills that prevent leakage and contamination of soil and underground water supplies