After much anticipation, when the Hubble Space Telescope was finally launched it was found to have a flaw in its primary mirror. Better controls could have prevented this problem. T, he Hubble Space Telescope was planned for more than fifteen years and cost more than $1.5 billion.1 Yet CnsIS when it was finally launched in April 1990, the National Aeronautics and Space Administration (NASA) found that there was a flaw in the telescope's primary mirror. The 94.5-inch diameter primary mirror was too flat in the center, and so it produced blurry images. The result: Because the telescope could not focus on distant stars nearly as sharply as had been expected, it threatened as many as half of the planned experiments, and many observations might not be able to be carried out. The sad part about the Hubble story is that, with better controls, it could have been prevented. The mirror's maker, Perkins-Elmer, used a flawed optical template to achieve the exacting specifications. An optical verification test that was used in making the mirror—a reflective null corrector—had not been set up correctly. A spacing error of 1.3 millimeters in this device—about the diameter of the tip of a ballpoint pen—caused the mirror's surface to be ground and polished in the wrong shape. But no one caught the mistake. Ironically, in contrast with many NASA projects, time pressures were not the issue. There was more than enough time to catch the telescope's flaws. Rough grinding of the mirror began in 1978, and final polishing was not finished until 1981. Then the completed telescope sat on the ground for two years after the space shuttle program was disrupted by the Challenger disaster, in which barely two minutes after liftoff a flame from one of the solid rocket boosters ignited the massive liquid-fuel tank in the shuttle. In a spectacular explosion, all seven of the crew were killed. Managers at NASA who had responsibility for the Hubble project paid little attention to the details of the telescope's construction. A NASA executive who headed up a six-member investigating committee on the Hubble debacle said, "There were at least three cases where there was clear evidence that a problem had developed, and it was missed all three times." Th Hubble example illustrates what can happen when an organization has inadequate controls. Regardless of the thoroughness of the planning, an idea still may be poorly or improperly implemented without a satisfactory control system. Effective management, therefore, needs to consider the benefits of a well-designed control system. What Is Control? control The process of monitoring activities to ensure they are being accomplished as planned and of correcting any significant deviations. Control can be defined as the process of monitoring activities to ensure that they are being accomplished as planned and of correcting any significant deviations. All managers should be involved in the control function even if their units are performing as planned. Managers cannot really know whether their units are performing properly until they have evaluated what activities have been done and have compared the actual performance with the desired standard.2 An effective control system ensures that activities are completed in ways that lead to the attainment of the organization's goals. The criterion that determines the effectiveness of a control system is how well it facilitates goal achievement. The more it helps managers achieve their organization's goals, the better the control system.3 The Importance of Control Planning can be done, an organization structure can be created to efficiently facilitate the achievement of objectives, and employees can be directed and motivated. Still, there is no assurance that activities are going as planned and that the goals managers are seeking are, in fact, being attained. Control is important, therefore, because it is the final link in the functional chain of management. However, the value of the control function lies predominantly in its relation to planning and delegating activities. In Chapter 7, we described objectives as the foundation of planning. Objectives give specific direction to managers. However, just stating objectives or having subordinates accept your objectives is no guarantee that the necessary actions have been accomplished. "The best-laid plans of mice and men oft go awry." The effective manager needs to follow up to ensure that the actions that others are supposed to take and the objectives they are supposed to achieve are, in fact, being taken and achieved. In our discussion of interpersonal skills we noted that many managers find it difficult to delegate. A major reason given was the fear that subordinates would do something wrong for which the manager would be held responsible. Thus many managers are tempted to do things themselves and avoid delegating. This reluctance to delegate, however, can be reduced if managers develop an effective control system. Such a control system can provide information and feedback on the perfor- 571 572 PÁRT SIX Controlling mance of subordinates to whom they have delegated authority. An effective control system is therefore important because managers need to delegate authority; but because they are held ultimately responsible for the decisions that their subordinates make, managers also need a feedback mechanism. ISŕZISZäBSgESS The Control Process control process The process of measuring actual performance, comparing it against a standard, and taking managerial action to correct deviations or inadequate standards. The control process consists of three separate and distinct steps: (1) measuring actual performance; (2) comparing actual performance against a standard; and (3) taking managerial action to correct deviations or inadequate standards. Before we consider each step in detail, you should be aware that the control process assumes that standards of performance already exist. These standards are the specific objectives against which progress can be measured. They are created in the planning function. If managers use MBO, then objectives are, by definition, tangible, verifiable, and measurable. In such instances, these objectives are the standards against which progress is measured and compared. If MBO is not practiced, then standards are the specific performance indicators that management uses. Our point is that these standards are developed in the planning function; planning must precede control. Measuring To determine what actual performance is, a manager must acquire information about it. The