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Management Control System Process

Management Control System Process

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Published by nikhilmate

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Published by: nikhilmate on Aug 16, 2009
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Management Control System ProcessStep 1: Setting Performance Standard
sPerformance standards may be set by staff or managers, by managers and staff,or by managers with input from employees whose performance is beingmeasured. The last method is the best because employees believe that line andstaff do not have enough information about the conditions of various jobs to setrealistic standards.Managers should see that objectives and standards are measurable and thatindividuals are held accountable for their accomplishment. The level of difficulty should be challenging but within the capabilities of the employee. Standards settoo low are usually accomplished but not exceeded, while standards set too highusually do not motivate the employee to expend much effort to reach the goal.It is important that standards be complete; however, it is difficult to develop asingle standard or goal that will indicate the effective overall performance. Forexample, consider the automobile dealer who decided to measure sales peoplesperformance on the basis of the number of automobiles sold. Sales increasedimpressively, but it was later learned that many sales had been made to poorcredit risks, and too high prices had been allowed on trade-ins.Finally managers should see that the number of standards assigned, like planningobjectives, are limited and placed in priority order for the employee. If there aretoo many controls assigned, the employee will not be able to give enoughattention to any of them and will become frustrated and confused.
Step 2: Measure and compare actual with planned results
 As with setting standards, the objectivity of the measurement and the person whomeasures and compares the performance are important. Measuring andcomparing can be accomplished by the person performing the task, by the boss,or by a staff person; even an automated system can measure and compare. Froma behavioral standpoint, the last method is the least popular, followed by measurement by a staff person only. An employee believes an automated system, a staff person, or even the boss doesnot know enough about the conditions of the job to make a fair comparison between actual and planned results. Also, the employee often distrusts the staff person and sometimes even the boss. At the same time, the employee is usually not trusted enough by the company toperform the measurement and comparison alone. The best solution is to have themeasurement done by the person most trusted by the employee and to allow theemployee some input.
Step 3: Evaluate results, give feedback and coach
The third step is most effective when steering controls are selected. With thesecontrols, forecasters of the results can also be used for early warning that specificactions may be required.For example, high morale is a popular goal but one that is difficult to measure.Forecasters such as number of accidents, absenteeism, and employee turnovermay be evaluated together and serve as a surrogate measure for increasing ordeclining morale.However, careful evaluation must be used. If the accident rate increases rapidly in the production area, it would suggest declining morale when a significantincrease is caused by employee carelessness. However, if the cause is related toequipment that suddenly wears out, then there probably is not a relationship between accident rate and low morale.It is essential that managers carefully evaluate deviations before taking action. Itis also important that they remember that deviations can be positive as well asnegative and that they reward employees for positive deviations. Unfortunately,this step is often omitted and only the negative aspects of deviation receiveattention. Who should receive feedback from this evaluation and how often should it beoffered?
The person who is accountable for accomplishing the standard shouldreceive the information first.
The employee's boss, or whoever is in a position to reward the employeeshould receive the information at about the same time or a little later.
Then peers, staff people, subordinates and other line people can receivethe information. At this time, the boss ought to have some suggestionsabout how to get back on course if the employee needs help.The boss's most important job is coaching subordinates and a good planningcontrol system provides an excellent framework for such coaching.Feedback must be reliable, relatively frequent, and prompt. The feedback has to be reliable for the employees to be able to change the behavior or plan in order toget on course. Frequency of information has to do with the interval for which dataare received.If, for instance, costs would not normally get out of control in a short period, thenmonthly reports might be adequate. On the other hand, a delay of 6 monthsmight allow the situation to get so far out of control that it would be too late totake corrective action.

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