CH-13 Fundamentals of Controlling – Supervision: Concepts and Practices of Management : Book Guide

Chapter 13 Fundamentals of Controlling Learning Objectives 1. Describe the nature and importance of the managerial controlling function. Controlling is the managerial function that determines whether plans are being followed and whether performance conforms to standards. Every manager must develop and apply controls that monitor the organization’s activities to achieve the desired results. The controlling function is most closely related to the planning function. Supervisors set the objectives that become the standards against which performance is checked. Well-designed controls can positively influence employee motivation. Controls should be forward-looking because nothing can be done about the past. The closeness of supervisory control depends, in part, on employees’ experience, initiative, dependability, and resourcefulness. 2. Discuss the characteristics of effective controls and their importance based on time factors. To be effective, controls should be understandable to everyone who uses them and should yield timely information so that problems can be corrected before situations get out of hand. Also, controls should be suitable to, and economical for, situations. The more serious the consequences of mistakes, the tighter the controls should be, despite the expense. Further, controls should indicate where trouble lies in the process and should be flexible enough to adjust to changing conditions. Control mechanisms can be categorized as feedforward, concurrent, or feedback based on when they are implemented in the control process. Feedforward, or preliminary, controls are used to anticipate and prevent undesirable outcomes. The person who checks the tires, oil, gas gauge, and the like before a trip uses a feedforward control. The traveler who notices that the fuel gauge is below half full or that the fuel warning light has just come on and pulls into the next gas station for a fill-up uses concurrent control. Feedback controls are employed after the fact; they are the basis for correction and improvement. The traveler who calculates average miles per gallon and uses that information when planning the budget for a next trip uses feedback control. Generally, effective supervisors rely on all three types of controls to improve the control process or to prevent problems. 3. Identify the essential steps in the control process. When performing the controlling function, a supervisor should follow three basic steps: •Set standards. •Check performance against standards. •Take corrective action when necessary. The age-old question: “How’s it going?” can only be answered if a person knows where he or she wants to go and how that person will know if they got there. In recent years, there has been a greater emphasis on metrics. A metric or standard is a measure to assess how one is doing in a particular area. Standards may be set for tangible and intangible areas. A supervisor’s experience and knowledge can help that supervisor develop performance standards. More precise work standards can be set through motion and time studies and workflow charts. Employee participation in setting standards is crucial to employee acceptance of those standards. Many supervisors focus their control efforts on selected strategic control points, or strategic standards, which are major performance indicators. The supervisor should continuously check performance against standards. In some instances, the supervisor must depend on reports, but in most cases, personal observation and inspection are appropriate for checking employee performance. At times, the supervisor may apply the exception principle, which means concentrating on areas in which performance is significantly below or above standards. Sampling can help the supervisor determine whether products meet standards. When discrepancies arise, the supervisor must take the necessary corrective actions to bring performance back in line and to prevent other deviations. 4. Clarify the supervisor’s role in creating budgets and using them as a control device. The most widely used financial control is the budget. Budget preparation is primarily a planning function. However, applying, supervising, and living within a budget are part of the controlling function. Supervisors should help prepare their departmental budgets, regardless of whether the enterprise practices traditional or zero-base budgeting. Virtually all budgets need some built-in flexibility to allow for adjustments, when necessary. When significant deviations from the budget occur, the supervisor must investigate and take whatever actions are appropriate to bring expenditures back in line. 5. Examine the supervisor’s role in maintaining cost consciousness and in responding to higher-level managers’ orders to reduce costs. Cost control and cost consciousness should be the continuing concerns of all supervisors. When top-level managers issue cost-cutting orders, supervisors should avoid extreme measures that may in the long run be more costly than the reductions themselves. Involving employees in cost-reduction efforts is one way the effective supervisor creates cost awareness. Suggestion programs can be used to solicit employee ideas for potential cost-reduction areas. The supervisor should constantly seek ways to eliminate costs. Periodically, the supervisor should look at the department “through the eyes of a stranger” and question the necessity of everything done in the department. 6. Explain how the controlling function is closely related to the other managerial functions. Many organizations have specialists who concentrate on inventory control, quality control, and production control. These types of control systems are not usually under the direct authority of most departmental supervisors but are handled by staff specialists. Other managerial concepts, techniques, and approaches used by departmental supervisors contain aspects of the controlling function. Among these are MBO, standing plans, discipline maintenance, and the employee performance appraisal. Thus, controlling is intimately interrelated with all other managerial functions. PowerPoint Presentation Slide 13-3, Learning Objectives Lecture Outline I. The Supervisor’s Role in Controlling The word control often elicits negative reactions, but controls is a normal part of daily life. At home, at work, and in the community, everyone is affected by various controls, such as alarm clocks, thermostats, fuel and electronic gauges, traffic lights, and police officers directing traffic. The managerial controlling function consists of checking to determine whether operations adhere to established plans, ascertaining whether progress is being made toward objectives, and taking action, where necessary, to correct deviations from plans. PowerPoint Presentation Slide 13-4, The supervisor’s Role in Controlling A. Nature of the Controlling Function Controlling is one of the five primary managerial functions. It is so closely related to the other functions that the line between controlling and the other functions sometimes blurs. Controlling is most closely related to planning. In planning, the supervisor sets objectives, and these objectives become standards against which performance is appraised. When performance and standards deviate, the supervisor must carry out the controlling function by taking corrective action, which may involve establishing new plans and different standards. PowerPoint Presentation Slide 13-5, The supervisor’s Role in Controlling (cont.) B. Employee Responses to Controls Employees often view controls negatively because the amount of control in departments may determine how much freedom employees have to do their jobs. Yet most employees