UNIT 5: CONTROLLING Overview of Controlling Controlling is an essential function for all managers in the organization by which they monitor performance and take corrective action when needed. Controlling is the process that checks performance against standards. Its purpose is to ensure that performance is consistent with plans and that the organizational and departmental goals and objectives are achieved. Controlling is the process of determining that everything is going according to plan. The controlling function is closely related to the other four managerial functions, but it is most closely related to the planning function. When the manager performs the planning function, the direction, goals, objectives, and policies are set and become standards against which performance is checked and appraised. If deviations are found, the manager has to take corrective action, which may entail new plans and standards. This is how planning decisions affect controls and how control decisions affect plans, illustrating the circular nature of the management process. There is no substitute for engaged leadership. A manager simply cannot afford to be distracted or disengaged. Small, isolated problems, when left unattended, often grow in size and complexity, stealing more and more resources as they compound and create other problems, until they become the sole focus of a manager’s time and attention. A manager must constantly and consistently review the current situation in the laboratory to ensure that there are no unattended details. The best way to avoid big problems is to address and solve small problems before they have a chance to become resource hogs that drain productivity and threaten accuracy. Being mindful of the daily activities of the laboratory is one of a manager’s most important responsibilities. By controlling the details, a manager ensures that the laboratory functions at the highest possible level of efficiency. The Human reaction to control The word control often carries negative connotations. Although controls are an absolute requirement in any organized activity, one must keep in mind that in behavioral terms control means placing constraints on behavior so that what people do in organizations is more or less predictable. Control systems are designed to regulate behavior, which implies loss of freedom. People react negatively to loss of freedom. The amount of control determines how much freedom of action an individual has in performing the job. Complete absence of control, however, does not maximize an individual’s perception of freedom because controls not only restrict a person’s behavior but also the behavior of others toward them. A certain amount of control, therefore, is essential for any organizational freedom to exist. Neither the extremes of tight control nor complete lack of control, however, bring about the desired organizational effectiveness. A balance between the two extremes is therefore necessary, which considers the amount of decentralization in the organization, management styles, motivational factors, situation, professional competence of the employees, and so on. Page 64 of 73 Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly pro- CONTROL SYSTEMS Three different types of control systems are discussed: anticipatory (preventive or ahead of time), concurrent (in process or during the event), and feedback (reactive or after-the-event) controls. These control systems assess whether deadlines and time constraints are met (time controls), whether the appropriate amounts of inventoried parts or materials have been consumed (material controls), whether the equipment functioned properly (equipment controls), and whether the product or service was delivered at the anticipated cost (cost controls). A. Anticipatory Controls Also known as feedforward controls, preliminary controls, or preventive controls, Anticipatory controls are in place before the service activity or production starts. They anticipate potential problems and prevent their occurrence. Anticipatory control is a proactive, not a reactive, approach. Anticipatory controls focus on human, material, and financial resources within the organization. These controls are evident in the selection and hiring of new employees. For example, organizations attempt to improve the likelihood that employees will perform up to standards by identifying the necessary job skills and by using tests and other screening devices to hire people with those skills.. The supervisor should preview the entire process and task. In doing this, forward-looking control mechanisms will be built into the system, and mistakes are likely to be avoided. The purpose of preliminary controls is to anticipate and prevent mistakes by taking care of a potential malfunction in advance. For example, the supervisor plans and arranges for regular preventive maintenance so that the equipment does not break down when needed. Other examples of anticipatory controls are policies, procedures, standard practices, and rules. These are designed so that a predetermined course of action is prescribed to prevent mistakes or malfunctioning. B. Concurrent controls Concurrent controls help spot problems as they occur. These monitor ongoing employee activity to ensure consistency with quality standards. The purpose is to apply controls while the operations are in progress instead of waiting for the outcome. In these situations, the supervisor does not anticipate problems but monitors operations in process. For example, concurrent controls enable the supervisor to keep the quality and quantity of output standardized. Their purpose is to ensure that work activities produce the desired results. As an example, many manufacturing operations include devices that measure whether the items being produced meet quality standards. Employees monitor the measurements; if they see that standards are not being met in some area, they make a correction themselves or let a manager know that a problem is occurring. Many computer software applications have concurrent controls that may require entry of data in a certain field or flagging a discrepancy. The software alerts the user immediately so corrective action can be taken at that time. Page 65 of 73 Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly pro- C. Feedback controls involve reviewing information to determine whether performance meets established standards. For example, suppose that an organization establishes a goal of increasing its profit by 12 percent next year. To ensure that this goal is reached, the organization must monitor its profit on a monthly basis. After three months, if profit has increased by 3 