Controlling for Organizational Performance

Controlling for Organizational Performance

1. 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 activities have been done and compared actual performance against the desired standard. Effective controls ensure that activities are completed in ways that lead to the attainment of goals.

2. What Is Performance? The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract, performance is deemed to be the fulfillment of an obligation, in a manner that releases the performer from all liabilities under the contract.

3. What Is Organizational Performance? An analysis of a company's performance as compared to goals and objectives. Within corporate organizations, there are three primary outcomes analyzed: financial performance, market performance and shareholder value performance (in some cases, production capacity performance may be analyzed). Organizational performance comprises the actual output or results of an organization as measured against its intended outputs (or goals and objectives).

4. Importance of controlling for performance Accomplishing Organizational Goals Judging Accuracy of Standards Making Efficient use of Resources Improving Employee Motivation Ensuring Order & Discipline Facilitating Coordination in Action Helps in improving performance of employees

5. CONTROL PROCESS

6. Step 1. Setting up of (target) standards Standards means target or the yardstick against which the actual performance is measured. The standards become basis for comparisons and the manager insists on following of standards. The standards must be achievable, high or very high standards which cannot be achieved are of no use. Standards must be set up keeping in mind the resources of the organization and as far as possible standards must be set up in numerical or measurable terms.

7. Step 2. Measuring Actual Performance HOW WE MEASURE. Four approaches used by managers to measure and report actual performance are personal observations statistical reports oral reports written reports. Most managers use a combination of these approaches.

8. WHAT WE MEASURE. After setting up of standards the performance of the employees is measured by evaluating the actual work done by the employees. When the performance can be measured numerically then it is very convenient to measure the performance. While measuring the performance the quantitative as well as qualitative aspect of performance is kept in mind. Certain quality parameters are fixed to measure the quality standard when number of rejections or sales return increases. It indicates low standard of quality. Generally the performance of managers is measured by looking at the overall efficiency level of the organization.

9. Step 3. Comparing Actual Performance Against the Standard The comparing step determines the variation between actual performance and the standard. Although some variation in performance can be expected in all activities, it’s critical to determine an acceptable range of variation.

10. Deviations outside this range need attention.

11. Step 4. Analyzing deviations All deviations need not be brought to the notice of top management. A range of deviations should be established and only cases beyond this range should be brought to the knowledge of top level management. They must divide the deviations in two categories deviations which need to be attended urgently in one category and minor or insignificant decisions in other category

12. Step 5. 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. 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 corrective action, not the performance.

13. CORRECT ACTUAL PERFORMANCE Depending on what the problem is, a manager could take different corrective actions. For instance, if unsatisfactory work is the reason for performance variations, the manager could correct it by things such as training programs, disciplinary action, changes in compensation practices, and so forth. One decision that 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

14. Case study BAGGAGE BLUNDERS Terminal 5 (T5), built by British Airways for $8.6 billion, is London Heathrow Airport’s newest state-of-the-art facility.62 Made of glass, concrete, and steel, it’s the largest free-standing building in the United Kingdom and has more than 10 miles of belts for moving luggage. At the terminal’s unveiling in March of 2008, Queen Elizabeth II called it a “twenty-first-century gateway to Britain.” Alas . . . the accolades didn’t last long! After two decades in planning and 100 million hours in manpower, opening day didn’t work out as planned. Endless lines and major baggage handling delays led to numerous flight cancellations stranding many irate passengers. Airport operators said the problems were triggered by glitches in the terminal’s high-tech baggage-handling system. With its massive automation features, T5 was planned to ease congestion at

15. Heathrow and improve the flying experience for the 30 million passengers expected to pass through it annually. With 96 self-service check-in kiosks, more than 90 fast check-in bag drops, 54 standard check-in desks, and miles of suitcase-moving belts estimated to be able to process 12,000 bags per hour, the facility’s design seemed to support those goals. However, within the first few hours of the terminal’s operation, problems developed. Presumably understaffed, baggage workers were unable to clear incoming luggage fast enough. Arriving passengers waited more than an hour for their bags. Departing passengers tried in vain to check in for flights. Flights left with empty cargo holds. Sometime on day one, the airline checked in only those passengers with no luggage. And it didn’t help that the moving belt system jammed at one point. Lesser problems also became apparent: a few broken escalators, some hand dryers that didn’t work, a gate that wouldn’t function at the new Underground station, and inexperienced ticket sellers who didn’t know the fares between Heathrow and various stations on the Piccadilly line.

16. By the end of the first full day of operation, Britain’s Department of Transportation released a statement calling for British Airways and the airport operator BAA to “work hard to resolve these issues and limit disruptions to passengers.” You might be tempted to think that all of this could have been prevented if British Airways had only tested the system. But thorough runs of all systems “from toilets to check in and seating” took place six months before opening, including four full-scale test runs using 16,000 volunteers. Although T5’s debut was far from perfect, things have certainly changed. A recent customer satisfaction survey showed that 80 percent of passengers waited less than five minutes to check in. And those passengers are extremely satisfied with the terminal’s lounges, catering, facilities, and ambience. It’s a nice ending to the chaotic beginning.

17. Measures of Organizational Performance All managers must know which measures will give them the information they need about organizational performance.

18. ORGANIZATIONAL PRODUCTIVITY Productivity is the amount of goods or services produced divided by the inputs needed to generate that output. Organizations 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.

19. ORGANIZATIONAL EFFECTIVENESS Organizational effectiveness is a measure of how appropriate organizational goals are and how well those goals are being met. That’s the bottom line for managers and it’s what guides managerial decisions in designing strategies and work activities and in coordinating the work of employees.

20. INDUSTRY AND COMPANY RANKINGS Rankings are a popular way for managers to measure their organization’s performance. Rankings are determined by specific performance measures, which are different for each list. These rankings give managers (and others) an indicator of how well their company performs in comparison to others

21. 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.

22. Types of Control

23. Tools For Monitoring And Measuring Organizational Performance

24. FINANCIAL CONTROLS Traditional Financial Control Measures Managers might use traditional financial measures such as ratio analysis and budget analysis. 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 is using its assets. profitability ratios measure how efficiently and effectively the company is using its assets to generate profits.

25. BALANCED SCORECARD The balanced scorecard approach is a way to evaluate organizational performance from more than just the financial perspective. 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, managers should develop goals in each of the four areas and then measure whether the goals are being met.

26. INFORMATION CONTROLS 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 standard. They also rely on information to help them determine if deviations are acceptable. Most of the information tools that managers use come from the organization’s management information system

27. BENCHMARKING OF BEST PRACTICES Benchmarking is the search for the best practices among competitors or non-competitors that lead to their superior performance. Research shows that best practices frequently already exist within an organization, but usually go unidentified and unused.

28. Conclusion Controlling for performance is a very wide scope as it does not end only by comparing the actual performance with planned performance but it tries to find the reason and solution for the problem as well. There by, helping the organization achieving its goals.

29. Thank You !