understand that a certain amount of control is essential to regulate performance. In a behavioral sense, controls and on-the-job freedom seem to conflict. However, when controls are well-designed and properly implemented, they can positively influence employee motivation and behavior. What Have You Learned? Question 1 PowerPoint Presentation Slide 13-6, The supervisor’s role in controlling (cont.) C. Controlling Should Be Forward-Looking A supervisor can do nothing about the past. Yet some supervisors believe that the main purpose of controlling is to assign blame for mistakes. This attitude is not sound because supervisors should primarily look forward, not backward. However, supervisors should study the past to learn how and why something happened and then take steps to avoid the same mistakes. Because supervisors should look forward while controlling, it is essential that they identify deviations from standards as quickly as possible. Controls within a process or within an activity’s time frame—rather than at its end—will enable the supervisor to take prompt corrective action. D. Controlling Should Be Consistent with Strategy Strategic planning begins with establishing goals and making decisions enable an organization to accomplish its objectives. The ultimate question becomes whether the organization achieved what it intended. Then changes, if necessary, must be made. See Figure 13.1 You Need a Blueprint to Get From Average to Outstanding? PowerPoint Presentation Slide 13-7, The supervisor’s role in controlling (cont.) E. Controlling and Closeness of Supervision Supervisors must know how closely to monitor employees’ work. The closeness of the supervisory follow-up is based on such factors as an employee’s experience, initiative, dependability, and resourcefulness. By familiarizing themselves with employees’ abilities, supervisors can learn how much leeway to give and how closely to follow up and control. What Have You Learned? Question 2 PowerPoint Presentation Slide 13-8, The supervisor’s role in controlling (cont.) II. Characteristics of Effective Controls For control mechanisms to work effectively, they should be understandable, timely, suitable and economical, indicational, and flexible. A. Understandable All control mechanisms—feedforward, concurrent, and feedback—must be understood by the managers, supervisors, and employees who use them. At higher management levels, control mechanisms may be rather sophisticated and based on management information systems, mathematical formulas, complex charts and graphs, and detailed reports. At the top levels, such controls should be understandable to all managers who use them. At the departmental level, controls should be much less complicated. When controls are confusing or too sophisticated for employees, the supervisor should devise new controls that meet departmental needs and are understandable to everyone who uses them. B. Timely Controls should indicate deviations from standards without delay, and such deviations should be reported to the supervisor promptly, even when substantiated only by approximated figures, preliminary estimates, or partial information. The sooner a supervisor knows about deviations, the more quickly the deviations can be corrected. This does not mean that the supervisor should jump to conclusions or hastily resort to drastic action. Generally, a supervisor’s experience and familiarity with a job will help determine when a job is not progressing as it should. C. Suitable and Economical Controls must be suited to activities. The controls the supervisor applies must also be economical for a job. For example, in a small company, it would be better to make employees check their own work or, possibly, to check their co-workers’ work. In contrast, in a large department of several hundred employees it makes considerable sense to employ full-time inspectors or quality-control specialists to check results. D. Indicational It is not enough for controls just to expose deviations as those deviations occur. A control should also indicate who is responsible for the deviation and where the deviation occurred. E. Flexible Because work operations occur in a dynamic setting, unforeseen circumstances can wreak havoc with even the best-laid plans and systems. Therefore, control mechanisms should be flexible enough to cope with unanticipated patterns and problems. Control mechanisms must permit changes when such changes are required. PowerPoint Presentation Slide 13-9, Characteristics of Effective Controls F. Time Factor Control Mechanisms It is important to distinguish among the following three types of control, which are classified according to time: •Feedforward (preliminary, preventative, anticipatory) •Concurrent (in-process) •Feedback (after-the-process) G. Feedforward (Preliminary, Preventive, Anticipatory) Controls Because controlling has forward-looking aspects, the purpose of a feedforward control is to anticipate and prevent potential sources of deviation from standards by considering, in advance, the possibility of any malfunctions or undesirable outcomes. A preventive maintenance program, designed so that equipment will not break down at the height of production, is an example of a feedforward control. H. Concurrent (In-Process) Controls A control that is applied while operations are proceeding and that spots problems as they occur is called a concurrent control. The traveler who notices that the fuel gauge is below half full or that the fuel warning light has just come on, and who pulls into the next gas station for a fill-up uses a concurrent control. I. Feedback (After-the-Process) Controls The purpose of a feedback control is to evaluate and, when necessary, correct the results of a process or an operation and to determine ways to prevent deviations from standard. When no damage or mistakes occur, feedback controls are used to further improve the process or product. Feedback controls are probably the most widely used category of controls at the supervisory level. Too often, however, they are used primarily to determine what went wrong and where to place blame rather than to prevent the problem from recurring. What Have You Learned? Question 3 PowerPoint Presentation Slide 13-10, Characteristics of Effective Controls (cont.) III. Steps in the Control Process The control process involves three sequential steps. The first step, which is usually part of the planning function, is to set standards appropriate to the task. In the second step, performance is measured against these standards. If performance does not meet the standards, the third step is to take corrective action. What Have You Learned? Question 4 A. Setting Standards Standards may be defined as the units of measure or the criteria against which performance or results are judged. Standards are targets; they are the criteria to which performance is compared in order to exercise control. Standards must be set before a person’s work, a finished product, or a service can be meaningfully evaluated. There are many types of standards, depending on the areas of performance or results to be measured. Tangible standards are performance targets for results that are identifiable and measurable. These standards can be set to measure such things as quantity of output, quality of output, market share, labor costs, overhead expenses, and time spent producing a unit or providing a service. Intangible standards are targets for results that have no physical form; these standards may cover such areas as an organization’s reputation, level of employee engagement, or quality of care in a healthcare center or nursing home. The most frequent tangible standards that supervisors determine or must follow pertain to departmental operations. In setting standards, a supervisor can use