Part 6 Controlling
Chapter 18 Controlling Activities
and Operations
It’s Your Career
Source: iQoncept/Shutterstock How to Be a Pro at Giving
Feedback
A key to success in
management and in your Everyone needs feedback! If you want people to
career is knowing how do their best, they need to know what they’re
to be effective at giving doing well and what they can do better. That’s
feedback. why providing feedback is such an important skill
to have. But being effective at giving feedback is
tricky! That’s why we often see managers either
(a) not wanting to give feedback or (b) giving
feedback in such a way that it doesn’t result in
anything positive.
You can feel more comfortable with and be
more effective at providing feedback if you use
the following specific suggestions:1
1. Be straightforward by focusing on specific
behaviors. Feedback should be specific rather than
general. Avoid such statements as “You have a bad attitude” or “I’m really
impressed with the good job you did.” They’re vague and although they
provide information, they don’t tell the recipient enough to correct the
“bad attitude” or on what basis you concluded that a “good job” had been
done so the person knows what behaviors to repeat or to avoid.
2. Be realistic. Focus your feedback on what can be changed. When
people get comments on things over which they have no control, it can be
frustrating.
3. Keep feedback impersonal. Feedback, particularly the negative kind,
should be descriptive rather than judgmental or evaluative. No matter how
upset you are, keep the feedback focused on job-related behaviors and
never criticize someone personally because of an inappropriate action.
Keep feedback goal oriented. Feedback should not be given primarily to
“blow off steam” or “unload” on another person. If you have to say some-
thing negative, make sure it’s directed toward the recipient’s goals. Ask
yourself whom the feedback is supposed to help. If the answer is you, bite
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Learning Objectives
18.1 Explain the nature and importance of control.
18.2 Describe the three steps in the control process.
18.3 Explain how organizational and employee performance are measured.
● Know how to be effective at giving feedback.
18.4 Describe tools used to measure organizational performance.
18.5 Discuss contemporary issues in control.
● Develop your skill at dealing with difficult people.
your tongue and hold the comment. Such feedback or if you’re otherwise emotionally upset. In such
undermines your credibility and lessens the mean- instances, “well timed” could mean “somewhat
ing and influence of future feedback. delayed.”
4. Know when to give feedback—make 5. Ensure understanding. Make sure your
it well timed. Feedback is most meaningful to feedback is concise and complete so that the
a recipient when there’s a very short interval recipient clearly and fully understands the
between his or her behavior and the receipt of communication. It may help to have the recipient
feedback about that behavior. Moreover, if you’re rephrase the content of your feedback to find
particularly concerned with changing behavior, out whether it fully captured the meaning you
delays in providing feedback on the undesirable intended.
actions lessen the likelihood that the feedback
will be effective in bringing about the desired 6. Watch your body language, tone of voice,
change. Of course, making feedback prompt and facial expressions. Your body language and
merely for the sake of promptness can backfire if tone of voice can speak louder than words.Think
you have insufficient information, if you’re angry, about what you want to communicate and make
sure your body language supports that message.
Things don’t always go as planned. That’s why controlling is so important! Controlling
is the final step in the management process. Managers must monitor whether goals
that were established as part of the planning process are being accomplished efficiently
and effectively as planned. That’s what they do when they control. Appropriate con-
trols can help managers look for specific performance gaps and areas for improve-
ment. And that’s what we’re going to look at in this chapter—the control process, the
types of controls that managers can use, and contemporary issues in control.
631
632 Part 6 Controlling WHAT is controlling and why is it important?
controlling LO18.1 • Only weeks after the South Korean multinational firm Samsung
Management function that involves introduced the Galaxy Note 7 phone with high-profile promotions
monitoring, comparing, and correcting and publicity, it received reports that some units were overheating and even
work performance bursting into flames. Samsung recalled more than two million Note 7 mobiles,
but as the recall progressed, some customers reported that replacements were
also smoking or catching fire. Samsung then decided to stop production and
discontinue the Note 7 while it continued investigating the cause of the problem.
Weeks later, when the company reported significantly lower quarterly profits, it
blamed the Note 7 for its poor financial results.2
• Hundreds of customers were found to have overpaid or underpaid for gas for years
because of a mixup when U.K. energy firms replaced old metering equipment
but didn’t adjust usage measurements to current standards. The old equipment
measured gas consumption based on the previous standard of cubic feet, whereas
the new equipment measured gas consumption based on the current standard of
cubic meters.3
• Royal Diamonds Pty Ltd, an Australian jewelry business, tried to back out of
selling a two-carat diamond ring after it was mistakenly priced online at A$1,100,
rather than the actual price of A$34,000. But after the buyer insisted on making
the purchase, a government agency ordered the jeweler to complete the transaction.
“We are going to make the ring and close the company,” the owner said after the
government ruling.4
• A developer in Singapore deposited a large check into his account at DBS Bank,
only to be informed 82 days later that the entire amount was being removed from
his account. Why? Because the bank later learned that the person who wrote the
check had insufficient funds to cover it. “The isolated incident was due to an
inadvertent human error,” explained a DBS spokesperson, adding that the bank
was tightening its processes.5
Yikes! Can you see why controlling is such an important managerial function?
What is controlling? It’s the process of monitoring, comparing, and correcting
work performance. All managers should control even if their units are performing
as planned because they can’t really know that unless they’ve evaluated what activi-
ties have been done and compared actual performance against the desired standard.6
Effective controls ensure that activities are completed in ways that lead to the attain-
ment of goals. Whether controls are effective, then, is determined by how well they
help employees and managers achieve their goals.7
In David Lee Roth’s autobiography (yes, that David Lee Roth, the former front man
for Van Halen), he tells the story of how he had a clause (article 126) in his touring con-
tract asking for a bowl of M&Ms backstage, but no brown ones.8 Now, you might think
that is just typical demanding rock star behavior, but instead it was a well-planned effort
by Roth to see whether the venue management had paid attention. With the technical
complexity of his show, he figured if they couldn’t get the M&Ms right, he needed to
demand a line check of the entire production to ensure that no technical errors would
occur during a performance. Now that’s how managers should use control!
Why is control so important? Planning can be done, an organizational structure
created to facilitate efficient achievement of goals, and employees motivated through
effective leadership. But there’s no assurance that activities are going as planned and
that the goals employees and managers are working toward are, in fact, being attained.
Control is important, therefore, because it’s the only way that managers know whether
organizational goals are being met and, if not, the reasons why. The value of the con-
trol function can be seen in three specific areas: planning, empowering employees, and
protecting the workplace.
In Chapter 8, we described goals, which provide specific direction to employees
and managers, as the foundation of planning. However, just stating goals or having
Controlling Planning Chapter 18 Controlling Activities and Operations 633
Goals Exhibit 18-1
Standards Objectives Planning-Controlling Link
Measurements Strategies
Comparison Plans Organizing
Actions Structure
Leading Human Resource
Motivation
Leadership Management
Communication
Individual and
Group Behavior
employees accept goals doesn’t guarantee that the necessary actions to accomplish
those goals have been taken. As the old saying goes, “The best-laid plans often go
awry.” The effective manager follows up to ensure that what employees are supposed
to do is, in fact, being done and goals are being achieved. Controlling provides a criti-
cal link back to planning. (See Exhibit 18-1.) If managers didn’t control, they’d have
no way of knowing whether their goals and plans were being achieved and what future
actions to take.
The second reason controlling is important is because of employee empowerment.
Many managers are reluctant to empower their employees because they fear some-
thing will go wrong for which they would be held responsible. But an effective control
system can provide information and feedback on employee performance and minimize
the chance of potential problems.
The final reason why managers control is to protect the organization and its
assets.9 Today’s environment brings heightened threats from natural disasters, finan-
cial scandals, workplace violence, global supply chain disruptions, security breaches,
and even possible terrorist attacks. Managers must protect organizational assets in the
event that any of these things should happen. Comprehensive controls and back-up
plans will help assure minimal work disruptions.
THE control process
LO18.2 Ensuring that expensive products don’t go astray during their journey
from factory to store shelf is only one reason why Milan-based Mon-
cler embeds a tiny tracking device in each piece of clothing. Thanks to the devices,
Moncler is able to track items as they leave the factory, are loaded into trucks, arrive
at stores, are put on display, and get purchased. If an item isn’t where it should be,
Moncler can take immediate action to find it. Customers also benefit, because they
can use a special mobile app to check whether a Moncler-branded item they’re buy-
ing is actually genuine.10 What a great use of the control process to improve internal
efficiency and protect the brand from illegal counterfeiting.
The control process is a three-step process of measuring actual performance,
comparing actual performance against a standard, and taking managerial action to control process
correct deviations or to address inadequate standards. (See Exhibit 18-2.) The control A three-step process of measuring
process assumes that performance standards already exist, and they do. They’re the actual performance, comparing actual
specific goals created during the planning process. performance against a standard, and
taking managerial action to correct
deviations or inadequate standards
634 Part 6 Controlling Step 1 Measuring
Exhibit 18-2 Actual Performance
The Control Process
GOALS AND Comparing Actual Step 2
Exhibit 18-3 OBJECTIVES Performance
Organizational
Sources of Information for Against Standard
Measuring Performance Divisional
Departmental
Individual
Step 3 Taking
Managerial Action
Step 1: Measuring Actual Performance
To determine what actual performance is, a manager must first get information about
it. Thus, the first step in control is measuring.
HOW WE MEASURE Four approaches used by managers to measure and report
actual performance are personal observations, statistical reports, oral reports, and
written reports. Exhibit 18-3 summarizes the advantages and drawbacks of each
approach. Most managers use a combination of these approaches.
WHAT WE MEASURE At GEICO, customer service representatives’ job perfor-
mance is measured by metrics—such as selling more expensive insurance policies to
customers. Measuring the number of new policies and added revenue makes sense to
boost company profits. However, selling more expensive policies isn’t always in the best
interests of the company. For instance, a customer called a GEICO representative to
request a tow truck after becoming stranded. The representative dispatched the tow
truck and proceeded to convince the customer that he needed a more expensive insur-
ance policy.11 Shouldn’t the GEICO representative have focused on the customer’s
well-being during a stressful time? And shouldn’t GEICO include customer care as a
relevant job performance metric? Yes, what is measured is probably more critical to the
control process than how it’s measured. Why? Because selecting the wrong criteria can
create serious problems. Besides, what is measured often determines what employees
will do.12 What control criteria might managers use?