percent, management might assume that plans are going according to plan. Feedback controls are most helpful in planning process improvements. Examples of feedback controls are quality and quantity reports, opinion surveys or service surveys, and accounting reports. A common human resources feedback control is the exit interview performed with employees leaving the organization. Requirements of Adequate Controls 1. Controls must reflect the nature and needs of the activity All control systems should reflect the job they are to perform. Controls of the sales department will differ from those of the finance department and these from the controls of the purchasing department. And a small business will need different controls from a large business. The manager must be aware of the strategic factors in his plans and operations calling for control and use techniques suited to them. 2. Controls should report deviations promptly The ideal control system detects deviations before they actually occur. In any case, the information must reach the manager as soon as possible. 3. Controls should be forward looking Although ideal control is instantaneous, as in certain electronic controls, the facts of managerial life include a time lag between the deviation and corrective action. Therefore, the manager should strive for a control technique which will forecast deviations in time for him to make corrections before the problem occurs. That this is possible is illustrated by such forward-looking devices as cash control. A company manager cannot very well find in April that he ran out of cash in March. Properly, he forecasts his cash requirements to handle his payroll and other cash needs as they arise. This approach to control can surely be applied on a much broader front than is now the case. 4. Controls should point up exceptions as strategic points The time-honored exception principle, that the manager should only watch for and deal with exceptions, is not enough for effective control. Some deviations from standards have little meaning and others have a great deal. Small exceptions in certain areas have greater significance than larger deviations in other areas. A manager, for example, might be concerned if the cost of office labor deviated from standard by 5%, but unworried if the cost of postage stamps deviated from budget by 20%. Therefore, controls should not only point up deviations but should pinpoint them where they are important or strategic to his operations. 5. Controls should be objective Management necessarily has many subjective elements in it, but whether a subordinate is doing a good job should not be the matter for subjective determination. Where controls are Page 66 of 73 Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly pro- subjective, a manager’s or subordinate’s personality may influence judgments of performance inaccurately; but people have difficulty in explaining away objective control of their performance, particularly if the standards and measurements are kept up to date through periodic review. Objective control should be definite and determinable in a clear and positive way. Objective standards can be quantitative, such as costs or man-hours per unit, or date of job completion; they can also be qualitative, such as a better budget program or accomplishing an upgrading of the quality of personnel. The point is that, in either case, the standard is determinable and verifiable. 6. Controls should be flexible Controls must remain workable in the face of changed plans, unforeseen circumstances, or outright failures. A complex program of managerial plans may fail in some particulars. The control system should report such failures, and should contain sufficient elements of flexibility to maintain managerial control of operations despite such failures. 7. Controls should reflect the organization pattern Organization, being the principle vehicle for coordinating the work of people with assigned duties and delegated authority, is also the means of maintaining control; and the manager is the focal point of control, just as he is the focal point for assignment of tasks and the delegation of authority. 8. Controls should be economical Control must be worth its cost. Although this requirement is simple, its practice is often complex, for a manager may find it difficult to know what a particular control system is worth, nor may he know what it costs. Economy is relative, since the benefits vary with the importance of the activity, the size of the business, the expense that might be incurred in the absence of control, and the contribution the system can make. Since a limiting factor of control systems is relative economy, this, in turn, will depend a great deal on the manager’s selecting for control only strategic factors in areas important to him. If tailored to the job and the size of the enterprise, control will probably be economical. On the other hand, one of the economies of large-scale enterprise results from being able to afford expensive and elaborate control systems. 9. Controls should be understandable Sometimes the manager could understand controls if he would take the time to learn the techniques, but whether his lack of understanding results from complex techniques or impatience in learning them, the effect is the same: The control system will not function well. Many so-called experts in graphs, charts, advanced statistical methods, or exhaustive analyses fail to communicate the meaning of their control data to the manager who should use it. “Control” staffs and departments in business often develop needed information that cannot or will not be used by managers, because it is not simple enough or adopted to the manager’s understanding. Page 67 of 73 Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly pro- What may be valuable and comprehensible to one manager may not be to another, and it is up to the manager (or his staff assistant) to make sure that he has an adequate control system that he understands. 