experience and job knowledge as guides. Through experience and observation, most supervisors have general ideas of how much time it takes to perform certain jobs, the resources that are required, and what constitutes good or poor quality. See Supervisory Tips Box: Supervisory Do’s for Controlling Employee Performance on page 503 PowerPoint Presentation Slide 13-11, Steps in the Control Process PowerPoint Presentation Slide 13-12, Figure 13.2 B. Motion and Time Studies A more thorough and systematic way to establish standards for the amount of work employees should accomplish in a given time frame is to apply work measurement techniques, preferably performed by, or with the assistance of, industrial engineers. In a motion study, engineers analyze how a job is performed to identify ways to improve, eliminate, change, or combine steps to make the job easier and faster. Once the best current method has been identified, a time study is performed to determine a time standard for the job. This is accomplished in a systematic and largely quantitative manner by selecting certain employees for observation; observing the time needed to accomplish various parts of the job; applying correction factors; and making allowances for fatigue, personal needs, and unavoidable delays. When all these factors are combined properly, the result is a time standard for the job. The standards developed through motion and time studies can help the supervisor distribute work more evenly and judge each employee’s performance fairly. Such standards also help the supervisors predict the number of employees needed and the probable job cost. PowerPoint Presentation Slide 13-13, Steps in the Control Process (cont.) Personal Skill Builder 13-2: Technology Tools—Motion and Time Study Software Applications C. Employee Participation Some employees resent standards, especially those standards arrived at through motion and time studies. However, the main purpose of performance standards should be to create realistic targets, that is, objectives that can be achieved and are considered fair by both the supervisor and the employees. Workers are more apt to accept standards as reasonable and fair when they help formulate the standard. One technique for including employees in standards establishment is to form a committee of workers to help the supervisor or industrial engineer carry out a work-measurement program. When adopting this approach, the supervisor and industrial engineer should explain to all employees what is involved in motion and time studies, including areas in which judgment is involved. Employees should be allowed to challenge any standard they consider unfair and perhaps even be allowed to request that a job be restudied or retimed. PowerPoint Presentation Slide 13-14, Steps in the Control Process (cont.) PowerPoint Presentation Slide 13-15, Figure 13.3 D. Strategic Control Points Strategic control points, or strategic standards, are a limited number of key indicators that give the supervisor a good sampling of overall performance. Because the nature of the department and the makeup of the supervisor and employees differ in each situation, only general guidelines can be suggested. One major consideration that may render one standard more strategic than another is timeliness. Because it is essential to control time, the sooner a deviation is discovered, the better it can be corrected. A supervisor should be careful to choose strategic control points that do not significantly impede other important standards. PowerPoint Presentation Slide 13-16, Steps in the Control Process (cont.) PowerPoint Presentation Slide 13-17, Steps in the Control Process (cont.) E. Checking Performance against Standards The second major step in the control process, an ongoing activity for every supervisor, is to check performance against standards. The primary ways for a supervisor to do this are to observe, study oral and written reports, spot check, and use statistical sampling. F. Personal Observation When monitoring employee performance, there is no substitute for a supervisor’s direct observation and personal contract. The opportunity to inspect and closely observe employee performance is an advantage the supervisor has over top-level managers because the further a manager is from employees’ work, the more that manager must depend on reports from others. When supervisors find deviations from standards, they should assume a questioning, though not necessarily a fault-finding, attitude. Supervisors should question mistakes in a positive, helpful manner. To identify the causes of poor performance that are not employees’ fault, such as inadequate training, problems with workflow design, or an unusual increase in workload, supervisors can use personal observation and questioning. Checking employee performance through personal observation has limitations. It is time-consuming, and it may require supervisors to spend hours away from other activities. Also, it may be impossible for the supervisor to observe some important activities at critical times. Nevertheless, personal observation is still the most widely used and probably the best method of checking employee performance at the supervisory level. See Figure 13.5 Would You “Rat” on an Associate? On page 509 G. Oral and Written Reports When a department is large, operates in different locations, or works around the clock, oral and written reports are necessary. Whenever reports are required, the supervisor should insist that those reports are clear, complete, concise, and correct. When possible, oral presentations should accompany written reports. Reports are most effective when they are substantiated with statistical or comparative data. Report accuracy depends largely on the supervisors’ reactions to reports and their relations with employees. When supervisors handle adverse reports constructively and helpfully, appreciating honesty instead of just giving demerits, employees are encouraged to submit accurate reports, even when those reports show them unfavorably. When checking reports, supervisors usually find that many activities have been performed according to standards and can be passed over quickly. As a result, many supervisors use the exception principle, which means concentrating on those areas in which performance is significantly above or below standard. H. Spot Checks When the employees’ work routine does not lend itself to reports, the supervisor may have to rely on periodic spot checks. Supervisors with little or no opportunity to spot check usually must depend on reports. I. Sampling Techniques Sampling techniques are really supplements to strategic control points and spot checks. In some firms, each part or product is inspected to determine whether it meets standards.Statistical quality control (SQC) is a method to help supervisors determine which item(s) to inspect and how many of each. Sampling is the process of inspecting some predetermined number of products from a batch to determine whether the batch is acceptable or unacceptable. PowerPoint Presentation Slide 13-18, Figure 13.4 PowerPoint Presentation Slide 13-19, Steps in the Control Process (cont.) PowerPoint Presentation Slide 13-20, Steps in the Control Process (cont.) J. Taking Corrective Action When no deviations from standards occur, the process of control is fulfilled by the first two steps of control (1) setting standards and (2) checking performance against standards. When, however, deviations are noted through personal observation, reports, or spot checks, the supervisor must take the third step: taking corrective action to bring performance back into line. Before taking any corrective action, the supervisor should remember that deviations from standards can occur in any job for various reasons. Following are some