The 4th Management Function:
CONTROLLING
Managing for productivity and results
…must operate
in
You as a
manager…
a complex
environment
and…
Competitive
advantage
Diversity
…make
decision
about
Globalization
Information
technology
Ethical
standards
Your
happiness &
goals
the 4
manage
ment
functions
Planning
… to achieve
Organizing
productivity
Leading
and realize
results
Controlling
What is productivity?
• Productivity can be applied at any level, whether for you
as an individual, for work unit you’re managing, or for
organization you work for
• It is defined by the formula of outputs divided by inputs
for a specified period of time.
▫ Outputs are all the goods and services produced.
▫ Inputs are not only labor but also capital, materials, and
energy
productivity = outputs/ inputs
= goods+services/
labor+capital+materials+energy
Why increasing productivity is
important?
• Productivity is important to companies because
ultimately it determines whether the
organization will make profit or even survive
• These functions (below) affect one another and it turn affect in Org’s
productivity
Planning:
set goals &
decide how
to achieve
them
Organizing:
arrange
tasks,
people, and
other
resources to
accomplish
the work
Leading:
motivate
people to
work hard
to achieve
Org’s goals
Controlling:
monitor
performance
, compare it
with goals,
and take
corrective
action as
needed
For
productivity
What is Controlling?
• A process of monitoring performance,
comparing with goals, and correcting work
performance as needed to make sure
performance meets objectives
Why control is needed?
• To adapt to change & uncertainty
• To discover irregularities & errors
• To reduce costs, increase productivity, or add
value
• To detect opportunities
• To deal with complexity
• To decentralize decision making & facilitate
teamwork
Why control is needed?
• To adapt to change & uncertainty
▫
▫
▫
▫
▫
Consumer tastes change
New competitor appear
Technologies are reborn
New materials are invented
Government regulations are altered
Why control is needed?
• To discover irregularities & errors
▫
▫
▫
▫
▫
Cost overruns
Manufacturing defects
Employee turnover
Bookkeeping errors
Customer satisfaction
Why control is needed?
• To reduce costs, increase productivity, or add
value
▫
▫
▫
▫
▫
Reduce labor costs
Eliminate waste
Increase output
Increase product delivery cycle
Add value to product
Why control is needed?
• To detect opportunities
▫
▫
▫
▫
Hot-selling products
Competitive prices on materials
Changing population trends
New overseas market
Why control is needed?
• To decentralize decision making & facilitate
teamwork
▫ Allow top management to decentralize decision
making at lower levels within the organization
▫ Encourage employees to work together in teams
Why control is needed?
• To deal with complexity
▫ Help managers, in larger organization, coordinate
well with various elements:




several product lines
material-purchasing policies
customer bases
workers from different cultures
Control Process
• It is a 3 steps processes of measuring actual
performance, comparing actual performance
against a standard, and taking managerial action
to correct deviations or inadequate standards
• 3 main steps for controlling process:
1. Measuring
2. Comparing
3. Taking Managerial Action
1. Measuring
• Establish standard: “What is the desired outcome we want?”
▫ A control standard (or performance standard or standard) is
the desired performance level for a given goal, for example,
level of charitable contributions, number of students retained,
number of financial performance, number of employee hiring,
number of manufacturing defects, percentage increase in market
share, percentage reduction in costs, number of customer
complaints, and etc.
• Measure performance: “What is the actual performance?”
▫ Example: number of products sold, units produced, cost per
item sold, new products create by research scientist, scholarly
writing by a college professor, or opinions expressed in peer
report
How we measure & report actual
performance
Advantages (+)
Drawbacks (-)
Personal Observations
•Get firsthand knowledge
•Information isn’t filtered
•Intensive coverage of work
activities
•Subject to personal biases
•Time-consuming
•Obtrusive (interfering)
Statistical Reports
•Easy to visualize
•Effective for showing
relationships
•Provide limited information
•Ignore subjective factors
Oral Report
•Fast way to get information
•Allow for verbal and
nonverbal feedback
•Information is filtered
•Information can’t be
documented
Written Reports
•Comprehensive (detailed)
•Formal
•Easy to file and retrieve
•Take more time to prepare
2. Comparing Performance to Standard
• This step determines the variation between actual performance and
a standard
• How much deviation (difference) is acceptable? It depends on the
range of variation built into the standards.
• Managers prefer to see performance exceeds the standards.
• The greater the difference between the desired and actual
performance, the greater the need for action.
Acceptable Range of Variation
Measurement of
Performance
Products Sold
20
18
16
14
12
10
8
6
4
2
0
Acceptable
Upper Limit
Acceptable rage of
variation
Products Sold
Acceptable
Lower Limit
t
t+1
t+2
t+3
t+4
t+5
3. Taking managerial action
• “What changes should we make to obtain
desirable outcomes?”