10. Controls should indicate corrective action A control system that detects deviations from plans will be little more than an interesting exercise if it does not show the way to corrective action. An adequate system should disclose where failures are occurring, who is responsible for them, and what should be done about them. Barriers to Successful Controlling Control activities may unnecessarily create an overemphasis on short term goals neglecting long term goals. Control activities may frustrate employees by putting a check on their freedom. This type of reaction tends to occur primarily where management exerts too much control. Control activities may result in manipulations and tempering with the facts. It may encourage falsification of reports. Control activities may hamper the creativity of the individuals which ultimately lead to narrowing the perspectives of organizational members. Control activities may not show their effectiveness where proper standards have not been set and faulty evaluation systems are there. Control activities may show their ineffectiveness in an environment where there is fear of discrimination and favoritism. Control activities go against the basic fundamental belief system or ideology of human being then also, they won't be effective. Page 68 of 73 Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly pro- THE CONTROL PROCESS The organizational control system can be viewed as a feedback model. Information on how the system is doing is obtained by the supervisor, or the sensor, who then monitors the system by comparing the actual results with the desired performance. Whenever the actual performance deviates from the standards set, the system triggers corrective action in the form of an input (Figure 1.5.2). This closed-loop feedback system works the same way a thermostat in the home functions. The thermostat is set at the desired degree of temperature. Whenever the room temperature falls below or rises above that temperature, the thermostat, continuously comparing room temperature to the desired temperature, corrects the variation by turning on or shutting off the furnace or air conditioner. This type of control is known as cybernetic because it monitors and manages a process with the help of a selfregulating mechanism. Figure 1.5.1 Closed-Loop System of Feedback (Source: Dunn, 2016 . Haimann’s Healthcare Management 10th Edition) Controlling involves ensuring that performance does not deviate from standards. Controlling consists of five steps (Figure 1.5.1). Corrective action can include changes made to the performance standards—setting them higher or lower or identifying new or additional standards. Performance standards are often stated in monetary terms such as revenue, costs, or profits but may also be stated in other terms, such as units produced, number of defective products, or levels of quality or customer service. 1. Establishing Standards The establishment of standards is the first step in the control process. Standards are criteria against which subsequent performance or results can be judged. Standards also are known as performance metrics. Figure 1.5.2 Five-Step Control Process Performance metrics are any performance-related (Source: Adapted from Exploring Business. measurement of activity or resource utilization. 2016. University of Minnesota.) Tangible Standards The most common tangible standards are physical standards that pertain to the actual operation of a department in which goods are produced (e.g., the dietary department) or services are rendered (e.g., nursing services, laboratories, and laundry). Physical standards define the amount of work to be produced within a given time span. Cost standards are also tangible standards and define direct and indirect labor costs, costs of materials and supplies used, overhead, and many other items. Page 69 of 73 Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly pro- Intangible Standards In a hospital or related healthcare facility some intangible standards are the institution’s reputation in the community; the quality of medicine practiced; the excellence of patient care; and the degree of “tender loving care,” the level of commitment to values, and the level of morale of the employees. It is exceedingly difficult, if not impossible, to express the criteria for such intangible standards in precise and numerical terms. It is much simpler to measure performance against tangible standards, such as number of nursing personnel in relation to the number of patients or days of revenue in unbilled accounts. 2. Performance Measurement Observing and measuring performance is an ongoing activity for every manager. Work is observed, output is measured, and reports are compiled. The checking of activities is usually done by the supervisor after the subordinate has completed the function. Because the supervisor does not shift responsibility when assigning a duty to a subordinate and when delegating authority, he or she must make certain that enough controls are available to take corrective action in case the performance does not meet the standards. The measurement of performance can be done in several ways, depending on the performance standards, including financial statements, sales reports, production results, customer satisfaction, and formal performance appraisals. Managers at all levels engage in the managerial function of controlling to some degree. All organizations measure performance to some extent. However, there is a large disparity among organizations in terms of which performance measures are used with many primarily focusing on financial measures. There has however, been a general move away from financial measurement since the early 1980's. This was accelerated in the 1990's and 2000’s by the worldwide acceptance of business excellence models and performance measurement frameworks that address all stakeholders' needs. Performance measurement is one of the cornerstones of business excellence. Business excellence models encourage the use of performance measures, but in addition and more importantly, they consider the design of performance measurement systems to ensure that measures are aligned to strategy, and that the system is working effectively in monitoring, communicating, and driving performance. 3. Comparing As the manager observes and measures performance, it must be compared with the standards developed in the beginning of the control process. Such comparisons are an ongoing activity of the supervisor daily, weekly, and monthly. The observed performance may be higher, the same as, or lower than the standards. In the first two situations, the supervisor obviously does not have any problems. If the performance does not meet standards, however, corrective action is required. Because some deviation is expected in some activities, the question is how much deviation is acceptable before taking remedial action. Observation is probably the most widely used technique for measurement. There is no better way for a supervisor to check performance than by direct observation and personal contact. Unfortunately, personal observation is time consuming, but every manager should spend part of each day away from his or her desk observing the performance of the employees. For example, Page 70 of 73 Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly pro- regular rounds are not only necessary for the head nurse; they are just as important for the director of housekeeping, the chief dietitian, and the hospital administrator. 