Some control criteria can be used for any management situation. For instance, all
managers deal with people, so criteria such as employee satisfaction or turnover and
Personal Benefits Drawbacks
Observations • Subject to personal biases
• Get firsthand knowledge • Time-consuming
Statistical Reports • Information isn’t filtered • Obtrusive
• Intensive coverage of work
Oral Reports • Provide limited information
activities • Ignore subjective factors
Written Reports
• Easy to visualize • Information is filtered
• Effective for showing • Information can’t be
relationships documented
• Take more time to prepare
• Fast way to get information
• Allow for verbal and
nonverbal feedback
• Comprehensive
• Formal
• Easy to file and retrieve
Measurement of Performance Acceptable Chapter 18 Controlling Activities and Operations 635
Upper Limit Exhibit 18-4
Acceptable Range of Variation
Standard
Acceptable Acceptable
Lower Limit Range of
Variation
t t+1 t+2 t+3 t+4 t+5
Time Period (t )
absenteeism rates can be measured. Keeping costs within budget is also a fairly com-
mon control measure. Other control criteria should recognize the different activities
that managers supervise. For instance, a manager at a pizza delivery location might
use measures such as number of pizzas delivered per day, average delivery time for
phone 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.
Most work activities can be expressed in quantifiable terms. However, managers
should use subjective measures when necessary. Although such measures may have
limitations, they’re better than having no standards at all and doing no controlling.
Step 2: Comparing Actual Performance Against range of variation
the Standard The acceptable parameters of variance
between actual performance and the
The comparing step determines the variation between actual performance and the standard
standard. Although some variation in performance can be expected in all activities, it’s
critical to determine an acceptable range of variation (see Exhibit 18-4). Deviations
outside this range need attention. Let’s work through an example.
Chris Tanner is a sales manager for Green Earth Gardening Supply, a distributor
of specialty plants and seeds in the Pacific Northwest. Chris prepares a report dur-
ing the first week of each month that describes sales for the previous month, classi-
fied by product line. Exhibit 18-5 displays both the sales goals (standard) and actual
sales figures for the month of June. After looking at the numbers, should Chris be
concerned? Sales were a bit higher than originally targeted, but does that mean there
were no significant deviations? That depends on what Chris thinks is significant; that
Product Standard Actual Over (Under) Exhibit 18-5
Vegetable plants 1,075 913 (162) Green Earth Gardening Supply—
Perennial flowers 630 634 4 June Sales
Annual flowers 800 912
Herbs 160 140 112
Flowering bulbs 170 286 (20)
Flowering bushes 225 220 116
Heirloom seeds 540 672
Total 3,777 (5)
3,600 132
177
636 Part 6 Controlling
is, outside the acceptable range of variation. Even though overall performance was
generally quite favorable, some product lines need closer scrutiny. For instance, if sales
of heirloom seeds, flowering bulbs, and annual flowers continue to be over what was
expected, Chris might need to order more product from nurseries to meet customer
demand. Because sales of vegetable plants were 15 percent below goal, Chris may need
to run a special on them. As this example shows, both overvariance and undervariance
may require managerial attention, which is the third step in the control process.
Step 3: Taking Managerial Action
Managers can choose among three possible courses of action: do nothing, correct the
actual performance, or revise the standards. Because “do nothing” is self-explanatory,
let’s look at the other two.
immediate corrective action CORRECT ACTUAL PERFORMANCE Sports coaches understand the importance
Corrective action that corrects problems of correcting actual performance. During a game, they’ll often correct a player’s
at once to get performance back on actions. But if the problem is recurring or encompasses more than one player, they’ll
track devote time during practice before the next game to correcting the actions.13 That’s
what managers need to do as well.
basic corrective action
Corrective action that looks at how Depending on what the problem is, a manager could take different corrective
and why performance deviated before actions. For instance, if unsatisfactory work is the reason for performance variations,
correcting the source of deviation the manager could correct it by things such as training programs, disciplinary action,
changes in compensation practices, and so forth. One decision a manager must make
is whether to take immediate corrective action, which corrects problems at once
to get performance back on track, or to use basic corrective action, which looks
at how and why performance deviated before correcting the source of deviation. It’s
not unusual for managers to rationalize that they don’t have time to find the source
of a problem (basic corrective action) and continue to perpetually “put out fires” with
immediate corrective action. Effective managers analyze deviations and, if the benefits
justify it, take the time to pinpoint and correct the causes of variance.
REVISE THE STANDARD It’s possible that the variance was a result of an unrealistic
standard—too low or too high a goal. In that situation, the standard needs the correc-
tive action, not the performance. If performance consistently exceeds the goal, then a
manager should look at whether the goal is too easy and needs to be raised. On the other
hand, managers must be cautious about revising a standard downward. It’s natural to
blame the goal when an employee or a team falls short. For instance, students who get
a low score on a test often attack the grade cut-off standards as too high. Rather than
accept the fact that their performance was inadequate, they will argue that the standards
are unreasonable. Likewise, salespeople who don’t meet their monthly quota often want
to blame what they think is an unrealistic quota. The point is that when performance
isn’t up to par, don’t immediately blame the goal or standard. If you believe the standard
is realistic, fair, and achievable, tell employees that you expect future work to improve,
and then take the necessary corrective action to help make that happen.
Managerial Decisions in Controlling
Exhibit 18-6 summarizes the decisions a manager makes in controlling. The standards
are goals developed during the planning process. These goals provide the basis for
the control process, which involves measuring actual performance and comparing it
against the standard. Depending on the results, a manager’s decision is to do nothing,
correct the performance, or revise the standard.
Watch It 1! If your professor has assigned this, go to www.mymanagementlab.com to watch a video
titled: CH2MHill: Foundations of Control and to respond to questions.
Chapter 18 Controlling Activities and Operations 637
Exhibit 18-6 Is Yes
standard
Managerial Decisions in the Control Process Do nothing
being Do nothing
Compare attained?
actual Identify
cause of
performance variation
with standard Correct
performance
No Yes
Is
Measure
actual variance
acceptable?
performance
Objectives Standard No
Is
Yes
standard
acceptable?
No
Revise
standard
CONTROLLING for organizational and
employee performance
LO18.3 Cost efficiency. The length of time customers are kept on hold. Cus-
tomer satisfaction with service provided. These are just a few of the
important performance indicators that executives in the intensely competitive call-
center service industry measure. To make good decisions, managers in this indus-
try want and need this type of information so they can manage organizational and
employee performance. Managers in all types of businesses are responsible for manag-
ing organizational and employee performance.
What Is Organizational Performance? performance
The end result of an activity
When you hear the word performance, what do you think of ? A summer evening con-
cert by a local community orchestra? An Olympic athlete striving for the finish line in a organizational performance
close race? A Southwest Airlines ramp agent in Ft. Myers, Florida, loading passengers The accumulated results of all the
as efficiently as possible in order to meet the company’s 20-minute gate turnaround organization’s work activities
goal? Performance is all of these things. It’s the end result of an activity. And whether
that activity is hours of intense practice before a concert or race or whether it’s car-
rying out job responsibilities as efficiently and effectively as possible, performance is
what results from that activity.
Managers are concerned with organizational performance—the accumulated
results of all the organization’s work activities. It’s a multifaceted concept, but man-
agers need to understand the factors that contribute to organizational performance.
After all, it’s unlikely that they want (or intend) to manage their way to mediocre per-
formance. They want their organizations, work units, or work groups to achieve high
levels of performance.
638 Part 6 Controlling
Peter Hong, merchandise manager for Adidas, Measures of Organizational Performance
display’s the firm’s Battle Pack soccer boots
and Brazuca soccer ball. According to a global How does a professional sports team measure organization-
survey of 200,000 business students, Adidas al performance? The team manager of Manchester United
ranks in the top 50 list of the world’s most measures performance differently than the corporate owners.
attractive employers. This ranking of Adidas Manager Jose Mourinho evaluates the football team and its
as an ideal employer is one way that the firm’s players on the basis of goals scored, wins and losses, league
managers can measure their organization’s standings, and other sports-related measures. Over the years,
performance. Manchester United has earned trophies at league champion-
Source: Anne Peterson/AP Images ships, European championships, and FIFA Club games. But
now that the team has gone public, corporate management
productivity must think about measures of business success. Executive
The amount of goods or services vice-chairman Ed Woodward evaluates Manchester United
produced divided by the inputs needed on the basis of stadium attendance and revenue, television
to generate that output broadcasting deals, commercial sponsorship deals, sales of
branded merchandise, size of team payroll, and size of the
team’s global audience for team games.14 Both the team man-
ager and corporate executives must know which measures will give them the informa-
tion they need to understand organizational performance.
ORGANIZATIONAL PRODUCTIVITY Productivity is the amount of goods or
services produced divided by the inputs needed to generate that output. Organiza-
tions and individual work units want to be productive. They want to produce the
most goods and services using the least amount of inputs. Output is measured by the
sales revenue an organization receives when goods are sold (selling price × number
sold). Input is measured by the costs of acquiring and transforming resources into
outputs.
It’s management’s job to increase this ratio. Of course, the easiest way to do this is
to raise prices of the outputs. But in today’s competitive environment, that may not be
an option. For instance, it is difficult for Walmart to meet its objective of “Everyday
Low Prices” because it has increased pay for 1.2 million workers and is facing intense
competition from retailers such as Costco.15 The only other option, then, is to decrease
the inputs side. How? By being more efficient in performing work and thus decreasing
the organization’s expenses. Walmart has been pressuring product suppliers to lower
their prices in an effort to reduce expenses and maintain competitive store pricing.16
organizational effectiveness ORGANIZATIONAL EFFECTIVENESS Organizational effectiveness is a mea-
A measure of how appropriate sure of how appropriate organizational goals are and how well those goals are met.
organizational goals are and how well That’s the bottom line for managers, and it’s what guides managerial decisions in
those goals are being met designing strategies and work activities and in coordinating the work of employees.
INDUSTRY AND COMPANY RANKINGS Industry and company rankings are a
popular way for managers to measure their organization’s performance. And there’s
not a shortage of these rankings, as Exhibit 18-7 shows. Rankings are determined by
specific performance measures, which are different for each list. For instance, Fortune’s
Best Companies to Work For are chosen by answers given by thousands of randomly
selected employees on a questionnaire called “The Great Place to Work® Trust Index®”
and on materials filled out by thousands of company managers, including a corporate
culture audit created by the Great Place to Work Institute. These rankings give man-
agers (and others) an indicator of how well their company performs in comparison to
others. Wegmans Food Markets is an example of a great place to work. It has been on
the Fortune list every year since 1998. One employee shared the following sentiment:
“Management cares about its employees and always asks how we are doing when we
come into work or are just shopping.”17 It is not surprising that 97 percent of Weg-
mans’ employees said that they have great bosses and great rewards, and 98 percent
indicated that the work atmosphere is great.
