Chapter 18: Controlling Activities and Operations

1. WHAT is controlling and why is it important?

- Controlling Management function that involves monitoring, comparing, and correcting
work performance.
- The value of the control function can be seen in three specific areas: planning,
empowering employees, and protecting the workplace.
- Controlling provides a critical link back to planning.

Controlling is important because:

- An effective control system can provide information and feedback on employee

performance and minimize the chance of potential problems.
- Manager use controlling to protect the organization and its assets.

2. THE control processes

- Control process: A three-step process of measuring actual performance, comparing
actual performance against a standard, and taking managerial action to correct
deviations or inadequate standards
 • Step 1: Measuring Actual Performance

Determine what actual performance is, a manager must first get information about it.

HOW WE MEASURE

o WHAT WE MEASURE
▪ What is measured is probably more critical to the control process than how it’s
measured.
▪ Some control criteria can be used for any management situation
Example:
All managers deal with people
Criteria: employee satisfaction, turnover, absenteeism rates, keeping costs within
budget.
 ▪ Other control criteria should recognize the different activities that managers supervise.
Example:

A manager at a pizza delivery location might use measures such as number of pizzas
delivered per day, average delivery time for 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.
▪ Managers should use subjective measures when necessary.
• Step 2: Comparing Actual Performance Against the Standard
- Although some variation in performance can be expected in all activities, it’s critical to
determine an acceptable range of variation.
- Range of variation: The acceptable parameters of variance between actual performance
and the standard.

Example:
• Step 3: Taking Managerial Action
o CORRECT ACTUAL PERFORMANCE
▪ Depending on what the problem is, a manager could take different corrective actions:
1. Immediate corrective action: Corrective action that corrects problems at once to get
performance back on track
2. Basic corrective action: Corrective action that looks at how and why performance
deviated before correcting the source of deviation
o REVISE THE STANDARD
- If performance consistently exceeds the goal, a manager should look at whether the
goal is too easy and needs to be raised.
- If not, managers must be cautious about revising a standard downward.
- Managerial Decisions in Controlling
III. CONTROLLING for organizational and employee performance
1. What Is Organizational Performance?
- Performance: The end result of an activity
- Organizational performance: The accumulated results of all the organization’s work
activities
2. Measures of Organizational Performance
a. Organizational productivity
• Productivity is the amount of goods or services produced divided by the inputs needed
to generate that output.
o Output is measured by the sales revenue an organization receives when goods are sold
(selling price × number sold).
o Input is measured by the costs of acquiring and transforming resources into outputs.
• It’s management’s job to increase this ratio.
 b. Organizational effectiveness

Organizational effectiveness is a measure of how appropriate organizational goals are and

how well those goals are met.

c. Industry and company rankings

Rankings are determined by pecific performance measures, which are different for each list

3. Controlling for Employee Performance

Disciplinary actions Actions taken by a manager to enforce the organization’s work standards
and regulations

a. DELIVERING EFFECTIVE PERFORMANCE FEEDBACK

- Managers need to provide their employees with feedback so that the employees know
where they stand in terms of their work.
- When giving performance feedback, both parties need to feel heard, understood, and
respected
b. USING DISCIPLINARY ACTIONS

Progressive disciplinary action: An approach to ensure that the minimum penalty appropriate
to the offense is imposed
IV. TOOLS for measuring organizational performance
1. Feedforward/Concurrent/Feedback Controls

a. Feedforward control

Feedforward control: Control that takes place before a work activity is done problems can
be prevented rather than having to correct them after any damage (poor-quality products,
lost customers, lost revenue, etc.) has already been done/

b. Concurrent control
- Concurrent control: Control that takes place while a work activity is in progress.
- 2 forms of Concurrent control:
• Direct supervision.
• Management by walking around is when a manager is in the work area interacting
directly with employees.
- All managers can benefit from using concurrent control, but especially first-line
managers, because they can correct problems before they become too costly
c. Feedback control
- Feedback control: Control that takes place after a work activity is done
- Feedback controls have two advantages.
1. Feedback gives managers meaningful information on how effective their planning
efforts were.
2. Feedback that shows little variance between standard and actual performance indicates
that the planning was generally on target
- Feedback can enhance motivation. People want to know how well they’re doing and
feedback provides that information.
2. Financial Controls

- Budgets are planning and control tools.