first step in control, then, is measuring. Let us consider how we measure and what we measure. How We Measure Four common sources of information, frequently used by managers to measure actual performance, are personal observation, statistical reports, oral reports, and written reports. Each has particular strengths and weaknesses; however, a combination of them increases both the number of input sources and the probability of receiving reliable information. An increasing number of managers, such as Ralph Stayer of Johnsonville Foods, are using personal observation as a means of control. Management-by-walking-around provides a richness of information often lost in formal reports. ^iTrT CHAPTER 19 Foundations of Control 573 Personal observation provides firsthand, intimate knowledge of the actual activity—information that is not filtered through others. It permits intensive coverage because minor as well as major performance activities can be observed as well as opportunities for the manager to "read between the lines." Management-by-walking-around can pick up omissions, facial expressions, and tones of voice that may be missed by other sources. Unfortunately, in a time when quantitative information suggests objectivity, personal observation is often considered an inferior information source. It is subject to perceptual biases—what one manager sees, another might not. Personal observation also consumes a good deal of time. Finally, this method suffers from obtrusiveness. Employees might interpret a manager's overt observation as a sign of a lack of confidence in them or of mistrust. The current wide use of computers in organizations has made managers rely increasingly on statistical reporis for measuring actual performance. This measuring device, however, is not limited to computer outputs. It also includes graphs, bar charts, and numerical displays of any form that managers may use for assessing performance. Although statistical data is easy to visualize and effective for showing relationships, it provides limited information about an activity. Statistics report on only a few key areas and often ignore other important factors. Information can also be acquired through oral reports—that is, through conferences, meetings, one-to-one conversations, or telephone calls. The advantages and disadvantages of this method of measuring performance are similar to those of personal observation. Although the information is filtered, it is fast, allows for feedback, and permits language expression and tone of voice, as well as words themselves, to convey meaning. Historically, one of the major drawbacks of oral reports was the problem of documenting information for later references. However, our technological capabilities have progressed in the last couple of decades to the point at which oral reports can be efficiently taped and become as permanent as if they were written. Actual performance may also be measured by written reports. As with statistical reports, they are slower yet more formal than first- or secondhand oral measures. This formality also often means greater comprehensiveness and conciseness than is found in oral reports. In addition, written reports are usually easy to catalogue and reference. Given the varied advantages and disadvantages of each of these four measurement techniques, comprehensive control efforts by managers should use all four. What We Measure What we measure is probably more critical to the control process than how we measure. The selection of the wrong criteria can result in serious dysfunctional consequences. Besides, what we measure determines, to a great extent, what people in the organization will attempt to excel at.4 Some control criteria are applicable to any management situation. For instance, because all managers, by definition, direct the activities of others, criteria such as employee satisfaction or turnover and absenteeism rates can be measured. Most managers have budgets for their area of responsibility set in dollar costs. Keeping costs within budget is therefore a fairly common control measure. However, any comprehensive control system needs to recognize the diversity of activities among managers. A production manager in a manufacturing plant might use measures of the quantity of units produced per day, units produced per labor hour, scrap per unit of output, or percent of rejects returned by customers. The manager of an administrative unit in a government agency might use number of document pages typed per day, number of orders processed per hour, or average time required to process service calls. Marketing managers often use measures such as percent of market captured, average dollar value per sale, or number of customer visits per salesperson. The performance of some activities is difficult to measure in quantifiable terms. It is more difficult, for instance, for an administrator to measure the performance of a 574 PÁRT SIX Controlling research chemist or an elementary school teacher than of a person who sells life insurance. But most activities can be broken down into objective segments that allow for measurement. The manager needs to determine what value a person, department, or unit contributes to the organization and then convert the contribution into standards. Most jobs and activities can be expressed in tangible and measurable terms. When a performance indicator cannot be stated in quantifiable terms, managers should look for and use subjective measures. Certainly, subjective measures have significant limitations. Still, they are better than having no standards at all and ignoring the control function. If an activity is important, the excuse that it is difficult to measure is inadequate. In such cases, managers should use subjective performance criteria. Of course, any analysis or decisions made based on subjective criteria should recognize the limitations of the data. range of variation The acceptable parameters of variance between actual performance and the standard. Comparing The comparing step determines the degree of variation between actual performance and the standard. Some variation in performance can be expected in all activities; it is therefore critical to determine the acceptable range of variation. (See Figure 19-1.) Deviations in excess of this range become significant and receive the manager's attention. In the comparison stage, managers are particularly concerned with the size and direction of the variation. An example should make this clearer. Rich Tanner is sales manager for Eastern States Distributors. The firm