Chapter 18 Controlling Activities and Operations 639
Fortune (www.fortune.com) IndustryWeek (www.industryweek.com) Exhibit 18-7
Fortune 500 IndustryWeek 1000 Popular Industry and Company
Global 500 IndustryWeek U.S. 500 Rankings
World’s Most Admired Companies 50 Best Manufacturers
100 Best Companies to Work For IndustryWeek Best Plants
100 Fastest-Growing Companies
Forbes (www.forbes.com) Customer Satisfaction Indexes
World’s Biggest Public Companies American Customer Satisfaction Index—
University of Michigan Business School
Customer Satisfaction Measurement
Association
Controlling for Employee Performance disciplinary actions
Actions taken by a manager to enforce
Since managers manage employees, they also have to be concerned about controlling for the organization’s work standards and
employee performance; that is, making sure employees’ work efforts are of the quantity regulations
and quality needed to accomplish organizational goals. How do managers do that? By
following the control process: measure actual performance; compare that performance FYI
to standard (or expectations); and take action, if needed. It’s particularly important for
managers to deliver effective performance feedback and to be prepared, if needed, to use • 73 percent of managers say they
disciplinary actions—actions taken by a manager to enforce the organization’s work deliver difficult feedback well
standards and regulations.18 Let’s look first at effective performance feedback. although they struggle with it
sometimes and it doesn’t always
DELIVERING EFFECTIVE PERFORMANCE FEEDBACK Throughout the semes- go perfectly.19
ter, do you keep track of all your scores on homework, exams, and papers? If you do,
why do you like to know that information? For most of us, it’s because we like to know
where we stand in terms of where we’d like to be and what we’d like to accomplish in
our work. We like to know how we’re doing. Managers need to provide their employ-
ees 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. And if done that way, positive outcomes can result. “In a productive per-
formance discussion, organizations have the opportunity to reinforce company values,
strengthen workplace culture, and achieve strategic goals.”20 Sometimes, however, per-
formance feedback doesn’t work. An employee’s performance may continue to be an
issue. Under those circumstances, disciplinary actions may be necessary to address the
problems.
Providing Good Feedback—If your instructor is using Pearson MyLab Management, It’s Your Career
log onto mymanagementlab.com and test your providing good feedback knowledge.
Be sure to refer back to the chapter opener!
USING DISCIPLINARY ACTIONS Fortunately, most employees do their jobs well progressive disciplinary action
and never need formal correction. Yet, sometimes it is needed. Exhibit 18-8 lists An approach to ensure that the minimum
some common types of work discipline problems and examples of each. In those penalty appropriate to the offense is
circumstances, it’s important for a manager to know what the organization’s policies imposed
are on discipline. Is there a process for dealing with unsatisfactory job performance?
Do warnings need to be given when performance is inadequate? What happens
if, after the warnings, performance or the troublesome behavior doesn’t improve?
Progressive disciplinary action policies help managers to answer these questions.
Progressive disciplinary action is intended to ensure that the minimum penalty
appropriate to the offense is imposed.21 The typical progression begins with a verbal
640 Part 6 Controlling PROBLEM TYPE EXAMPLES OF EACH
Attendance
Exhibit 18-8 On-the-Job Absenteeism, tardiness, abuse of sick leave
Behaviors
Types of Discipline Problems and Dishonesty Insubordination, failure to use safety devices,
Examples of Each alcohol or drug abuse
Outside Activities Theft, lying to supervisors, falsifying information
on employment application or on other
organizational forms
Criminal activities, unauthorized strike activities,
working for a competing organization (if no-compete
clause is part of employment)
warning and proceeds through a written warning, suspension, and, only in the most
serious cases, dismissal. Still, disciplinary actions are never easy or pleasant; how-
ever, discipline can be used to both control and correct employee performance, and
managers must know how to discipline. Don Crosby, vice president of international
and corporate HR at McDonald’s, said, “It’s the hardest thing a manager has to do.
It’s also rocky terrain for many executives, who simply do not know when or how
to hold the stick, swinging it haphazardly and inconsistently, striking too hard, too
soft, or not at all.”22
REALlegte’st
The Scenario:
Malik Green knows today is going to Source: Kevin Krossber
be challenging. As the manager of the
pool at the local community center,
safety is his top priority. Today he must
give a disciplinary action to a part-time
lifeguard who failed to follow safety
procedures during a shift change at the
pool. While he knows he needs to give Kevin Krossber
the employee a warning, he is nervous Director of Operations
about the disciplinary meeting. He wants to make sure he provides a
clear warning and also encourages the lifeguard to use proper safety
procedures moving forward.
What advice can you give Malik about giving the disciplinary action?
Prepare yourself for the conversation by having your talking points
clearly defined to explain the logic behind your coaching of the policy.
It is important to explain the reasoning behind the safety procedures
being enforced. By doing so the manager earns credibility that the
culture he or she desires to create is built from commitment rather
than compliance. Give the employee an opportunity to ask questions,
define your expectations and be sure the policy being enforced is
clearly understood.
Chapter 18 Controlling Activities and Operations 641
WORKPLACE CONFIDENTIAL Responding to an Unfair Performance Review
A recent survey of 1000 full-time employees, all born after The goal should be to eliminate surprises in your annual re-
1980, found a great deal of frustration with their performance view. You want to know if you’re underperforming as soon
reviews. Sixty-two percent, for instance, felt “blindsided” by as your boss is concerned so you can correct the problem
their reviews; 74 percent frequently felt unsure as to what quickly. The idea is to discourage your boss from accumulat-
their managers thought of their performance; 22 percent ing performance problems, then unloading them in the an-
called in sick because they were anxious about their reviews; nual review.
and 28 percent reacted to their reviews by looking for an-
other job. Our conclusion: It’s very possible that sometime Do you want to push back? What if you take issue with
in your career you’ll experience frustration as a result of your your boss’s assessment? If you’re convinced your boss’s
performance review. evaluation if unfair, you have a serious decision to make. Do
you let the evaluation go or do you challenge it? Both have
It might surprise you to learn that most bosses actually risks. Ignoring a negative review may begin your boss’s effort
dislike performance reviews. Why? First, managers are often to terminate your employment. On the other hand, challeng-
uncomfortable discussing performance weaknesses directly ing your boss’s assessment could escalate a conflict that has
with employees because they fear a confrontation when long-term career implications.
presenting negative feedback. Second, many employees
become defensive when their weaknesses are pointed out. If you truly feel your review is unfair, there is always a
It’s not uncommon for employees to challenge the evaluation possibility to change the decision in your favor. However, be-
by criticizing the manager or redirecting blame to someone fore you protest your boss’s decision, consider your organiza-
else. Finally, employees tend to have an inflated assessment tion’s culture and talk to your colleagues to assess how those
of their own performance. Statistically speaking, half of all who have challenged a bad performance review in the past
employees must be below-average performers. But the evi- were treated.
dence indicates that the average employee’s estimate of his
or her performance level generally falls around the 75th per- Challenging your performance appraisal. If you decide to
centile. So even when managers are providing good news, challenge your performance appraisal, here are a few sug-
employees are likely to perceive it as not good enough! gestions: (1) Request a copy of your appraisal so you can bet-
ter process the information. (2) Determine what exact as-
The above offers some clues on how best to handle a pects of the appraisal that you disagree with. (3) Schedule a
performance evaluation that you feel isn’t fair: meeting with your boss to provide your evidence in support
of your position. (4) If the meeting with your boss fails to
Listen closely to what your boss is saying. The place achieve the ends you desire, present your case to your Hu-
to begin is to listen carefully to the specifics in your review. man Resources department—but let your boss know ahead
What exactly is your boss saying? Don’t interrupt your boss of time of your intention.
as she goes over your review. You specifically want to have
clarity on the negative comments. Let your boss complete Writing a rebuttal. If you decide to challenge your review,
her review and make sure you understand her concerns be- you will want to write up a formal rebuttal. It should be short
fore you initiate a response. and to the point. Don’t attack your boss or the organization.
Stay positive and respectful, and control your anger or other
Be prepared to accept that there might be truth in some negative emotions. Finally, address only the specific issues
or all of the negative comments. As we noted above, we within the review that you feel were unfair.
have a tendency to overestimate our own performance level.
Your boss’s assessment may be more accurate than your The worst-case scenario. If you see that your perfor-
self-evaluation. mance review is really just a precursor to being let go, don’t
despair. This may be an opportunity in disguise. It might just
Stay calm and cool, and avoid being defensive. Control be the impetus you need to find your true calling. As we
your emotions and your tongue. Don’t get angry and say noted in Chapter 10, there is no shortage of people who
something you’ll regret. Don’t react by diverting blame, giv- turned being “fired” into a success story. Thomas Edison
ing excuses, or getting into a debate with your boss. As you was dismissed from his night-shift telegraph operator job at
seek clarity, pay attention to your tone so it doesn’t appear Western Union. Robert Redford was sacked from a manual
that you’re challenging the truthfulness of her feedback. At labor job at Standard Oil. Madonna was let go after only one
this point, just treat her negative comments as constructive day as a counter clerk at Dunkin’ Donuts. And early in his
criticism. career, billionaire Mark Cuban was fired from his job as a
computer-store salesman.
Ask what you can do to improve. Asking for suggestions
on what you might do to improve can work for you in two Sources: Based on S.P. Robbins, The Truth About Managing People, 3rd
ways. First, it shows your acceptance of the criticism. Sec- ed. (Upper Saddle River, NJ: Pearson Education, 2013), pp. 199–201; “How
ond, it indicates your willingness to change. to Handle an Unfair or Negative Performance Review at Work,” hubpages.
com, November 5, 2014; “Survey: Performance Reviews Drive One in Four
Request more feedback between reviews. Once you un- Millennials to Search for a New Job or Call in Sick,” newstex finance & ac-
derstand the content of your performance review and what counting blogs, October 28, 2015; and “How to Write a Rebuttal to Unfair
you need to improve, you should talk to your boss about the Performance Review,” arkadylaw.com, November 16, 2015.
possibility of getting more feedback between formal reviews.
642 Part 6 Controlling TOOLS for measuring organizational performance
feedforward control LO18.4 • Missoni-loving fashionistas scrambling to buy the high-end Italian
Control that takes place before a work designer’s clothes at Target crashed the company’s website. Target
activity is done executives admitted being unprepared for online shoppers’ demand for the items.
