Chapter 7 Controlling - To Ensure Results

1. Chapter 7Controlling - To Ensure Results • Planning Ahead • How do controls work in organizations? • Plan metrics and measurements use feedback • How do organizational systems assist in control? See model of control process • How can operations management improve control? Economic Order Quantity • How can planning and controlling be integrated? MBO Schermerhorn - Chapter 7

2. How Controls Work • Steps in the Control Process • Establish objectives and standards(metrics) • Use your past performance metrics • Use metrics from competitors • Use benchmark companies to measure against • Measure actual performance (measures) • Compare results with objectives and standards • Take corrective action as needed Schermerhorn - Chapter 7

3. How Controls Work • Step 1: Establishing Objectives and Standards • Types of Standards • output • measure results in terms of performance criteria • Output is more important, for instance on tests doing well regardless of how much time you study • input • measure effort in terms of amount of work (inputs versus • outputs is efficiency) You measure inputs to control costs. Schermerhorn - Chapter 7

4. How Controls Work • Step2: Measuring Actual Performance • goal is accurate measurement of output and/or input standards • Are you giving your customers what they want, the quality of products and the service. Schermerhorn - Chapter 7

5. How Controls Work • Step 3: Comparing Results with Objectives and Standards • Need foraction x desired performance - actual performance • Historical Comparison (e. g. Your financial ratios against your past performance) • Relative Comparison (e.g. Your ratios against others in industry • Engineering Comparison • IS0 9000 can tell you how much each piece of • work should be from time and motion studies and past history of those processes. Schermerhorn - Chapter 7

6. How Controls Work • Step 4: Taking Corrective Action • Management by exception • problem situation • opportunity situation Note we are Trying to overcome problems or exploit opportunities Schermerhorn - Chapter 7

7. How Controls Work • Characteristics of Effective Controls • strategic and results oriented • understandable (for those that use controls) • encourage self-control • timely (quick enough to avoid defective work) • exception oriented • positive in nature • fair and objective • Flexible ( for emergencies) Schermerhorn - Chapter 7

8. Types of Controls • Feedforward (Preliminary) Controls • ensure that • objectives are clear • proper directions are established • right resources are available • focus on conditions before a work activity begins (Process engineering) Many in quality management believe employees rarely do a poor job if you have engineered the job correctly Schermerhorn - Chapter 7

9. Types of Controls • Concurrent (Steering) Controls • monitor ongoing operations to make sure they are being done according to plan • focus on quality of task activities during work process • In Six Sigma quality control, we want to monitor what is going on so well that a few times in a million a product/service is not correctly accomplished. Schermerhorn - Chapter 7

10. Types of Controls • Feedback (Post action) Controls • take place after work is completed • focus on quality of end results • recently we also focus on speed • Quick Response is a strategy for some companies. Schermerhorn - Chapter 7

11. Types of Controls • Internal Versus External Control • Internal • allows motivated individuals to exercise self-discipline in fulfilling job expectations. You get the feedback before management has to correct your work. Most people rather control themselves and are not called out by management • External • personal supervision • formal administrative systems (HRM discipline) • progressively sanctions increase Schermerhorn - Chapter 7

12. Organizational Control Systems • Employee Discipline Systems • progressive discipline • achieve compliance with organizational expectations • use least extreme amount of reprimand possible • Negative control systems are real iffy Schermerhorn - Chapter 7

13. Organizational Control Systems • Management Process Controls to Measure • strategy and objectives • policies and procedures • selection and training • performance appraisal • job design and work structures • performance modeling • performance norms • organizational culture • Don’t over control Schermerhorn - Chapter 7

14. Organizational Control Systems • Information and Financial Controls ( are Comprehensive Controls) • liquidity • leverage • asset management • profitability Schermerhorn - Chapter 7

15. Operations Management and Control • Purchasing Control • leverage buying power– looking for quantity discounts • small number of suppliers– looking for control over products and services of suppliers • supplier-purchaser partnerships – we are likely to have cross-functional teams with our suppliers to control processes up and down the value chain across businesses Schermerhorn - Chapter 7

16. Operations Management and Control • Inventory Control • Economic Order Quantity (EOQ) • minimize two costs • ordering • carrying • just-in-time scheduling • JIT Inventory reduces total carrying costs, losses due to lack of products, goods getting old Schermerhorn - Chapter 7

17. Operations Management and Control • Quality Control • Involves checking processes, materials, products, and services to ensure that they meet high standards. • Statistical quality control involves: • Taking samples of work • Measuring quality in the samples • Determining the acceptability of results • Our processes engineering, training ect should be so good • we almost never have a reject. Schermerhorn - Chapter 7

18. Management by Objectives (MBO) • MBO • structured process of regular communication • supervisor and worker jointly set performance objectives • jointly review results Schermerhorn - Chapter 7

19. Management by Objectives (MBO) • Formal agreement • worker’s performance objectives for a specific time period • plans through which they will be accomplished • standards for measuring results • procedures for reviewing results Schermerhorn - Chapter 7

20. Management by Objectives (MBO) • Advantages • clearly focuses employee work efforts • clearly focuses manager’s work efforts on areas of support • relationship building between manager and employee • employee participates in decisions that affect work Schermerhorn - Chapter 7

21. Management by Objectives (MBO) • Performance objectives • improvement • personal development • maintenance Schermerhorn - Chapter 7

22. Management by Objectives (MBO) • Performance objective criteria • specific • time defined • challenging • measurable Schermerhorn - Chapter 7

23. Management by Objectives (MBO) • How to make MBO work • hire best people • work with them to set challenging performance objectives • give best possible support • hold employee accountable Schermerhorn - Chapter 7

24. Management by Objectives (MBO) • Pitfalls to avoid • tying MBO to pay • focusing too much attention on easily quantifiable objectives • requiring excessive paperwork • have managers tell workers objectives • Employee learns how to work system and sets goals low so they can easily make them. Schermerhorn - Chapter 7