of the reasons: •Standards were based on faulty forecasts or assumptions •Unforeseen problems arose and distorted results •Failure occurred on some preceding job or activity •Employee who performed the job was unqualified or was given inadequately directions or instructions •Employee who performed the job was negligent or failed to follow directions or procedures Therefore, before taking corrective action, the supervisor should determine the causes of the deviation by analyzing the situation. Only after identifying specific causes can the supervisor decide which remedial actions will obtain better results. PowerPoint Presentation Slide 13-21, Steps in the Control Process (cont.) IV. Budgetary Control Among the tools for financial control, the budget is usually the one with which supervisors have the most frequent contact. A budget is a written plan expressed in numerical terms that projects anticipated resources and expenditures for a period, such a month, a quarter, six months, or one year. Supervisors are most familiar with the operating budget. The operating budget projects the dollar amounts of the various costs and expenses needed to run the business, given projected revenues. Operating budgets, which may be developed for every department, usually show how much is allocated for inventory, salaries, supplies, travel, rent, utilities, advertising, and other expenses. All managers, from the CEO to supervisors, must learn how to develop budgets, live within budgetary limits, and use budgets for control purposes. The term budgetary control refers to the use of budgets by supervisors, accountants, and high-level managers to control operations so that they comply with organizational standards for making budgets. PowerPoint Presentation Slide 13-22, Budgetary Controls A. Supervisory Participation in Budget Making Budget making falls under the managerial function of planning, but carrying out the budget, or living within the budget, is part of the controlling function. Preparing a budget, whether it is expressed in monetary or other terms, requires the budget-maker to quantify estimates by attaching numerical values to each budgetary item. The numerical figures in the final budget become the desired financial standards of the organization. Most annual budgets are projections for the following year based on the previous year’s budget. This approach for making a budget is known as incremental budgeting. Another approach, which has gained some acceptance in recent years, is zero-base budgeting. When an organization practices zero-based budgeting, all budgets must begin “from scratch,” and each budget item must be justified and substantiated. The advantage of zero-base budgeting, sometimes called zero-base review, is that all ongoing programs, activities, projects, products, and the like are reassessed by management in terms of their benefits and costs to the organization. The disadvantage of zero-base budgeting is that it involves a large amount of paperwork and is very time-consuming. Moreover, in practice, it is difficult to apply the concept to some departments and types of operations. The budget that most concerns supervisors is usually the departmental expense budget, which covers the expenditures incurred by the department. To facilitate acceptance, expense budgets should be prepared with the participation and cooperation of those responsible for executing them. Preferably, supervisors should help make their departmental budgets. PowerPoint Presentation Slide 13-23, Budgetary Controls (cont.) B. Supervising Within the Budget Supervisors must manage their departments within budget limits and refer to their budgets to monitor their expenditures during the operating period. At regular intervals (perhaps weekly), the supervisor must review budgetary figures and compare them with expenses. If the expenditures for an item greatly exceed the item’s budgeted amount, the supervisor must find out what happened. Investigation could reveal a logical explanation for the discrepancy. A supervisor’s budget should not be so detailed and rigidly applied that it becomes a burden. The budget should allow the supervisor some freedom to accomplish departmental objectives. Budgets are guides for management decisions, not substitutes for good judgment. What Have You Learned? Question 5 Personal Skill Builder 13-3: Preparing a Budget PowerPoint Presentation Slide 13-24, Budgetary Controls (cont.) PowerPoint Presentation Slide 13-25, Figure 13.6 V. Cost Control and the Supervisor Intense competition and an uncertain economic environment require all organizations to strive continuously to control their costs. Sooner or later, most supervisors become involved in some way with cost control because higher-level managers expect supervisors to control costs at the departmental level to help meet organizational cost goals. A. Sharing Information and Responsibility with Employees In forging a partnership with its employees, a firm should be willing to share financial information with them. Employees must understand financial data and have a basis for comparing their firms’ financial information with that of previous years and competitors. Many organizations practice transparency, a form of open-book management in which all financial information is shared with employees and other stakeholders. Further, transparent organizations make organizational financial data available to the public, typically on their Web site or upon request, in order to build public trust and confidence. When employees have relevant financial data, they may act more conscientiously when making decisions with cost consequences. If all financial information is out in the open, there is no place for unscrupulous dealings to hide. B. Maintaining Cost Awareness Because cost consciousness is of ongoing concern to the supervisor, plans should be made to achieve cost awareness throughout the department. When setting cost objectives, the supervisor should involve the employees who will be most affected. The supervisor should fully communicate cost-reducing objectives to employees and get as much input from them as possible. The more employees contribute to a cost-control program, the more committed they will be to meeting objectives. Supervisors should help employees see cost containment as part of their jobs and as being in their long-term interest. When their supervisors approach them positively, most employees will try to do the right thing and to reduce waste and costs. C. Responding to a Cost-Cutting Order Reducing costs, a natural objective of most organizations, is frequently brought on by competition. Some supervisors are constantly aware of costs and operate their departments efficiently; others are lax and perhaps even wasteful. Some supervisors will read a blanket order to mean that everything possible should be done immediately to bring about the desired cost reduction. They might hold “pep rallies” with employees or, at the other extreme, harshly criticize employees and others. Other supervisors will follow cost-cutting directives halfheartedly. They will make minimal efforts here and there to give the appearance that they are doing something about costs. This type of supervisory response contributes inadequately to cost control. An across-the-board cost-reduction order may present a hardship to the diligent, cost-conscious supervisor whose department is working efficiently. Nevertheless, this supervisor may strive to take some action by looking again at areas where there is still room to reduce expenses. This supervisor will call for employee suggestions because employees can bring about results. Effective supervisors constantly seek ways to eliminate costs by questioning the necessity of everything done in their departments. Costs are associated