• There are 3 possibilities:
▫ Make no changes
▫ Recognize and reinforce positive performance
▫ Take action to correct negative performance
3. Taking managerial action (con’t)
• When performance meets or exceeds the
standards set, managers should give rewards,
ranging from giving a verbal “Job well done” to
more substantial payoffs such as raises, bonuses,
and promotions to reinforce good behavior
3. Taking managerial action (con’t)
• When performance falls significantly short of the
standard, managers should carefully examine the
reason why and take the appropriate action.
▫ They may need to revise the standards as they were unrealistic or faced
changing conditions.
▫ Or when the employees can’t perform tasks to achieve the standards,
manager may need to take some actions according to the specific reason
of low performance.
▫ Example: When a UPS driver fails to perform according to the standard set for
him/her, a supervisor rides along and give suggestions for improvement. If
drivers are unable to improve, they are warned, then suspended, and then
dismissed.
Types of control
Before the work
is done:
Anticipates
problems
While the work
is going on:
Corrects
problems as they
occur
After the work is
done: Corrects
problems after
they occur
Future-oriented
Present-oriented
Past-oriented
Feedforward
controls
Concurrent
controls
Feedback
controls
Feedback
Types of control (con’t)
• Feedforward—control the future: before the work begins
▫ It takes place before operations begin and is intended to prevent
anticipate problems
▫ The purpose is to keep problems from happening so that manager won’t
have to fix them afterward
• Concurrent—control for the present: while the work is in progress
▫ It takes place while operations are going on and is intended to minimize
problems as they occur
▫ The purpose is to correct problems before they become too difficult or
expensive by directing, monitoring, and fine-tuning activities
• Feedback—control for the past: after the work is done
▫ It takes place after operations are finished and is intended to correct the
problems that have already occurred
▫ The drawback is the damage has already been done, however, the benefit
is feedback shows how well the planning process worked and tell
employees how well they performed, thereby contributing to employee
motivation
Levels of Control
1.
▫
Strategic control by top managers
It is monitoring performance to ensure that strategic plans are
being implemented and taking corrective action as needed
2. Tactical control by middle managers
▫
It is monitoring performance to ensure that tactical plans—
those at the divisional or departmental level—are being
implemented and taking corrective action as needed
3. Operational control by first-level managers
▫
It is monitoring performance to ensure that operational plans—
day to day goals—are being implemented and taking corrective
action as needed
Areas of control
• Physical control: buildings, equipments, and tangible
products
▫ Example: the use of computers, cars, and other machinery.
▫ There are inventory-management controls to keep
track of how many products are in stock, how many will be
needed, and what their delivery dates are from suppliers
▫ There are quality controls to make sure that products
are being built according to certain acceptable standards
• Human control
• Informational control
• Financial control
Areas of control (con’t)
• Physical control: buildings, equipments, and
tangible products
• Human control: controls used to monitor
employees
▫ Example: personality tests and drug testing for hiring,
performance tests during training, performance
evaluations to measure work productivity, and
employee surveys to assess job satisfaction and
leadership
• Informational control
• Financial control
Areas of control (con’t)
• Physical control: buildings, equipments, and
tangible products
• Human control: controls used to monitor employees
• Informational control
▫ Example: production schedules, sales forecasts,
environmental impact statement, analyzes of
competitions
• Financial control
Areas of control (con’t)
• Physical control: buildings, equipments, and tangible
products
• Human control: controls used to monitor employees
• Informational control
• Financial control
▫ Example: Are bills being paid on time? How much money is
owed by customers? Is there enough cash on hand to meet
payroll obligations? What are the debt-repayment
schedules? What is the advertising budget?
▫ Financial controls are very important because they can
affect the other 3 types of resources
Balanced Scorecard Approach
• The balanced scorecard approach to evaluate
organizational performance beyond just a financial
perspective.
• Managers should develop goals in each of 4 areas and then measure
whether the goals are being met.
Balanced Scorecard Perspectives
• The Learning & Growth Perspective:
Includes employee training, learning and corporate cultural
attitudes related to both individual and corporate self-improvement.
• The Business Process (Internal) Perspective:
Includes how well their business is running, and whether its
products and services conform to customer requirements (the
mission).
• The Customer Perspective:
Includes customers satisfaction, how to fulfill their needs in order to
prevent future decline
• The Financial Perspective:
Include all financial controls, timely and accurate funding data will
always be a priority for organizations
Importance of Control
• It helps managers know whether organizational
goals are being met and if they’re not being met,
the reason why
• Maintaining productivity depends on control as
control is to make something happen the way it
was planned to happen