• When someone typed the word “bailout” into a Domino’s promo code window
and found it was good for a free medium pizza, the news spread like wildfire across
the Web. Domino’s ended up having to give away thousands of free pizzas.
• A simple mistyped Web address by a Google employee caused all search results
worldwide during a 55-minute period to warn, “This site may be harmful to your
computer,” even though it wasn’t.23
What kinds of tools could managers at these companies have used for monitoring and
measuring performance?
All managers need appropriate tools for monitoring and measuring organiza-
tional performance. Before describing some specific types of control tools, let’s look at
the concept of feedforward, concurrent, and feedback control.
Feedforward/Concurrent/Feedback Controls
Managers can implement controls before an activity begins, during the time the activity is
going on, and after the activity has been completed. The first type is called feedforward
control; the second, concurrent control; and the last, feedback control (see Exhibit 18-9).
FEEDFORWARD CONTROL The most desirable type of control—feedforward
control—prevents problems because it takes place before the actual activity.24 For
instance, hospital emergency rooms are looking to prevent mistakes such as an 18-year-
old with fever and chills being sent home from the emergency room with Tylenol and
later dying of sepsis, a blood infection; or a 42-year-old woman with chest pains being
discharged, only to suffer a heart attack two hours later. Medical experts know that a
serious ailment can look a lot like something else in the hubbub and chaos of the ER.
So that’s why many are setting protocols and oversights in place to prevent these kinds
of mistakes.25 When McDonald’s opened its first restaurant in Moscow, it sent com-
pany quality control experts to help Russian farmers learn techniques for growing high-
quality potatoes and to help bakers learn processes for baking high-quality breads. Why?
McDonald’s demands consistent product quality no matter the geographical location.
They want a cheeseburger in Moscow to taste like one in Omaha. Still another example
of feedforward control is the scheduled preventive maintenance programs on nuclear
power plants done by energy companies. These programs are designed to detect and
hopefully to prevent malfunctions that might lead to an accident.
The key to feedforward controls is taking managerial action before a problem
occurs. That way, 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. However, these controls require timely and accurate information that isn’t always
easy to get. Thus, managers frequently end up using the other two types of control.
Exhibit 18-9 Input Processes Output
Types of Control Feedforward Concurrent Feedback
Control Control Control
Corrects Corrects
Anticipates
problems problems as problems after
they happen they occur
Chapter 18 Controlling Activities and Operations 643
CONCURRENT CONTROL Concurrent control, as its name implies, takes place concurrent control
while a work activity is in progress. For instance, Nicholas Fox is director of busi- Control that takes place while a work
ness product management at Google. He and his team keep a watchful eye on one of activity is in progress
Google’s most profitable businesses—online ads. They watch “the number of searches
and clicks, the rate at which users click on ads, the revenue this generates—everything management by walking around
is tracked hour by hour, compared with the data from a week earlier and charted.”26 A term used to describe when a
If they see something that’s not working particularly well, they fine-tune it. There manager is out in the work area
are many examples of concurrent control taking place in manufacturing settings. For interacting directly with employees
example, upholsterers for Rolls-Royce vehicles remove blemishes on leather hides
before fitting them to the seat frames. The ongoing monitoring of material quality and
proper assembly at every stage virtually eliminates producing a substandard product.
The best-known form of concurrent control is direct supervision. Another term
for it is management by walking around, which is when a manager is in the work
area interacting directly with employees. For example, Michael Bowman, former CEO
of Valley Forge Casino Resort, worked alongside housekeepers to clean guest rooms.27
He observed that it was taking too long to travel from one room to the next. By observ-
ing and listening to the housekeepers, Bowman learned that lengthy wait times for
elevators were slowing them down. One housekeeper offered a solution: “Just block
this elevator off from 7:00 in the morning until 9:00, so we just have it for the top
floors.”28 Implementing this suggestion led to more rooms being cleaned on a timely
basis. Bowman could have easily assumed that the housekeepers were just slacking off
had he not been on the scene. Even GE’s CEO, Jeff Immelt, spends a large portion of
his workweek on the road talking to employees and visiting the company’s numerous
locations.29 All managers can benefit from using concurrent control, but especially
first-line managers, because they can correct problems before they become too costly.
FEEDBACK CONTROL The most popular type of control relies on feedback. In feedback control
feedback control, the control takes place after the activity is done. For instance, the Control that takes place after a work
Denver Mint discovered the flawed Wisconsin quarters using feedback control. The activity is done
damage had already occurred, even though the organization corrected the problem
once it was discovered. And that’s the major problem with this type of control. By the
time a manager has the information, the problems have already occurred, leading to
waste or damage. However, in many work areas (for example, financial), feedback is
the only viable type of control.
Feedback controls have two advantages.30 First, feedback gives managers mean-
ingful information on how effective their planning efforts were. Feedback that shows
little variance between standard and actual performance indicates that the planning
was generally on target. If the deviation is significant, a manager can use that informa-
tion to formulate new plans. Second, feedback can enhance motivation. People want
to know how well they’re doing and feedback provides that information. Now, let’s
look at some specific control tools that managers can use.
Financial Controls
Every business wants to earn a profit. To achieve this goal, managers need financial
controls. For instance, they might analyze quarterly income statements for excessive
expenses. They might also calculate financial ratios to ensure that sufficient cash is
available to pay ongoing expenses, that debt levels haven’t become too high, or that
assets are used productively.
Managers might use traditional financial measures such as ratio analysis and
budget analysis. Exhibit 18-10 summarizes some of the most popular financial ratios.
Liquidity ratios measure an organization’s ability to meet its current debt obligations.
Leverage ratios examine the organization’s use of debt to finance its assets and whether
it’s able to meet the interest payments on the debt. Activity ratios assess how efficiently
a company uses its assets. Finally, profitability ratios measure how efficiently and effec-
tively the company uses its assets to generate profits. These ratios are calculated using
selected information from the organization’s two primary financial statements (the
644 Part 6 Controlling
Exhibit 18-10 Objective Ratio Calculation Meaning
Liquidity Current ratio
Popular Financial Ratios Current assets Tests the organization’s
Leverage Acid test Current liabilities ability to meet short-term
Activity obligations
Debt to assets Current assets less inventories
Profitability Current liabilities Tests liquidity more
Times interest accurately when
earned Total debt inventories turn over
Inventory Total assets slowly or are difficult
turnover to sell
Total asset
turnover The higher the ratio, the
more leveraged the
Profit margin organization
on sales
Return on Profits before interest and taxes Measures how many times
investment
Total interest charges the organization is able to
meet its interest expenses
Sales The higher the ratio, the
Inventory more efficiently inventory
assets are used
Sales The fewer assets used to
Total assets achieve a given level of
sales, the more efficiently
management uses the
organization’s total assets
Net profit after taxes Identifies the profits that
Total sales are generated
Net profit after taxes Measures the efficiency of
Total assets assets to generate profits
balance sheet and the income statement), which are then expressed as a percentage
or ratio. Because you’ve probably studied these ratios in other accounting or finance
courses, or will in the near future, we aren’t going to elaborate on how they’re calcu-
lated. We mention them here to remind you that managers use such ratios as internal
control tools.
REALlegte’st
The Scenario:
Lily Wong manages a product testing lab. Source: Alfonso Marrese
Although her team works normal hours (8 to 5),
there are times when the product testers need
to work after hours or even on the weekend.
She doesn’t have a supervisor there when
these associates are working but is wondering
whether she needs to.
What would you suggest to Lily? Alfonso Marrese
Retail Executive
Lily needs to start training a few of her key
associates to become lead associates. When the supervisor or manager
is not around, the lead associate can oversee the project. By doing this,
she can have a group of associates work on the weekend with the lead
to get more of the projects done. You always need a supervisor around.
While the associates are working, the lead will keep them focused and
will keep the project going.
Chapter 18 Controlling Activities and Operations 645
Budgets are planning and control tools. (See the Planning and Control Techniques management information system
module for more information on budgeting.) When a budget is formulated, it’s a planning (MIS)
tool because it indicates which work activities are important and what and how much A system used to provide management
resources should be allocated to those activities. But budgets are also used for control- with needed information on a regular
ling, because they provide managers with quantitative standards against which to mea- basis
sure and compare resource consumption. If deviations are significant enough to require
action, the manager examines what has happened and tries to uncover why. With this Software engineers at General Electric
information, necessary action can be taken. For example, if you use a personal budget for Company’s Diagnostic and Monitoring iCenter
monitoring and controlling your monthly expenses, you might find that one month your in Kuala Lumpur, Malaysia, remotely monitor
miscellaneous expenses were higher than you had budgeted for. At that point, you might the performance of customers’ oil and gas
cut back spending in another area or work extra hours to get more income. equipment to acquire and analyze data such
as temperature and pressure. The purpose
Information Controls of monitoring the equipment is to provide
customers with valuable information that helps
During the most critical—and worst possible—time period for retailers, Target Cor- them operate it at the highest levels of safety,
poration found that cybercriminals caused an enormous data breach in late 2013. Six efficiency, and reliability.
months after the attack, Target executives were still trying to fix the mess. Cyberat- Source: Goh Seng Chong/Bloomberg/Getty
tackers from China targeted Google and 34 other companies in an attempt to steal in- Images
formation. A large criminal theft of credit card data—account information belonging
to millions of people—happened to Heartland Payment Systems, a payments proces-
sor. American Express found its Web site under attack, one of several powerful at-
tacks on American financial institutions. An ex-worker at Goldman Sachs stole “black
box” computer programs that Goldman uses to make lucrative, rapid-fire trades in
the financial markets. Even the U.S. government is getting serious about controlling
information. For instance, former Secretary of State Hillary Clinton was under inves-
tigation for using a personal e-mail server to send official communications. Financial
market sensitive data (think Consumer Price Index, housing starts, inflation numbers,
gas prices, corn yields, etc.) will be guarded as a precaution against anyone who might
want to take advantage of an accidental or covert leak to get an insider’s edge in the
financial markets.31 Talk about the need for information controls! Managers deal with
information controls in two ways: (1) as a tool to help them control other organiza-
tional activities and (2) as an organizational area they need to control.
HOW IS INFORMATION USED IN CONTROLLING?
Managers need the right information at the right time and
in the right amount to monitor and measure organizational
activities and performance.
In measuring actual performance, managers need
information about what is happening within their area of
responsibility and about the standards in order to be able to
compare actual performance with the standards. They also
rely on information to help them determine if deviations are
acceptable. Finally, they rely on information to help them
develop appropriate courses of action. Information is impor-
tant! Most of the information tools managers use come from
the organization’s management information system.