with internal process activities and inventory. Whether for changing policies or controlling costs, employee suggestions can be a valuable source of ideas. Employees like to see their ideas put into effect and are more committed to goals they help set. Note: Instructors can ask students what costs the university could cut as an alternative to raising their tuition. This makes for a very interesting discussion. Often, cost cutting programs focus primarily on reducing the workforce. Students, like mine, can come up with some great ideas for reducing costs. What Have You Learned? Question 6 Team Skill Builder 13-1: Where Should Caitlyn Robbins Go From Here? PowerPoint Presentation Slide 13-26, Cost Control and the Supervisor VI. Controlling Is Part of a Continuous Process In most organizations there are specialists who can help the supervisor get things back on track. It is imperative that supervisors be aware of how various staff specialists can help them do a better job. A. Specialized Controls Inventory control means keeping watch over raw materials, supplies, work-in-process, finished goods, and the like. Quality control means maintaining the quality standards a firm sets for its products or services. Products and services must be monitored and improved continually to ensure that quality is maintained. Production control is usually consists of a number of activities that are designed to keep overall operations on schedule. It involves routing operations, scheduling, and, when necessary, expediting workflow.Two of the most-widely used analyses—program evaluation review technique (PERT) and Gantt charts were discussed in Chapter 3. PowerPoint Slide, 13-27 Controlling Is Part of a Continuous Process (cont.) PowerPoint Slide, 13-28 Controlling Is Part of a Continuous Process (cont.) B. Controlling and the Other Managerial Functions Managerial activities such as performance appraisal and employee discipline show how intrinsically related the controlling function is to all other managerial functions. Controlling is typically performed simultaneously with the other managerial functions.The better supervisors plan, organize, staff, and lead, the better their ability to control activities and employees. Team Skill Builder 13-2: Help Caitlyn Understand Her Financials Team Skill Builder 13-3: Wise the “Know-It-All” PowerPoint Presentation Slide 13-29, Key Terms Answers to What have you Learned? 1. Define the managerial controlling function, and discuss its relationship to the other managerial functions. Why do many people view controls negatively? Controlling is determining whether or not employees are adhering to established plans and meeting objectives, and taking corrective action where necessary. Controlling not only seeks to determine if performance has met predetermined objectives or standards, but it also points toward the planning and accomplishment of future objectives. Controlling is involved in all of the other managerial functions but it is most closely related to planning. Planning sets the managerial process in motion; controlling means to determine if the managerial process has been successful and to adjust it if necessary. The close relationship of the controlling function to the planning function should be emphasized as a natural “tying together” of all the managerial functions. Supervisors must have the controlling function in mind when they plan, organize, staff their departments, and carry out the leading function in supervising the activities of their people. Controls have an authoritative (even punitive) connotation that some employees and even supervisors resent. Controls do inhibit a certain amount of personal freedom, but most employees understand that purposeful controls are essential in order for the department and organization to operate effectively. Self-discipline (or self-control) among employees is the most desirable form of control. This does not mean to suggest that a supervisor can abdicate responsibility for developing appropriate control systems. Even if a supervisor is fortunate to have excellent, well-motivated employees, he or she still will need control systems to follow up and check whether or not performance is being achieved in accordance with standards and objectives. In short, controls are often viewed negatively by employees because the amount of control that exists within one’s department may determine how much freedom of action they have in performing their jobs, yet most employees still understand that a certain amount of control is essential to regulate performance. 2. After reviewing Figure 13.1, ponder the following statements: a. “It’s OK to break the rules.” b. “If in doubt, check with your boss.” c. “Rules exist to make things work consistently, but when rules get in the way of meeting customer needs, it is appropriate to question the rule.” d. “You should always be willing to take a risk!” e. “Celebrate your success!” Do you agree with the statements? Why or why not? Recall an instance where you followed each of these statements. Did the situation turn out ok? If not, why not? Most students will agree—to some extent—with the five statements above, but will qualify them with situational facts and stories. They will understand that these statements are not always acceptable or recommended, but can be, under the right circumstances. Hopefully, students will agree with some of these statements; depending on the climate of the organization, being willing to “take a risk” demonstrates leadership and responsibility for decision-making. “Celebrating your success” and being happy with risk-taking can be confidence builders for employees. Student stories with positive end results will more than likely detail some form of controlling function. Did the actions focus on the goals of the organization—customer service, expense management, etc.? Is so, the end results are likely to be more positive in nature. 3. Define and give examples of each of the following controls: a. Feedforward b. Concurrent c. Feedback Definitions and examples of controls are provided in the text. Most controls can be categorized according to when they are applied, i.e., before (preliminary), during (in process), or after (feedback) the particular event or aspect being controlled. Because students come from a variety of backgrounds and experiences, they will be able to generate a more interesting list of examples than what can be provide here. Instructors may want to have students search the Web to find specific illustrations of how firms are using these types of controls. 4. Define and discuss each of the following primary steps in the control process: a. Setting standards b. Checking performance against standards c. Taking corrective action Setting standards: It means to develop guidelines by which performance can be appraised. It is preferable that most standards be objective and tangible. Of course, some standards will be intangible or subjective, and they, too, should be developed and maintained. A supervisor’s experience and knowledge of jobs performed in the department are often the major guides that can be called upon. Objective measurements can be made of some jobs through motion and time studies. If standards are to be accepted, employees should participate where possible in establishing them. Checking actual performance against standards: Standards by themselves are without value unless actual performance is checked against them. This can be done by observing work being done, by communicating with employees, or by studying data and reports submitted. In checking written reports, a supervisor may find it desirable to concentrate on items that are exceptionally superior or exceptionally below expected standards, i.e., the exception principle. Such checking and appraising is