"The MGMT Solution," Vocabulary from Chapter 16

Control is achieved when behavior and work procedures conform to standards and when company goals are accomplished.

Preventive measures are also a form of control.

The next step in the control process is to identify performance deviations, analyze those deviations, and then develop and implement programs to correct them.

Cybernetic derives from the Greek word kubernetes, meaning “steersman,” that is, one who steers or keeps on course.

Feedforward control is a mechanism for gathering information about performance deficiencies before they occur.

In contrast to feedback and concurrent control, which provide feedback on the basis of outcomes and results, feedforward control provides information about performance deficiencies by monitoring inputs rather than outputs.

To determine whether control is worthwhile, managers need to carefully assess regulation costs, that is, whether the costs and unintended consequences of control exceed its benefits.

Another factor to consider is cybernetic feasibility, the extent to which it is possible to implement each of the three steps in the control process.

By encouraging managers to apply well-thought-out rules, policies, and procedures in an impartial, consistent manner to everyone in the organization, bureaucratic control is supposed to make companies more efficient, effective, and fair.

In many companies, bureaucratic control has evolved into objective control, which is the use of observable measures of employee behavior or output to assess performance and influence behavior.

Whereas behavior control regulates, guides, and measures how workers behave on the job, output control gives managers and workers the freedom to behave as they see fit as long as they accomplish prespecified, measurable results.

First, output control measures must be reliable, fair, and accurate.

Rather than monitoring rules, behavior, or output, another way to control what goes on in organizations is to use normative control to shape the beliefs and values of the people who work there. With normative controls, a company’s widely shared values and beliefs guide workers’ behavior and decisions.

Highly autonomous work groups evolve through two phases as they develop concertive control. In phase one, group members learn to work with each other, supervise each other’s work, and develop the values and beliefs that will guide and control their behavior.

Ironically, concertive control may lead to even more stress for workers to conform to expectations than bureaucratic control. Under bureaucratic control, most workers only have to worry about pleasing the boss. But with concertive control, their behavior has to satisfy the rest of their team members.

Plus, with concertive control, team members have a second, much more stressful role to perform: that of making sure that their team members adhere to team values and rules.

In self-control or self-management, leaders and managers provide workers with clear boundaries within which they may guide and control their own goals and behaviors.

What should managers control? Costs? Quality? Customer satisfaction? The way managers answer this question has critical implications for most businesses.

The balanced scorecard encourages managers to look beyond such traditional financial measures to four different perspectives on company performance. How do customers see us (the customer perspective)? At what must we excel (the internal perspective)? Can we continue to improve and create value (the innovation and learning perspective)? How do we look to shareholders (the financial perspective)?

We explained the [balanced scorecard] theory to clinicians and administrators like this: if you sacrifice too much in one quadrant to satisfy another, your organization as a whole is thrown out of balance. We could, for example, cut costs to improve the financial quadrant by firing half the staff, but that would hurt quality of service, and the customer quadrant would fall out of balance.

Conceptually, economic value added (EVA) is not the same thing as profits. It is the amount by which profits exceed the cost of capital in a given year.

The most common costs of capital are the interest paid on long-term bank loans used to buy all those resources, the interest paid to bondholders (who lend organizations their money), and the dividends (cash payments) and growth in stock value that accrue to shareholders.

Second, because EVA can easily be determined for subsets of a company such as divisions, regional offices, manufacturing plants, and sometimes even departments, it makes managers and workers at all levels pay much closer attention to their segment of the business.

Rather than poring over customer satisfaction surveys from current customers, studies indicate that companies may do a better job of answering the question “How do customers see us?” by closely monitoring customer defections, that is, by identifying which customers are leaving the company and measuring the rate at which they are leaving.

When the company defines its quality goal as excellence, managers must try to produce a product or service of unsurpassed performance and features.

When a company emphasizes value as its quality goal, managers must simultaneously control excellence, price, durability, and any other features of a product or service that customers strongly associate with value.

When a company defines its quality goal as conformance to specifications, employees must base decisions and actions on whether services and products measure up to the standard.

Thus, the innovation and learning perspective involves continuous improvement in ongoing products and services, as well as relearning and redesigning the processes by which products and services are created.

The goals of the top level, waste prevention and reduction, are to prevent waste and pollution before they occur or to reduce them when they do occur.

Good housekeeping—performing regularly scheduled preventive maintenance for offices, plants, and equipment.

Material/product substitution—replacing toxic or hazardous materials with less harmful materials.

Process modification—changing steps or procedures to eliminate or reduce waste.

At the second level of waste minimization, recycle and reuse, wastes are reduced by reusing materials as long as possible or by collecting materials for on- or off-site recycling.

A growing trend in recycling is design for disassembly, where products are designed from the start for easy disassembly, recycling, and reuse once they are no longer usable.

At the third level of waste minimization, waste treatment, companies use biological, chemical, or other processes to turn potentially harmful waste into harmless compounds or useful by-products.

Cow manure is a concern for cattle and dairy farmers, especially since it can pollute water supplies, spread disease, and contribute to global warming through carbon dioxide and methane.

The fourth and lowest level of waste minimization is waste disposal.

Wastes that cannot be prevented, reduced, recycled, reused, or treated should be safely disposed of in processing plants or in environmentally secure landfills that prevent leakage and contamination of soil and underground water supplies.

Many companies give old computers and computer equipment to local computer recycling centers that distribute usable computers to nonprofit organizations or safely dispose of lead and other toxic materials.

A number of retailers and electronics manufacturers operate recycling programs to keep electronics out of landfills.