A management information system (MIS) is a sys-
tem used to provide managers with needed information on a
regular basis. In theory, this system can be manual or com-
puter based, although most organizations have moved to computer-supported appli-
cations. The term system in MIS implies order, arrangement, and purpose. Further,
an MIS focuses specifically on providing managers with information (processed and
analyzed data), not merely data (raw, unanalyzed facts). A library provides a good
analogy. Although it can contain millions of volumes, a library doesn’t do you any
good if you can’t find what you want quickly. That’s why librarians spend a great deal
of time cataloging a library’s collections and ensuring that materials are returned to
their proper locations. Organizations today are like well-stocked libraries. The issue
is not a lack of data; instead, the issue is whether an organization has the ability to
646 Part 6 Controlling process that data so that the right information is available to the right person when
he or she needs it. An MIS collects data and turns them into relevant information for
balanced scorecard managers to use.
A performance measurement tool that
looks at more than just the financial CONTROLLING INFORMATION Using pictures of a cute kitty attached to e-mails
perspective or as a link, companies are using “ethical hackers” to demonstrate how easily employ-
ees can put company data at risk by clicking on them.32 Although these cute kitties are
simulated attacks, it seems that every week, there’s another news story about actual
information security breaches. A survey shows that 60 percent of companies had a
network security breach in the past year.33 Because information is critically impor-
tant to everything an organization does, managers must have comprehensive and
secure controls in place to protect that information. Such controls can range from
data encryption to system firewalls to data back-ups, and other techniques as well.34
Problems can lurk in places that an organization might not have considered, like blogs,
search engines, and Twitter accounts. Sensitive, defamatory, confidential, or embar-
rassing organizational information has found its way into search engine results. For
instance, after Sony Pictures Entertainment’s e-mail servers were hacked, unflatter-
ing comments about numerous actors, directors, and producers showed up in Web
searches.35 Equipment such as tablet and laptop computers, smartphones, and even
RFID tags are vulnerable to viruses and hacking. Needless to say, information con-
trols should be monitored regularly to ensure that all possible precautions are in place
to protect important information.
Balanced Scorecard
The balanced scorecard approach is a way to evaluate organizational performance
from more than just the financial perspective.36 A balanced scorecard typically looks
at four areas that contribute to a company’s performance: financial, customer, internal
processes, and people/innovation/growth assets. According to this approach, manag-
ers should develop goals in each of the four areas and then measure whether the goals
are being met.
Although a balanced scorecard makes sense, managers will tend to focus on areas
that drive their organization’s success and use scorecards that reflect those strategies.37
For example, if strategies are customer-centered, then the customer area is likely to
get more attention than the other three areas. Yet, you can’t focus on measuring only
one performance area because others are affected as well. For instance, the United
Kingdom treasury recommends that financial firms link executive teams to gender
balance.38 This recommendation is based on several studies that showed more diverse
leadership leads to better financial returns. At IBM Global Services in Houston, man-
agers developed a scorecard around an overriding strategy of customer satisfaction.
However, the other areas (financial, internal processes, and people/innovation/growth)
support that central strategy. The division manager described it as follows, “The inter-
nal processes part of our business is directly related to responding to our customers
in a timely manner, and the learning and innovation aspect is critical for us since what
we’re selling our customers above all is our expertise. Of course, how successful we are
with those things will affect our financial component.”39
Benchmarking of Best Practices
The Cleveland Clinic is world renowned for delivering high-quality health care, with
a top-ranked heart program that attracts patients from around the world. But what
you may not realize is that it’s also a model of cost-effective health care.40 It could
serve as a model for other health care organizations looking to be more effective and
efficient.
Managers in such diverse industries as health care, education, and financial
services are discovering what manufacturers have long recognized—the benefits
Chapter 18 Controlling Activities and Operations 647
of benchmarking, which is the search for
LEADER making athe best practices among competitors or non-
DIFFERENCEcompetitors that lead to their superior perfor-
mance. Benchmarking should identify various
benchmarks, the standards of excellence
against which to measure and compare. For Walt Disney Company is one of the world’s largest
instance, chef Claude Bosi sees a Michelin
Guide star rating as a key performance Source: Stewart Cook/Rex Features/AP Images entertainment and media companies and has had
benchmark for the high quality of his French a long record of success.46 When Bob Iger was
restaurant in London.41 Australian dairy farm- named CEO in 2005, analysts believed that the Dis-
ers benchmark performance on sustainability ney brand had become outdated. The perception
targets using the nationwide industry bench- was that there were too many Disney products in
the marketplace lacking the quality people ex-
mark of reducing greenhouse gas emissions pected. Iger decided to address that perception with what he called
by 30 percent by 2020.42 Following its motto, the Disney Difference. What is the Disney Difference? It’s taking
“the best or nothing,” the German automaker
Mercedes-Benz benchmarks improvements the content created company-wide and spreading it out over many
against the best of what competing luxury different markets and in many different forms. The company’s new,
carmakers offer.43 Many airlines benchmark
against the service quality of Hong Kong’s obsessive focus on product quality led it to a number-seven ranking
Cathay Pacific Airlines, which has been named in Fortune’s Most Admired list for 2014. What can you learn from this
leader making a difference?
the world’s best carrier four times.44 Irish
supermarkets, pharmacies, and other retail
businesses strive to meet the benchmarks for benchmarking
service and customer engagement achieved by winners of the annual Retail Excellence The search for the best practices among
competitors or noncompetitors that lead
Awards.45 At its most basic, benchmarking means learning from others. As a tool for to their superior performance
monitoring and measuring organizational performance, benchmarking can be used to
identify specific performance gaps and potential areas of improvement. But best prac-
tices aren’t just found externally.
benchmark
Sometimes those best practices can be found inside the organization and just need The standard of excellence against
to be shared. One fertile area for finding good performance improvement ideas is an which to measure and compare
employee suggestion box, which was discussed in Chapter 14. Research shows that best
practices frequently already exist within an organization but usually go unidentified
and unnoticed.47 In today’s environment, organizations seeking high performance lev-
els can’t afford to ignore such potentially valuable information. For example, Ameren
Corporation’s power plant managers used internal benchmarking to help identify per-
formance gaps and opportunities.48 Beer producer SABMiller initiated an ambitious
cost-cutting plan that is based on centralizing manufacturing, finance, and strategy.
These efforts are expected to double annual cost savings to at least $1.05 billion by
2020.49 Exhibit 18-11 provides some suggestions for internal benchmarking.
If your professor has assigned this, go to www.mymanagementlab.com to complete the Try It!
Simulation: Controlling and get a better understanding of the challenges of monitor-
ing and controlling in organizations.
CONTEMPORARY issues in control
LO18.5 The employees of Integrated Information Systems, Inc. didn’t think twice
about exchanging digital music over a dedicated office server they had set
up. Like office betting on college and pro sports, it was technically illegal, but harmless,
or so they thought. But after the company had to pay a $1 million settlement to the
Recording Industry Association of America, managers wished they had controlled the
situation better.50 Control is an important managerial function. We’re going to look at
six control issues that managers face today: cross-cultural differences, workplace privacy,
employee theft, workplace violence, customer interactions, and corporate governance.
648 Part 6 Controlling 1. Connect best practices to strategies and goals.The organization’s strategies
and goals should dictate what types of best practices might be most valuable
Exhibit 18-11 to others in the organization.
Suggestions for Internal 2. Identify best practices throughout the organization. Organizations must have
Benchmarking a way to find out what practices have been successful in different work areas
and units.
3. Develop best practices reward and recognition systems. Individuals must be
given an incentive to share their knowledge.The reward system should be
built into the organization’s culture.
4. Communicate best practices throughout the organization. Once best practices
have been identified, that information needs to be shared with others in the
organization.
5. Create a best practices knowledge-sharing system.There needs to be a formal
mechanism for organizational members to continue sharing their ideas and
best practices.
6. Nurture best practices on an ongoing basis. Create an organizational culture
that reinforces a “we can learn from everyone” attitude and emphasizes
sharing information.
Source: Based on “Extracting Diamonds in the Rough,” byTad Leahy, from Business Finance, August 2000.
Adjusting Controls for Cross-Cultural Differences and
Global Turmoil
The concepts of control that we’ve been discussing are appropriate for an organization
whose work units are not geographically separated or culturally distinct. But control
techniques can be quite different for different countries. The differences are primar-
ily in the measurement and corrective action steps of the control process. 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. Because distance creates a tendency to formalize controls, such
organizations often rely on extensive formal reports for control, most of which are
communicated electronically.
Technology’s impact on control is also seen when comparing technologically
advanced nations with less technologically advanced countries. Managers in coun-
tries 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, however, 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 investigat-
ing 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. For instance, a company that manufactures apparel in
Cambodia might produce the same products at a facility in Scotland. However, the
Cambodian facility might be more labor intensive than its Scottish counterpart to
take advantage of lower labor costs in Cambodia. This difference makes it hard to
compare, for instance, labor costs per unit.
Finally, global organizations need to have controls in place for protecting their
workers and other assets during times of global turmoil and disasters. For instance,
when the earthquake/tsunami hit Japan in March 2011, companies scrambled to acti-
vate their disaster management plans. In the volatile Middle East, many companies
have had to evacuate workers during times of crisis. The best time to be prepared
Chapter 18 Controlling Activities and Operations 649
is before an emergency occurs, and many organizations are doing just that, so that
if a crisis occurs, employees and other organizational assets are protected as best as
possible.
Workplace Privacy
If you work, do you think you have a right to privacy at your job? What can your
employer find out about you and your work? You might be surprised at the answers!
Employers can (and do), among other things, read your e-mail (even those marked
“personal” or “confidential”), tap your telephone, monitor your work by computer,
store and review computer files, monitor you in an employee bathroom or dressing
room, and track your whereabouts in a company vehicle. And these actions aren’t that
uncommon.