distributes imported beers in several states on the east coast. Rich prepares a report during the first week of each month that describes sales for the previous month, classified by brand name. Table 19-1 displays both the standard and actual sales figures (in hundreds of cases) for the month of July. Should Rich be concerned about the July performance? Sales were a bit higher than he had originally targeted, but does that mean that there were no significant deviations? Even though overall performance was generally quite favorable, several brands might deserve the sales manager's attention. However, the number of brands that FIGURE 19-1 Defining an Acceptable Range of Variation Acceptable Upper-limit Standard Acceptable Lower-limit Acceptable range of variation t t+1 t+2 t+3 t+4 t+5 CHAPTER 19 Foundations of Control 575 TABLE 19-1 Eastern States Distributors' Sales Performance for July (hundreds of cases) Brand Standard \ctual Over (Under) 913 (162) 634 4 912 112 622 2 672 132 140 (20) 220 (5) 65 (15) 286 116 4,464 164 Heineken Molson Beck's Moosehead Labatt's Corona Amstel Light Dos Equis Tecate Total Cases 1,075 630 800 620 540 160 225 80 170 4,300 deserve attention depends on what Rich believes to be significant. How much variation should Rich allow before he takes corrective action? The deviation on several brands is very small and undoubtedly not worthy of special attention. These include Molson, Moosehead, and Amstel Light. Are the shortages for Corona and Dos Equis brands significant? That's a judgment Rich must make. Heineken sales were 15 percent below Rich's goal. This needs attention. Rich should look for a cause. In this case, Rich attributed the loss to aggressive advertising and promotion programs by the big domestic producers, Anheuser-Busch and Miller. Because Heineken is the number one selling import, it is most vulnerable to the promotion clout of the big domestic producers. If the decline in Heineken is more than a temporary slump, Rich will need to reduce his orders with the brewery and lower his inventory stock. An error in understating sales can be as troublesome as an overstatement. For instance, is the surprising popularity of Tecate a one-month aberration, or is this Eastern States Distributors uses monthly sales reports to identify problem areas. Significant deviations between actual sales and the budgeted standard will require attention from the company's sales manager. 576 PART SIX Controlling brand increasing its market share? Our Eastern States' example illustrates that both overvariance and undervariance require managerial attention. immediate corrective action Correcting an activity at once in order to get performance back on track. basic corrective action Determining how and why performance has deviated and correcting the source of deviations. Taking Managerial Action The third and final step in the control process is taking managerial action. Managers can choose among three courses of action: They can do nothing; they can correct the actual performance; or they can revise the standard. Because "doing nothing" is fairly self-explanatory, let's look more closely at the latter two. Correct Actual Performance If the source of the variation has been deficient performance, the manager will want to take corrective action. Examples of such corrective action might include changes in strategy, structure, compensation practices, or training programs; the redesign of jobs; or the replacement of personnel. a'manager who decides to correct actual performance has to make another decision: Should he or she take immediate or basic corrective action? Immediate corrective action corrects problems at once and gets performance back on track. Basic corrective action asks how and why performance has deviated and then proceeds to correct the source of deviation. It is not unusual for managers to rationalize that they do not have the time to take basic corrective action and therefore must be content to perpetually "put out fires" with immediate corrective action. Effective managers, however, analyze deviations and, when the benefits justify it, take the time to permanently correct significant variances between standard and actual performance. To return to our example of Eastern States Distributors, Rich Tanner might take basic corrective action on the negative variance for Heineken. He might increase promotion efforts, increase the advertisement budget for this brand, or reduce future orders with the manufacturer. The action he takes will depend on his assessment of each brand's potential effectiveness. Revise the Standard It is possible that the variance was a result of an unrealistic standard—that is, the goal may be too high or too low. In such cases it's the standard that needs corrective attention, not the performance. In our example, the sales manager might need to raise the standard for Tecate to reflect its increasing popularity. This frequently happens in sports when athletes adjust their performance goals upward during a season if they achieve their season goal early. The more troublesome problem is the revising of a performance standard downward. If an employee or unit falls significantly short of reaching its target, the natural response is to shift the blame for the variance to the standard. For instance, students who make a low grade on a test often attack the grade cutoff points as too high. Rather than accept the fact that their performance was inadequate, students argue that the standards are unreasonable. Similarly, salespeople who fail to meet their monthly quota may attribute the failure to an unrealistic quota. It may be true that standards are too high, resulting in a significant variance and acting to demotivate those employees being assessed against it. But keep in mind that if employees or managers don't meet the standard, the first thing they are likely to attack is the standard itself. If you believe the standard is realistic, hold your ground. Explain your position, reaffirm to the employee or manager that you expect future performance to improve, and then take the necessary corrective action to turn that expectation into reality. Summary Figure 19-2 summarizes the control process. Standards evolve out of objectives, but because objectives are developed during planning, they are tangential to the control process. The process is essentially a continuous flow between measuring, comparing, CHAPTER 19 Foundafions of Control 577 Cornp.iru dClllril perform.inro with sLriridcini Objectives Standard FIGURE 19-2 The Control Process Types of Control Measure