a supervisor’s continuous responsibility. Taking corrective action. The control function requires that corrections be made for deviation from standards. When deviations are noted, the supervisor should study and analyze the facts in order to determine causes of the deviations. This puts the supervisor in a position to take corrective action. After the course of corrective action has been put into effect, the supervisor should continue to study the situation to see if additional adjustments should be made. 5. To what degree should supervisors be permitted to prepare budgets for their departments? What are the advantages and disadvantages of allowing employees to participate in the budget-making process? Supervisors usually don’t participate in budgeting for the firm as a whole, but their input is important for development of the departmental expense budget. Supervisors, and all managers, must learn how to plan for budgets, work within those limitations, and use them for control purposes. Supervisors should regularly compare expenditures with budgeted amounts. Large deviance from the budget—in either direction—should be investigated, and will likely require justification to higher management. Supervisors should view cost consciousness as an ongoing part of their regular job, as it is one major illustration of the controlling function. Supervisors should solicit employee participation and suggestions on ways to meet higher-level managers’ cost-reduction requests in ways that will benefit the firm in the long run. Employee input and awareness are important for the budget-making process; however, the ultimate responsibility lies with the supervisor; soliciting too much feedback could be a disadvantage for the department. Employees often become disgruntled when they are asked for feedback, and they don’t see the merits of their suggestions being implemented. 6. Discuss the supervisor’s duty to take appropriate action when accounting reports indicate that expenditures are significantly above or below budget allocations. How do effective supervisors reduce costs? Increase revenues? Even though it has been carefully prepared, a budget cannot anticipate all future events that may influence it during the period of its existence. Supervisors should not assume that they are locked into a budget estimate. On the other hand, budget figures are not to be ignored or dismissed casually. Every supervisor should make a serious effort to operate within the budget, until such time as conditions have changed significantly. The need for budget flexibility should not be misconstrued to suggest that budgets can be made and applied in a slipshod or routine manner. However, if a supervisor finds that a budget figure is a serious handicap to current performance, the supervisor should plead his or her case to higher management to have the budget adjusted as appropriate in order to meet realistic needs for carrying out the departmental job. Supervisors who normally perform within the limits of their budgets usually will find that they can have a budget figure adjusted when a real need dictates such adjustment. Thus, a budget guides a supervisor, but it should not overwhelm a supervisor to the point that he or she cannot use good judgment in requesting needed adjustments. Cost consciousness (or cost awareness) is an ongoing concern of the supervisory job. Every employee is aware of costs in their role as a consumer of goods and services—many are demanding a higher quality product at a lower price. If one store can’t deliver, they go elsewhere. Cost awareness helps firms meet their organizational objectives and in some cases, gain a competitive advantage. When top management issues an across-the-board cost reduction order, supervisors must respond in a conscientious way to reduce costs wherever feasible without taking drastic actions that will be more costly in the long run. Any lasting cost reduction program requires a continuing cost consciousness on the part of all employees if the program is not to become a short-term “fix” that will only have a temporary effect. Sidebar Illustration: Instructors can share this story with my students. In 1994, Pine Village Community Hospital (now Pine Village Community Medical Center or CMC) was faced with escalating costs and fewer patients. (Not much different from what most health care facilities are facing in 2009.) The vice-president of administrative services and an employee group worked together with a consultant (Professor Ed Leonard) to develop an employee suggestion program. Initial discussions focused only on cutting costs. It took a while to get them to look at both sides of the balance sheet; i.e., revenues and costs. Suggestions then started to flow that would increase the revenue stream. It was decided that they should embark on a program to eliminate $50,000 in costs without eliminating employees, hours, or benefits. While some organizations have eliminated jobs or stopped filling positions as they became vacant, CMC’s top management did not want to do that. CMC had been involved in a cooperative purchasing arrangement for about 15 years, and thus the purchasing of supplies was not an area that would generate cost savings. However, better inventory procedures and use of supplies would be a candidate for savings. A program dubbed the BAD program (“buck a day”) was decided upon. Each employee was given a new one dollar bill and asked to look for ways to reduce costs by that much each day. Coffee cups, tee-shirts, and prominently displayed posters all promoted the BAD program. Why did we use a dollar bill? The typical employee cannot comprehend the reduction of $50,000 in costs but they do understand a dollar bill. (Imagine: The reaction of GM employees if they were asked to find ways to eliminate $5,000,000,000 in costs so that the company might remain afloat. Use the K.I.S.S technique in presenting ideas.) Employee meetings stressed the following: •Look at each process through the eyes of a stranger. o Why is it necessary? o Is it needed? o Could certain operations by simplified, combined, or eliminated? •Analyze each procedure to determine whether or not costs associated with the procedure are necessary. •Look for ways to: o Eliminate idle time. o Eliminate handling time. o Eliminate indirect costs. o Eliminate costs by simplifying, combining, or eliminating operations. o Eliminate used inventory, machinery, equipment, or tools. o Eliminate overtime or extra cost operations. •Analyze the work flow. o Would better coordination improve work flow? o What can we do to improve communication? o How can scheduling be more efficient? •Can we make better use of employees? o Are we using more employees on a job than are actually needed? o Are there occasions when not having enough employees on the job results in unnecessary overtime? o Are we using highly paid, skilled employees on jobs that lower-paid employees can do? o Do we fail to use skilled employees in their specialties for reasons of day-to-day expediency? o Are employees lacking in job knowledge because of our failure to provide on-the-job training? o Are some department supervisors not onboarding or engaging their employees in sound health-care principles? o Are we using our employees to their fullest potential? Recognition was given for every suggestion. Employees were encouraged to work across department lines to develop their suggestions. Review committees evaluated each suggestion and championed those ideas what were worthy of implementation. The BAD program suggestions resulted in a cost savings of several hundred thousand dollars over a three-year period. A retail organization decided in March 2009 to adapt the BAD program to their organization. Hopefully, the results will improve their bottom line. In the