One survey indicates that 66 percent of U.S. companies monitor Internet use,
45 percent log keystrokes, and 43 percent track e-mails.51 There are consequences for
employees who inappropriately surf the Web or use e-mail. And some companies do
not limit monitoring computer use to just the office. For instance, UPS tracks the loca-
tion of delivery drivers, driving speed, and the number of daily deliveries. Their efforts
have paid off. Tracking has allowed the company to deliver 1.4 million more packages
per day with 1,000 fewer drivers.52
Some 26 percent of companies have fired an employee for e-mail misuse; 26 per-
cent have fired workers for misusing the Internet; 6 percent have fired employees for
inappropriate cell phone use; 4 percent have fired someone for instant messaging mis-
use; and 3 percent have fired someone for inappropriate text messaging.53
Why do managers feel they need to monitor what employees are doing? A big
reason is that employees are hired to work, not to surf the Web checking stock
prices, watching online videos, playing fantasy baseball, or shopping for presents
for family or friends. Recreational on-the-job Web surfing is thought to cost bil-
lions of dollars in lost work productivity annually. In fact, a survey of U.S. employ-
ers said that 87 percent of employees look at non-work-related Web sites while at
work and more than half engage in personal Web site surfing every day.54 Watch-
ing online videos has become an increasingly serious problem not only because
of the time being wasted by employees but also because it clogs already-strained
corporate computer networks.55 All this nonwork adds up to significant costs to
businesses.
Another reason why managers monitor employee e-mail and computer usage
is that they don’t want to risk being sued for creating a hostile workplace envi-
ronment because of offensive messages or an inappropriate image displayed on a
coworker’s computer screen. Concerns about racial or sexual harassment are one
reason companies might want to monitor or keep back-up copies of all e-mail.
Electronic records can help establish what actually happened so managers can
react quickly.56
Finally, managers want to ensure that company secrets aren’t being leaked.57 In
addition to typical e-mail and computer usage, companies are monitoring instant mes-
saging and banning camera phones in the office. Managers need to be certain that
employees are not, even inadvertently, passing information on to others who could use
that information to harm the company.
Because of the potentially serious costs and given the fact that many jobs now
entail computers, many companies have workplace monitoring policies. Such policies
should control employee behavior in a nondemeaning way, and employees should be
informed about those policies.58
If your professor has assigned this, go to www.mymanagementlab.com to complete the Write It!
Writing Assignment MGMT 3: Technology.
650 Part 6 Controlling
F U T U R E V I S I O N Real-time Feedback
Keeping track of feedback on employee performance app also allows management to track and document
patterns of performance by keeping a timeline of the
is challenging for managers. While face-to-face feed- feedback. The use of such an app can help eliminate
back is usually best, managers must provide it in a the bias that can sometimes arise in the traditional em-
timely manner and also make sure to document it as ployee review process because the app captures feed-
well, especially if corrective action is needed. Could a back from peers, subordinates, and managers, giving
mobile app solve this problem? a more complete view of an employee’s performance.
Some companies are abandoning formal annual re- If your professor has chosen to assign this, go to
views of performance in favor of immediate, real-time www.mymanagementlab.com to discuss the follow-
feedback delivered via a mobile device or an app.59 ing questions.
Real-time feedback can be delivered to employees by
managers or coworkers quickly and efficiently via this TALK ABOUT IT 1: Would you like getting feed-
technology. Experts claim that instant feedback apps back through an app? Could the use of such an app
can boost productivity by letting employees know what create any problems?
they are doing well on the job and what they need to
improve. Today’s younger workforce, raised on instant TALK ABOUT IT 2: Should real-time feedback be
communication via technology, particularly appreciates delivered anonymously? Why or why not?
the fast feedback from colleagues. A real-time feedback
Most organizational theft is committed Employee Theft
by employees such as Bill Davis, former
CEO of Community Action of Minneapolis, At the Saks flagship store in Manhattan, a 23-year-old sales
a nonprofit organization that provides job clerk was caught ringing up $130,000 in false merchandise
search assistance and home heating aid to returns and putting the money onto a gift card.60 And such
low-income people. Davis pleaded guilty to practices have occurred at other retailers as well.
16 counts of theft and fraud for stealing more
than $800,000 of taxpayer money on trips, cars, Would you be surprised to find that up to 85 percent of
golf, and other personal expenses. all organizational theft and fraud is committed by employees,
Source: Leila Navidi /AP Photo/The Star not outsiders?61 And it’s a costly problem—estimated to be
Tribune around $4,500 per worker per year.62 In retail settings alone,
employee theft accounts for a staggering 43 percent of lost
employee theft revenue.63
Any unauthorized taking of company
property by employees for their personal Employee theft is defined as any unauthorized taking
use of company property by employees for their personal use.64 It
can range from embezzlement to fraudulent filing of expense
reports to removing equipment, parts, software, or office supplies from company prem-
ises. Although retail businesses have long faced serious potential losses from employee
theft, loose financial controls at start-ups and small companies and the ready availabil-
ity of information technology have made employee stealing an escalating problem in
all kinds and sizes of organizations. Managers need to educate themselves about this
control issue and be prepared to deal with it.65
Why do employees steal? The answer depends on whom you ask.66 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. Crimi-
nologists say it’s because people have financial-based pressures (such as personal
financial problems) or vice-based pressures (such as gambling debts). And the 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 com-
ing,” “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).67 Although each approach pro-
vides compelling insights into employee theft and has been instrumental in attempts to
deter it, unfortunately, employees continue to steal. What can managers do?
Chapter 18 Controlling Activities and Operations 651
FEEDFORWARD CONCURRENT FEEDBACK Exhibit 18-12
Use careful prehiring Treat employees with Make sure employees
screening. respect and dignity. know when theft or fraud has Controlling Employee Theft
occurred—not naming names
Establish specific Openly communicate but letting people know this Sources: Based on A. H. Bell and
policies defining theft the costs of stealing. is not acceptable. D. M. Smith, “Protecting the Company
and fraud and discipline AgainstTheft and Fraud,” Workforce
procedures. Use the services of Management Online, December 3,
professional investigators. 2000; J. D. Hansen, “To Catch aThief,”
Journal of Accountancy, March 2000, pp.
Involve employees Let employees know on Redesign control measures. 43–46; and J. Greenberg, “The Cognitive
in writing policies. a regular basis about their Geometry of EmployeeTheft,” in
successes in preventing Dysfunctional Behavior in Organizations:
theft and fraud. Nonviolent and Deviant Behavior, ed.
S. B. Bacharach, A. O’Leary-Kelly, J. M.
Educate and train Use video surveillance Evaluate your organ- Collins, and R. W. Griffin (Stamford, CT:
employees about the equipment if conditions ization’s culture and the JAI Press, 1998), pp. 147–193.
policies. warrant. relationships of managers
Have a professional and employees. FYI
review of your internal
security controls. Install “lock-out” options on computers, The following statistics describe
telephones, and e-mail. theft in small businesses:
Use corporate hotlines for reporting incidences. • 40 percent of thefts were cash.
Set a good example. • $20,000 is the average amount
The concept of feedforward, concurrent, and feedback control is useful for iden- stolen over time.
tifying measures to deter or reduce employee theft.69 Exhibit 18-12 summarizes several • 64 percent of businesses
possible managerial actions.
experienced employee theft.
• 16 percent of firms reported
theft.68
If your professor has assigned this, go to www.mymanagementlab.com to watch a video Watch It 2!
titled: Sticky Fingers in the Workplace and to respond to questions.
Workplace Violence
In Sagamihara, Japan, a man killed 19 residents and wounded 25 others in a knife at-
tack at a care center for disabled people, where he had previously worked. In Scotland,
a chef died after being punched multiple times by the restaurant manager during an ar-
gument about a customer’s order. In a wood processing factory near Lucerne, Switzer-
land, a former employee brought a firearm to the company cafeteria and opened fire,
killing three workers and injuring seven. In India, nurses at SSKM Hospital staged a
protest after a nurse and a trainee were attacked by the agitated relatives of a patient.70
The above are just some of the violent workplace attacks in recent years. But is
workplace violence really an issue for managers? Yes. Despite these examples, thankfully
the number of workplace shootings has decreased.71 However, the U.S. National Insti-
tute for Occupational Safety and Health still says that each year, some 2 million Ameri-
can workers are victims of some form of workplace violence. In an average week, one
employee is killed and at least 25 are seriously injured in violent assaults by current or
former coworkers. And according to a Department of Labor survey, 58 percent of firms
reported that managers received verbal threats from workers.72 Anger, rage, and violence
in the workplace are intimidating to coworkers and adversely affect their productivity.
The annual cost to U.S. businesses is estimated to be $121 billion.73 And office rage isn’t
a uniquely American problem. A survey of aggressive behavior in Britain’s workplaces
found that 18 percent of managers say they have personally experienced harassment or
verbal bullying, and 9 percent claim to have experienced physical attacks.74
652 Part 6 Controlling
What factors are believed to contribute to workplace violence? Undoubtedly,
employee stress caused by an uncertain economic environment, job uncertainties,
declining value of retirement accounts, long hours, information overload, other daily
interruptions, unrealistic deadlines, and uncaring managers play a role. Even office
layout designs with small cubicles where employees work amid the noise and commo-
tion from those around them have been cited as contributing to the problem.75 Other
experts have described dangerously dysfunctional work environments characterized by
the following as primary contributors to the problem:76
• 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.
Reading through this list, you surely hope that workplaces where you’ll spend your
professional life won’t be like this. However, the competitive demands of succeeding
in a 24/7 global economy put pressure on organizations and employees in many ways.
What can managers do to deter or reduce possible workplace violence? Once
again, the concept of feedforward, concurrent, and feedback control can help identify
actions that managers can take.77 Exhibit 18-13 summarizes several suggestions.
Controlling Customer Interactions
Every month, every local branch of Enterprise Rent-a-Car conducts telephone surveys
with customers.78 Each branch earns a ranking based on the percentage of its custom-
ers who say they were “completely satisfied” with their last Enterprise experience—a
level of satisfaction referred to as “top box.” Top box performance is important to
Enterprise because completely satisfied customers are far more likely to be repeat cus-
tomers. By using this service quality index measure, employees’ careers and financial
aspirations are linked with the organizational goal of providing consistently superior
service to each and every customer. Managers at Enterprise Rent-a-Car understand
the connection between employees and customers and the importance of controlling
these customer interactions.
Chapter 18 Controlling Activities and Operations 653
Feedforward Concurrent Feedback Exhibit 18-13
Use MBWA (managing Ensure management Communicate openly Controlling Workplace Violence
by walking around) to commitment to func- about incidences and
identify potential prob- tional, not dysfunctional, what’s being done. Sources: Based on M. Gorkin, “Five
lems; observe how em- work environments. Strategies and Structures for Reducing
ployees treat and interact Investigate incidents and Workplace Violence,” Workforce
with each other. Allow employees or work take appropriate action. Management Online, December 3, 2000;
groups to “grieve” during “Investigating Workplace Violence: Where
Provide employee periods of major organi- Review company policies DoYou Start? Workforce Management
assistance programs zational change. and change, if necessary. Online, December 3, 2000; “TenTips on
(EAPs) to help employees Be a good role model in Recognizing and Minimizing Violence,”
with behavioral problems. how you treat others. Workforce Management Online, December
3, 2000; and “Points to Cover in a
Enforce organizational Use corporate hotlines or Workplace Violence Policy,” Workforce
policy that any workplace some other mechanism Management Online, December 3, 2000.
rage, aggression, or for reporting and investi-
violence will not be gating incidents.
tolerated. Use quick and decisive
intervention.