4. Determine any reason for deviations Whenever supervisors observe their employees at work, they should assume a questioning attitude and not a fault-finding one. Supervisors should not ignore mistakes, but the manner in which they question is essential. They should ask themselves whether there is any way they could help the employees do the job better or more easily, safely, or efficiently. Written and oral reports are good means of checking on performance. Reports can be used as documentations for any reasoning resulting to deviations. The nature of healthcare activities calls for reports that are accurate, complete, and correct, especially when patient care is involved. The supervisor must bear in mind that the performance standards were based on certain prerequisites, forecasts, and assumptions and that some of these may have been faulty or may not have materialized. A check on the discrepancy may also point out that the trouble was not caused by the employee in whose work it appeared but in some preceding activity. For instance, a patient’s infection might not be caused by the nursing activities or conditions on the nursing floor, but rather by conditions or actions in the recovery room or the surgical suite. In such a situation, the corrective action must be directed toward the real source. In this case, the corrective action will emanate from the nursing director’s office, assuming that the latter is the common line superior to all the departments concerned. The supervisor might also discover that a deviation may be caused by an employee who is not qualified or who has not been given the proper directions and instructions. If the employee is not qualified, additional training and supervision might help, but in other cases finding a replacement might be in order. In a situation in which directions have not been given properly and the employee was not well informed of what was expected of him or her, it is the supervisor’s duty to explain again the standards required. 5. Taking corrective action If there are no deviations in performance from the established standards, the supervisor’s process of controlling is fulfilled by the first two steps—setting standards and checking performance. If a significant and worthwhile discrepancy or variation is found, however, the controlling function is not fulfilled until and unless the third step, appropriate corrective action, is taken. If the deviation is minor and acceptable and within a non-critical activity, it may be appropriate to do nothing except call it to the employee’s attention. As always, data must be examined as quickly as possible after the observations are made so that timely corrective action can be taken to curb undesirable results and bring performance back into line. Only after a thorough analysis of the reasons for a deviation will the supervisor be in a position to take appropriate corrective action concerning the employee in question. Again, it is not sufficient merely to find the deviation; controlling means to correct the situation. The supervisor must decide what remedial action is necessary to secure improved results in the future. Corrective action may require revising the standards, a simple discussion, a reprimand or other disciplinary action, transferring or even replacing certain employees, or devising better work methods. Corrective action, however, is not the final step. The supervisor must follow up by studying the effect of each corrective action on future control. With further study and analysis the supervisor may find that Page 71 of 73 Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly pro- additional or different measures may be required to produce the desired results, keep operations on line, or get them back on track. Benchmarking An effective approach to improving an organization’s operational performance is to identify similar organizations that seem to be performing better, visiting with the managers at those organizations, and discussing how they are able to achieve optimal performance. This process is known as benchmarking. Benchmarking allows organizations to assess their operations, become knowledgeable about competitors, and incorporate what they learn about the best practices used by these industry leaders. Using the wisdom of the optimally performing organization, the managers can attempt to implement the same or similar practices or processes at their own enterprise and hopefully experience some improvement in performance. Benchmarking can begin at a macro level by comparing one’s key statistics to those published by local, regional, or national organizations. If your organization’s length of stay falls within the first quartile but your costs fall into the third quartile, the source of the survey may be contacted for further information, or a performance improvement team may be convened to evaluate the situation. Benchmarking is really the seeking of best practices so that your organization remains competitive in the marketplace. Other sources of best practices are professional newsletters and journals and specialty discussion groups on the Internet. Conducting some research helps you locate organizations that more closely mirror yours and allows you to compare your processes to theirs. Benchmarking is similar to other process improvement activities. As with any activity that may require reorganizing or possibly reengineering, the customer must always be considered first, and, as noted above, the stakeholders— your employees—should always be involved in assessing the situation. According to Cashen (1999), “Furthermore, benchmarking is not a numbers-only exercise”. Measuring the performance of best practice organizations only reveals that they are doing better in the chosen activities. Understanding the managerial and operational processes that allow the target organizations to achieve their results is necessary in order to create improvements in one’s own activities. In other words, benchmarking is not about mimicking other organizations, it is about helping individuals learn new ways to think about existing problems.” MODULE 1 UNIT 4 & 5 — QUIZ ++ End of Unit 4 ++ Page 72 of 73 Property of and for the exclusive use of SLU. Reproduction, storing in a retrieval system, distributing, uploading or posting online, or transmitting in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise of any part of this document, without the prior written permission of SLU, is strictly pro-
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