- When a budget is formulated, it’s a planning tool because it indicates which work
activities are important and what and how much resources should be allocated to those
activities.
 - But budgets are also used for controlling, because they provide managers with
quantitative standards against which to measure and compare resource consumption.
3. Information Controls
a. How is information used in controlling?
- Information is useful because:
• Be able to compare actual performance with the standards.
• Help them determine if deviations are acceptable.
• Help them develop appropriate courses of action.
- A management information system (MIS) is a system used to provide managers with
needed information on a regular basis.
- This system can be manual or computer based.
- The term system in MIS implies order, arrangement, and purpose.
b. Controlling information
- Information controls should be monitored regularly to ensure that all possible
precautions are in place to protect important information.
4. Balanced Scorecard
- Balanced scorecard A performance measurement tool that looks at more than just the
financial perspective
- A balanced scorecard typically looks at four areas that contribute to a company’s
performance: financial, customer, internal processes, and people/innovation/growth
assets.
5. Benchmarking of Best Practices

Benchmarking The search for the best practices among competitors or noncompetitors that
lead to their superior performance

Benchmark The standard of excellence against which to measure and compare

V. CONTEMPORARY issues in control
1. Adjusting Controls for Cross-Cultural Differences and Global Turmoil
- In a global corporation, managers of foreign operations tend to be less controlled by the
home office, if for no other reason than the distance keeping managers from being able
to observe work directly
- Managers in countries where technology is more advanced often use indirect control
devices such as computer-generated reports and analyses in addition to standardized
rules and direct supervision to ensure that work activities are going as planned.
- In less technologically advanced countries, managers tend to use more direct
supervision and highly centralized decision making for control.
- Managers in foreign countries also need to be aware of constraints on investigating
complaints and corrective actions they can take.
- Some countries’ laws prohibit closing facilities, laying off employees, taking money out
of the country, or bringing in a new management team from outside the country.

- Another challenge for global managers in collecting data for measurement and
comparison is comparability.
- Global organizations need to have controls in place for protecting their workers and
other assets during times of global turmoil and disasters.
2. Workplace Privacy

Why do we need workplace privacy?

- A big reason is that employees are hired to work

- They don’t want to risk being sued for creating a hostile workplace environment
because of offensive messages or an inappropriate image displayed on a coworker’s
computer screen.
- Managers want to ensure that company secrets aren’t being leaked.
3. Employee Theft
- Employee theft Any unauthorized taking of company property by employees for their
personal use
- Why do employees steal?
• Experts in various fields—industrial security, criminology, clinical psychology—have
different perspectives.
• The industrial security people propose that people steal because the
opportunity presents itself through lax controls and favorable circumstances.
• Criminologists say it’s because people have financial-based pressures (such as personal
financial problems) or vice-based pressures (such as gambling debts).
• 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).
4. Workplace Violence

Dangerously dysfunctional work environments characterized by the following as primary

contributors to the problem:

- Employee work driven by TNC (time, numbers, and crises).

- Rapid and unpredictable change where instability and uncertainty plague employees.
- Destructive communication style where managers communicate in an excessively
aggressive, condescending, explosive, or passive-aggressive style; excessive workplace
teasing or scapegoating.
- Authoritarian leadership with a rigid, militaristic mindset of managers versus employees;
employees aren’t allowed to challenge ideas, participate in decision making, or engage
in team-building efforts.
- Defensive attitude where little or no performance feedback is given; only numbers
count; and yelling, intimidation, or avoidance is the preferred way of handling conflict.
- Double standards in terms of policies, procedures, and training opportunities for
managers and employees.
- Unresolved grievances because the organization provides no mechanisms or only
adversarial ones 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.
- Emotionally troubled employees and no attempt by managers to get help for these
people.
- Repetitive, boring work with no chance for doing something else or for new people
coming in.
- Faulty or unsafe equipment or deficient training, which keeps employees from being
able to work efficiently or effectively.
- 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.
- Culture of violence that has a history of individual violence or abuse; violent or explosive
role models; or tolerance of on-the-job alcohol or drug abuse.
5. Controlling Customer Interactions
- A service profit chain is the service sequence from employees to customers to profit.
- Managers who want to control customer interactions should work to create long-term
and mutually beneficial relationships among the company, employees, and customers
6. Corporate Governance
- Corporate governance, the system used to govern a corporation so that the interests of
corporate owners are protected
a. The role of boards of directors

The original purpose of a board of directors was to have a group, independent from
management, looking out for the interests of shareholders who were not involved in the
day-to-day management of the organization

b. Financial reporting and the audit committee