Use careful prehiring Get expert professional
screening. assistance if violence
erupts.
Never ignore threats. Provide necessary
equipment or procedures
Train employees about for dealing with violent
how to avoid danger if situations (cell phones,
situation arises. alarm system, code
names or phrases, and so
Clearly communicate forth).
policies to employees.
There’s probably no better area to see the link between planning and controlling service profit chain
than in customer service. If a company proclaims customer service as one of its goals, The service sequence from employees
it quickly and clearly becomes apparent whether that goal is being achieved by seeing to customers to profit
how satisfied customers are with their service! How can managers control the interac-
tions between the goal and the outcome when it comes to customers? The concept of
a service profit chain can help.79
A service profit chain is the service sequence from employees to customers to
profit. According to this concept, the company’s strategy and service delivery system
influence how employees deal with customers; that is, how productive they are in
providing service and the quality of that service. The level of employee service pro-
ductivity and service quality influences customer perceptions of service value. When
service value is high, it has a positive impact on customer satisfaction, which leads to
customer loyalty. And customer loyalty improves organizational revenue growth and
profitability.
What does this concept mean for managers? Managers who want to control cus-
tomer interactions should work to create long-term and mutually beneficial relation-
ships among the company, employees, and customers. How? By creating a work envi-
ronment that enables employees to deliver high levels of quality service and which
makes them feel they’re capable of delivering top-quality service. In such a service
climate, employees are motivated to deliver superior service. Employee efforts to sat-
isfy customers, coupled with the service value provided by the organization, improve
customer satisfaction. And when customers receive high service value, they’re loyal
654 Part 6 Controlling
Portland International Jetport employee and return, which ultimately improves the company’s growth
Ryan Tenny serves doughnuts to customers and profitability. One study showed that the payoffs can be
in celebration of the company being named substantial. Customers who had the best past service experi-
the best small airport for customer service ences spent 140 percent more than those who had the poorest
by Airports Council International. Courteous, experiences.80
cheerful, knowledgeable, and helpful employees
are important to Jetport’s service profit chain as There’s no better example of this concept in action than
they provide the high-quality service that leads Southwest Airlines, which is the most consistently profitable
to high customer satisfaction and loyalty and U.S. airline (the year 2015 marked 43 straight years of profit-
results in revenue growth and profitability. ability). Its customers are fiercely loyal because the company’s
Source: Derek Davis/Portland Press Herald/ operating strategy (hiring, training, rewards and recognition,
Getty Images teamwork, and so forth) is built around customer service.
Employees consistently deliver outstanding service value
corporate governance to customers. And Southwest’s customers reward the com-
The system used to govern a corporation pany by coming back. It’s through efficiently and effectively
so that the interests of corporate owners controlling these customer interactions that companies like
are protected Southwest and Enterprise have succeeded.
FYI Corporate Governance
A survey of corporate directors Although Andrew Fastow—Enron’s former chief financial officer who pled guilty to
revealed the following about their wire and securities fraud—had an engaging and persuasive personality, that still didn’t
understanding of company issues: explain why Enron’s board of directors failed to raise even minimal concerns about
management’s questionable accounting practices. The board even allowed Fastow
• 47 percent have a complete to set up off-balance-sheet partnerships for his own profit at the expense of Enron’s
understanding of the company’s shareholders.
financial position.
Corporate governance, the system used to govern a corporation so that the
• 34 percent have a complete interests of corporate owners are protected, failed abysmally at Enron, as it has at
understanding of current many companies caught in financial scandals. In the aftermath of these scandals, cor-
strategy. porate governance has been reformed. Two areas where reform has taken place are the
role of boards of directors and financial reporting. Such reforms aren’t limited to U.S.
• 22 percent have a complete corporations; corporate governance problems are global.81 Some 75 percent of senior
understanding of value creation. executives at U.S. and Western European corporations expect their boards of directors
to take a more active role.82
• 16 percent have a complete
understanding of industry THE ROLE OF BOARDS OF DIRECTORS The original purpose of a board of
dynamics. 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
• 15 percent have a complete organization. However, it didn’t always work that way. Board members often enjoyed
understanding of the risks the a cozy relationship with managers in which each took care of the other.
company faces.83
This type of “quid pro quo” arrangement has changed. The Sarbanes-Oxley Act
puts greater demands on board members of publicly traded companies in the United
States to do what they were empowered and expected to do.84 To help boards do this
better, the Business Roundtable developed a document outlining principles of corpo-
rate governance. (See http://businessroundtable.org/, section Principles of Corporate
Governance 2012, for a list and discussion of these principles.)
FINANCIAL REPORTING AND THE AUDIT COMMITTEE In addition to expand-
ing the role of boards of directors, the Sarbanes-Oxley Act of 2002 also called for
more disclosure and transparency of corporate financial information. In fact, senior
managers in the United States are now required to certify their companies’ financial
results. Such changes have led to better information—that is, information that is more
accurate and reflective of a company’s financial condition.
Chapter 18 Chapter 18 Controlling Activities and Operations 655
PREPARING FOR: Exams/Quizzes
CHAPTER SUMMARY by Learning Objectives
LO18.1 EXPLAIN the nature and importance of control.
LO18.2
LO18.3 Controlling is the process of monitoring, comparing, and correcting work perfor-
LO18.4 mance. As the final step in the management process, controlling provides the link back
to planning. If managers didn’t control, they’d have no way of knowing whether goals
were being met.
Control is important because (1) it’s the only way to know if goals are being met,
and if not, why; (2) it provides information and feedback so managers feel comfortable
empowering employees; and (3) it helps protect an organization and its assets.
DESCRIBE the three steps in the control process.
The three steps in the control process are measuring, comparing, and taking ac-
tion. Measuring involves deciding how to measure actual performance and what to
measure. Comparing involves looking at the variation between actual performance
and the standard (goal). Deviations outside an acceptable range of variation need
attention.
Taking action can involve doing nothing, correcting the actual performance, or
revising the standards. Doing nothing is self-explanatory. Correcting the actual perfor-
mance can involve different corrective actions, which can either be immediate or basic.
Standards can be revised by either raising or lowering them.
EXPLAIN how organizational and employee performance are
measured.
Organizational performance is the accumulated results of all the organization’s work
activities. Three frequently used organizational performance measures include (1) pro-
ductivity, the output of goods or services produced divided by the inputs needed to
generate that output; (2) effectiveness, a measure of how appropriate organizational
goals are and how well those goals are being met; and (3) industry and company rank-
ings compiled by various business publications.
Employee performance is controlled through effective performance feedback and
through disciplinary actions, when needed.
DESCRIBE tools used to measure organizational performance.
Feedforward controls take place before a work activity is done. Concurrent controls
take place while a work activity is being done. Feedback controls take place after a
work activity is done.
Financial controls that managers can use include financial ratios (liquidity, lever-
age, activity, and profitability) and budgets. One information control managers can
use is an MIS, which provides managers with needed information on a regular basis.
Others include comprehensive and secure controls such as data encryption, system
firewalls, data back-ups, and so forth that protect the organization’s information.
Managers approach information controls in two ways. Information control can be
used as a tool to help them control other organizational activities and as an organiza-
tional area they need to control.
Balanced scorecards provide a way to evaluate an organization’s performance in
four different areas rather than just from the financial perspective. Benchmarking pro-
vides control by finding the best practices among competitors or noncompetitors and
from inside the organization itself.
656 Part 6 Controlling
LO18.5 DISCUSS contemporary issues in control.
Six management control issues are cross-cultural differences, workplace privacy,
employee theft, workplace violence, customer interactions, and corporate governance.
For each of these issues, managers need to have policies in place to control inappropri-
ate actions and ensure that work is getting done efficiently and effectively.
Adjusting controls for cross-cultural differences may be needed primarily in the
areas of measuring and taking corrective actions. Organizations should clearly com-
municate to managers and employees how to approach and respond to routine and
nonroutine situations within and outside the home country.
Employees who use the Internet and social media for personal use are not entitled to
privacy. Organizations need to establish clear policies that outline the differences between
proper and improper use and the consequences for using technology inappropriately.
Employee theft is costly to organizations. Procedures for monitoring theft and the
consequences for committing a theft should be clearly explained to employees.
Workplace violence is a prevalent problem. Organizations need to develop emer-
gency plans for responding to incidents of violence that include protecting the safety
of employees and customers.
Control is important to customer interactions because employee service productivity
and service quality influences customer perceptions of service value. Organizations want
long-term and mutually beneficial relationships among their employees and customers.
Corporate governance is the system used to govern a corporation so that the inter-
ests of corporate owners are protected. A board of directors looks out for the interests
of shareholders. The Sarbanes-Oxley Act called for more disclosure and transparency
of corporate financial information.
Pearson MyLab Management
Go to mymanagementlab.com to complete the problems marked with
this icon .
REVIEW AND DISCUSSION QUESTIONS
18-1. Why is control an essential managerial function in all 18-7. In Chapter 6 we discussed the white-water rapids
types of organizations? view of change, which refers to situations in which
unpredictable change is normal and expected, and
18-2. State the information sources for measuring managing it is a continual process. Do you think it’s
performance. possible to establish and maintain effective standards
and controls in this type of environment? Discuss.
18-3. Discuss the four main workplace discipline problems.
18-4. What do the two liquidity ratios—current and acid— 18-8. “Every individual employee in an organization
plays a role in controlling work activities.” Do you
actually measure and reveal? agree with this statement, or do you think control is
18-5. Explain the balanced scorecard approach to something that only managers are responsible for?
Explain.
evaluating organizational performance.
18-6. Why is control important to customer interactions?
Pearson MyLab Management
If your professor has assigned these, go to mymanagementlab.com for the
following Assisted-graded writing questions:
18-9. Why is control important to customer interactions?
18-10. What are some work activities in which the acceptable range of variation
might be higher than average? What about lower than average? (Hint: Think
in terms of the output from the work activities, whom it might affect, and
how it might affect them.)