opinion of this author, “None of us is a smart as all of us, and if we can harness the heads and hearts of our employees, they will help us find ways to increase revenues and contain costs.” Instructors also may wish to have students identify other strategies and techniques that they can develop, or that they may have become aware of through their own experiences. Answers to Personal Skill Building Personal Skill Builder 13-1: What Should Nick Do? In this PSB, students should refer to the opening You make the Call and evaluate the way Nick Coy introduced the new software program. Students should then visit the HealthCare.gov website and provide at least two suggestions on how Lichty Manufacturing should bring forth its organizational change to the employees. Students should then suggest the safeguards they would have used to ensure that the new system would be accepted by the employees of the organization. Personal Skill Builder 13-2: Technology Tools—Motion and Time Study Software Applications In this PSB, students should read the scenarios in the text and choose whether they will consider tools from the perspective of the owner of Valley Boat Works, the executive director of the Crisis Pregnancy Center, or the streets department manager. Students should then visit the websites mentioned in the text and learn about the time and motion study tools. They should watch the demonstration videos and/or download the trial versions of the software applications. Students should then reflect on the type of information and data. They should also decide on the application that gives apt information to decide on whether to change processes or hire more employees. They should also suggest other information needed to know before using the applications. Then, students should draft a software review along with the list of software applications that they have reviewed. Personal Skill Builder 13-3: Preparing a Budget Budgets are both a planning and controlling tool. They help supervisors determine the best use of available funds and controlling spending. The following questions will give students an opportunity to understand budgets. Because budgets are both a planning and controlling tool, this relevant, hands-on application has the potential of helping them not only control their spending, but also determine the best use of their available funds. Comparing data will help students focus on major expenditure areas and also give them an opportunity to reflect on their personal financial situation. Science students may have greater textbook costs; students who live in the residence halls or apartments may have varying budget expenses. An interesting discussion might ensure for those who have credit cards and are paying unaffordable interest payments each month. Answers to Team Skill Building Team Skill Builder 13-1: Where Should Caitlyn Robbins Go From Here? This skills application is designed to be a comprehensive learning of the chapter, and forces students to apply their learning to a real-life situation. In a real work environment, the answers to some of these questions would likely be generated among a team or group of people as opposed to one supervisor. As such, it may be beneficial to divide the class into teams to complete this skill application. The questions listed should ensure a good deal of discussion and brainstorming. As discussed in previous chapters, the power of synergy tells us that two heads are better than one! Thus, this should give them some good practical experience in designing control systems and how to implement them in an organization. Instructors may want to refer to the Role Play guidelines as provided in the introduction to Chapter 1. Team Skill Builder 13-2: Help Caitlyn Understand Her Financials The most recent financial report for Fisherman’s Wharf just arrived. The company accountant, Lynn Green, is not available to answer questions Caitlyn, the owner, has about the financials. In groups of three or so, help Caitlyn understand the financials. 1. Working together, help Caitlyn understand her most recent financial report. Her sales have increased for the quarter which is positive Her operating expenses are in line with the prior quarter which is also positive Despite higher sales, her Net Income has declined significantly. This requires further analysis. 2. What are some appropriate financial ratios that might be used to demonstrate how Fisherman’s Wharf is really doing? What would they reveal? The most important analysis to complete is a gross margin analysis. This analysis speaks to the profitability of the business. Given her sales increased and operating expenses were stable, the decline in Net Income is attributable to declining gross margins (Gross Margin = the difference between the cost charged by her suppliers and the price at which she can sell the product to her customers). As illustrated in the table below, her Gross Margin for the quarter had declined from 24.6% of revenue to 17.0% of revenue. This is a significant decline and the leading driver of the decline in Net Income from $68 to $24. 3. Based on the group’s analysis of the most recent financials, what suggestions would the group make to Caitlyn? The decline in Gross Margin is the being driven by an increase in Cost of Goods Sold or a reduction in the sales price of her product. Assuming she has kept the sales price constant, she is paying more to get product and thus reducing her profitability. In order to correct his problem, she can either raise prices to her customers or negotiate a better price from her suppliers. 4. The pressure on small-business owners, like Caitlyn, to increase sales and control costs has increased dramatically in the past few years. What dimensions of organizational renewal and change might Caitlyn want to consider? Caitlyn should consider the following three steps in organizational renewal and change: •Set standards •Check performance against standards •Take corrective action when necessary The age-old question: “How’s it going?” can only be answered if a person knows where he or she wants to go and how that person will know if he or she got there. In recent years, there has been a greater emphasis on metrics. A metric or standard is a measure to assess how a person is doing in a particular area. Standards may be set for tangible and intangible areas. A supervisor’s experience and knowledge can help that supervisor develop performance standards. More precise work standards can be set through motion and time studies and workflow charts. Employee participation in setting standards is crucial to employee acceptance of those standards. Many supervisors focus their control efforts on selected strategic control points, or strategic standards, which are major performance indicators. Team Skill Builder 13-3: Wise the “Know-It-All” The “know-it-all” or “expert” presents her opinions as if she knows all there is to know on any and all subjects. A corollary problem in this skills application is that Brenda Wise is the plant manager. She leaves very little room for differences in opinion and her management style is “my way or the highway.” She will probably leave a few battered and bruised bodies in her wake. Students should begin by reviewing the suggestions for dealing with difficult people and on how the supervisor can more effectively manage meetings with the boss. One of the most difficult things for Dick Warfield is to give feedback to his boss. If he wants to modify his boss’ behavior, he needs to provide feedback that helps Brenda Wise understand the situation, his feelings, what he wants, and how the behavioral change will benefit the Barry Automotive’s New America facility. Specific suggestions include: •Prepare oneself before disagreeing with them. •Pick one’s turf and the subject on