Chapter 18 Controlling Activities and Operations 657
PREPARING FOR: My Career
PERSONAL INVENTORY ASSESSMENTS P I A PERSONAL
INVENTORY
ASSESSMENT
Workplace Discipline Indicator
Disciplining. It’s usually not a manager’s favorite thing to do. But it is important. Take this PIA and discover
how you prefer to discipline employees.
ETHICS DILEMMA
Cyber Monday falls on the first Monday following the 18-11. Other than the obvious, what problems do you see
Thanksgiving holiday. During Cyber Monday, employers here, especially as it relates to control?
find that a significant number of employees are surfing
the Web for holiday deals. A recent survey revealed that 18-12. How would you handle this? How could
among 24 percent of the employees who admitted to being organizations make sure they’re addressing work
caught shopping online during work hours, only 15 percent controls ethically?
were reprimanded.85 And 31 percent said that being caught
resulted in a discussion of shopping tips with the boss.
SKILLS EXERCISE Managing Challenging Employees
About the Skill • Attempt to limit contact. If possible, try to limit your
In Chapter 12, we provided some advice on handling difficult day-to-day interactions with the difficult employee. When
coworkers. Difficult people can be even more challenging to appropriate, use communication channels—like e-mail
manage. In this section, we expand on the ideas provided in and text messaging—that minimize face-to-face contact
Chapter 12 to provide further guidance in honing your skill and verbal intonations.
as a manager in working with difficult people. • Try polite confrontation. As a manager it is your
Almost all managers will, at one time or another, have to
responsibility to address the behavior. Let them know
manage employees who are difficult. There is no shortage that you’re aware of their behavior, that you find it
of characteristics that can make someone difficult to work unacceptable, and that you won’t tolerate it. For people
with. Some examples include people being short-tempered, who are unaware of the effect their actions have on
demanding, abusive, angry, defensive, complaining, you, confrontation might awaken them to altering their
intimidating, aggressive, narcissistic, arrogant, and rigid. behavior. For those who are acting purposefully, taking
Successful managers have learned how to manage difficult a clear stand might make them think twice about the
people and minimize their negative impact on fellow consequences of their actions.
employees.
Steps in Practicing the Skill • Practice positive reinforcement. We know that positive
No single approach is always effective in dealing with difficult
people.86 However, we can offer several suggestions that are reinforcement is a powerful tool for changing behavior.
likely to lessen the angst caused by a difficult employee and Rather than criticizing undesirable behavior, try
may have some influence in reducing their difficult behavior. reinforcing desirable behaviors with compliments or other
positive comments. This focus will tend to weaken and
• Don’t let your emotions rule. Our first response to a reduce the exhibiting of the undesirable behaviors.
Sources: Based on N. Pelusi, “Dealing with Difficult
difficult person is often emotional. We get angry. We People,” Psychology Today, September–October 2006, pp.
show frustration. We want to lash out at them or “get 68–69; and R. I. Sutton, The No Asshole Rule: Building
even” when we think they’ve insulted or demeaned us. a Civilized Workplace and Surviving One That Isn’t (New
This response is not likely to reduce your angst and may York: Business Plus, 2007).
escalate the other person’s negative behavior. So fight
your natural tendencies and keep your cool. Stay rational Practicing the Skill
and thoughtful. At worst, while this approach may not Consider a difficult person you have had to deal with in the
improve the situation, it is also unlikely to encourage and past. Someone you’ve worked with? Another student? Write
escalate the undesirable behavior. down the person’s behaviors that you found challenging or
658 Part 6 Controlling
difficult. Consider the strategies that you used to deal with would do if you are a manager and this person is your direct
this person. What worked? What didn’t work? Using the report. Write down the steps you could take to effectively
steps above, what could you do differently to work more manage this person and also limit the negative impact of
effectively with this person? Now, think about what you this person’s behavior on other employees.
WORKING TOGETHER Team Exercise
According to research, workplace violence is all too occurrences of workplace violence in your own country.
common across the globe.87 Employees do not just face Suggest some ideas of how the government and other
violence from outsiders but also from one another. Create organizations could prevent this. Share your findings
small groups of three to four students. Research the with the rest of the class.
MY TURN TO BE A MANAGER
• You have a major class project due in a month. Identify • Pretend you’re the manager of a customer call center
some performance measures you could use to help for timeshare vacations. What types of control measures
determine whether the project is going as planned and would you use to see how efficient and effective an
will be completed efficiently (on time) and effectively employee is? How about measures for evaluating the
(with high quality). entire call center?
• How could you use the concept of control in your • Disciplining employees is one of the least favorite tasks
personal life? Be specific. (Think in terms of feedforward, of managers, but it is something that all managers have to
concurrent, and feedback controls as well as specific do. Survey three managers about their experiences with
controls for the different aspects of your life—school, employee discipline. What types of employee actions have
work, family relationships, friends, hobbies, etc.) caused the need for disciplinary action? What disciplinary
• Survey 30 people as to whether they have experienced actions have they used? What do they think is the most
difficult thing to do when disciplining employees? What
office rage. Ask them specifically whether they have suggestions do they have for disciplining employees?
experienced any of the following: yelling or other verbal
abuse from a coworker, yelling at coworkers themselves, • Figure 18-7 lists several industry and company ranking
crying over work-related issues, seeing someone purposely lists. Find the Web site for each list and identify the
damaging machines or furniture, seeing physical violence performance measures that are used to determine the
in the workplace, or striking a coworker. Compile your rankings on each. Are there any similar measures? Any
findings in a table. Are you surprised at the results? Be unique measures? Summarize your findings in a brief
prepared to present these in class. report.
1CASE APPLICATION The Challenge of “Healthy”
Fast-Food
Non-GMO, organic, locally sourced . . . these terms are now a common part of our
food vocabulary, although not typically associated with the fast-food industry. Chipo-
tle entered the fast-food scene in the early 1990s with a seemingly impossible goal of
creating a healthy fast-food alternative.88 Chipotle’s promise of “food with integrity”
includes fresh, locally sourced ingredients and naturally raised meats. They effectively
met this promise for many years, but as the popular fast-food chain has grown to more
than 1,500 locations, the restaurant’s ability to promise such quality while meeting food
safety standards has become a challenge. Attempting to deliver on this promise on a
national scale has created a complex and risky supply chain challenge for the company.
Chipotle’s food contamination problems started with an E. coli outbreak in July
of 2015 in Seattle. Next was a norovirus outbreak in California, followed by salmonella
Chapter 18 Controlling Activities and Operations 659
in Minnesota. Other foodborne illnesses emerged among Chipotle customers in nine
more states. Over the course of a few months, more than 500 customers were sick from
contaminated food in Chipotle stores across the country. Sales dropped 30 percent
during the outbreak, and several stores closed for an extended period of time. The
company’s stock value dropped, and the company faced several lawsuits from custom-
ers who were sickened at one of the stores.
Most national fast-food restaurant chains control food quality by using a central
source for ingredients, exposing the supply chain to fewer outside elements. Simply put,
the more basic the food chain, the easier it is to control. To keep their fresh food prom-
ise, Chipotle sought to prepare as many foods as possible at the local stores. They also
sourced ingredients locally wherever possible, creating relationships with hundreds of
vendors. The complexity of their food sourcing, coupled with in-store food preparation,
is most likely what caused the food contamination problem. There were no known spe-
cific negligent acts on the part of Chipotle; the problems occurred because offering fresh
food on such a large scale creates a situation where quality control is difficult.
In most cases Chipotle did not know which foods were contaminated, making
the fix even more challenging. In response to the crisis, they have implemented new
controls to test for meat contamination and also changed some food-handling and
preparation procedures. They’ve shifted much of their food preparation to central-
ized kitchens and started sourcing ingredients from fewer vendors, much like their
fast-food competitors have done for years. To kick off their new standards, Chipotle
closed all of their stores for an afternoon to train employees consistently on the new
food-handling standards. While it seems the company is moving in the right direction,
critics suggest that a company that claims to focus so much on food quality should
have done a better job focusing on food safety.
DISCUSSION QUESTIONS
18-13. Why is it important for Chipotle to revise the company’s food-handling
standards?
18-14. Which controls would be more important to Chipotle: feedforward,
concurrent, or feedback? Explain.
18-15. How can Chipotle make sure that employees are following the new food-
handling standards?
18-16. What are some measures of organizational performance that Chipotle
management should use?
2CASE APPLICATION Bring Your Own Device
When Saman Rajaee resigned from his sales position at Design Tech Homes in Texas,
he wasn’t prepared for the next move the company made.89 He used his personal iPhone
to conduct business on behalf of the company, and as part of the standard separation
process, the company’s IT department remotely wiped his phone and restored it to
factory settings. He lost all of his contacts, data stored, and also irreplaceable family
photos. He then sued the company under Texas privacy laws. The courts ultimately
ruled in the employer’s favor, but the story creates a cautionary tale for employers.
Complicating the typical privacy and security concerns created by technology in
the workplace is the “Bring Your Own Device” (BYOD) trend emerging in many com-
panies. BYOD programs allow employees to use their own personal mobile devices
such as smartphones, tablets, or laptops in the workplace. While companies often
reimburse employees for expenses related to BYOD programs, the company ultimately
saves money by not purchasing the technology. The practice is also appealing to those
660 Part 6 Controlling
employees who prefer to use their own devices. Given that the boundaries between
work and personal lives are becoming increasingly blurred, many employees want to
have access to both on one piece of technology.
From a privacy perspective, some employees fear BYOD programs give the com-
pany too much access to their own personal business. A BYOD program typically has
guidelines that state that the employer has the right to access the device. When you
consider control and security issues, employers should want to access any device that
contains work-related information and data. Management must be extra cautious to
assure that the technology is secure and does not make company secrets vulnerable.
Also if employees are using their device to log in to company systems, the log-in in-
formation is typically stored on the device, putting the company at risk if it is lost or
stolen.
Many companies have established BYOD policies or asked employees to sign
agreements that make the security concerns clear and provide the company permission
to access the device. Policies or agreements help establish privacy expectations as well.
When it comes to wiping phones, it is best for companies to take more of a “surgical”
approach and remove only work-related information from an employee’s phone. A
more cautious approach can help keep company information secure, while reducing
the risk of employees losing precious pictures of Grandma.
DISCUSSION QUESTIONS
18-17. Would you want to use your personal device for work purposes?
18-18. Can you think of any other privacy or security concerns for companies that
have a BYOD program?
18-19. Given the privacy and security concerns, are BYOD programs really a good
idea for companies?
18-20. Are there any productivity concerns with allowing employees to use their
personal devices at work?
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