which to do battle. •Use effective communication techniques, reflective questioning, paraphrasing, etc. •Give feedback in a non-threatening, productive manner. •Express one’s feelings about the behavior, how it impacts one and the facility. •Identify the specific behavior one would like to have happen. •When Wise’s misrepresents the truth (facts), call her on them. Use facts and figures to support your position; otherwise Wise will be will impossible to persuade. •Model the behavior one desire in others. •Protect Brenda Wise’s dignity and self-respect. •Give her credit when due. •Spell out the consequences of what will happen if Brenda Wise changes her behavior. Students will find out that there are different types of experts. Some are nothing more than “hot air balloons.” Others are genuine experts and control freaks. Different strategies are necessary for coping with each. Every boss has a boss. Where is Brenda Wise’s boss? Does Wise behave this way when dealing with corporate management? In short, as Dick Warfield, the student must strive to change what Brenda Wise does, not who or what she is. As that great management theorist, Kenny Rogers, once said, “You’ve got to know when to hold them, know when to fold them, know when to walk away and know when to run!” Dick Warfield must be willing to cut his losses—even if that means putting his job at risk. Answers to Supervision in Action Questions Video Clip: Honest Tea—Adaptive Organization 1. Do you think that the business plan for Honest Tea should have had better detailed production and distribution plans? Why or why not? Students’ answers may vary. Yes, Honest Tea should have focused more on its production and distribution plans. Since the time the firm was started, they didn’t have the reach to reach out to their target market and customers. And instead, they bought one-third of a bottling plant which was becoming more of a burden on the firm as it neither produced good quality products that the firm wanted nor was it making good profits. This lead to a delay in reaching out to the target customers and this unnecessary investment limited the firm’s investment opportunities. 2. Do you think that it was a good thing that Seth managed the day-to-day operations alone as the TeaEO? Explain. Students’ answers may vary. Some may think that it was a good combination as Seth managed every department like he wanted it and Barry was always available for advice. There were not too many controlling forces in the firm and it helped Seth make decisions. This would also give Seth a clear picture as he was the one who saw the everyday operations of the firm. 3. Do certifications really matter when it comes to the quality of products offered by a firm? Why or why not? Explain. Students’ answers may vary. Certifications matter to the firm as well as its customers. Customers trust the certification organizations to do their job and guarantee a certain quality that is accepted by the nation. Honest Tea is one such firm with certifications from organizations which have certified that the firm manufactures quality products. It also has partner organizations that provide them with the best raw materials to produce their products and they also follow sustainable and organic farming practices. 4. What do you think about Seth Goldman’s career from being an employee to becoming an entrepreneur? Does it inspire you to start your own business venture? Why or why not? Students’ answers may vary. Seth Goldman started out as an employee at a corporate firm, but after some time, he wanted to start his own business. So, he quit his job and began Honest Tea with Barry Nalebuff, his professor at Yale School of Management. Seth handled the day-to-day operations while Barry was still teaching at Yale and giving advice to Seth about the firm’s operations and products. 5. What do you think about the “mission-driven-innovation” concept? Students’ answers may vary. As Seth Goldman puts it, “It is when a firm, throughout its life, finds a way to advance its mission and change the feature(s) of an existing product or service or bring a new product or service in to market. It’s really a continual process.” This is vital for a firm’s survival and advancement in today’s market. Customers want firms that can adapt and change as and when possible. Video Clip: Barcelona—Quality and Performance 1. What do you think about Scott’s approach to managing the Barcelona restaurants? Do you think he needs to modify his approach? Why or why not? Students’ answers may vary. Scott’s approach to managing the restaurants is mostly based on the feedback loops. But he also relies heavily on technology such as texts, secret shopper reports, e-mails. Students’ answers for the last question will vary. Some students might agree to modification to this approach. He could also observe the steps that the firm’s competitors are taking toward ensuring higher quality of service. As the firm’s budget is mostly for controlling the quality of service, customers expect it to be of the best quality in terms of the food, its service, the ambience, and the seating arrangement. 2. How do you think Barcelona’s restaurants are managing their quality of service despite many restaurants entering and leaving the industry? Students’ answers may vary. Barcelona invests all of its resources into controlling the quality of its services. Hence, customers expect only the best. They have meetings which are held to improve the quality of the service and it also provides for a learning curve amongst the chefs, the general managers, and the top management. They ensure that there is consistency in the quality of their service. 3. Why do you think that quality is important for Barcelona restaurants? Students’ answers may vary. Quality is important for Barcelona restaurants for a number of reasons. Firstly, they have a customer base which has come to expect a certain standard of service from the firm and the firm puts its best efforts in maintain the same quality of service. They see to it that the firm has a consistency in the quality of service. If the quality of the service drops below the set standard, then customers may refuse to visit the restaurant again. Another factor influencing the quality of service is the willingness of employees to ensure that customers love their dining experience in the restaurants. Employees must be willing to go to farthest lengths to ensure that their customers have the best dining experience. 4. Do you think that Barcelona restaurant group has set high standards for itself in terms of its quality? Explain. Students’ answers may vary. Some students might think that Barcelona Restaurant Group has set high standards for itself in terms of quality. It strives in maintaining its quality of service. The top management creates worksheets for chefs and general managers to improve the quality of the restaurant. Also, the restaurants face a lot of internal competition. The chefs and general managers of restaurants under the Barcelona Restaurant Group compete with each other to stay at the top. 5. Do you think Barcelona Restaurants would be able to survive in future with its existing strategies for quality management or do they need to develop new strategies to stand strong for the future? Explain. Students’ answers may vary. The strategies in place at Barcelona Restaurants are working for them. They have shoppers’ reports, food comment cards, and feedback loops that are working well for the firm. They also get e-mails from customers and watch video camera footage to see how customers could be served better. They train their general managers and chefs in areas they lack behind. Solution Manual for Supervision: Concepts and Practices of Management Edwin C. Leonard , Kelly A. Trusty 9781285866376, 9781111969790