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TOPIC: BASIC ELEMENTS OF CONTROL

THE NATURE OF CONTROL

Control is the regulation of organizational activities so that some targeted element of performance remains within acceptable limits. Without this regulation, organizations have no indication of how well they are performing in relation to their goals. Control, like a ship's rudder, keeps the organization moving in the proper direction. At any point in time, it compares where the organization is in terms of performance (financial, productive, or otherwise) to where it is supposed to be. Like a rudder, control provides an organization with a mechanism for adjusting its course if performance falls outside acceptable boundaries.

For example, FedEx has a performance goal of delivering 99.9 percent of its packages on time. If on-time deliveries fall to, say, 99.6 percent, control systems will signal the problem to managers so that they can make necessary adjustments in operations to regain the target level of performance. An organization without effective control procedures is not likely to reach its goals-or, if it does reach them, to know that it has! The Purpose of Control As Figure 14.1 illustrates, control provides an organization with ways to adapt to environ- mental change, to limit the accumulation of error, to cope with organizational complexity. and to minimize costs. These four functions of control are worth a closer look. Adapting to Environmental Change In today's complex and turbulent business environment, all organizations must contend with change.' If managers could establish goals and achieve them instantaneously, control would not be needed. But, between the time a goal is established and the time it is reached, many things can happen in the organization and its environment to disrupt movement toward the goal-or even to change the goal itself. A properly designed control system can help managers anticipate, monitor, and respond to changing circumstances.' In contrast, an improperly designed system can result in organizational performance that falls far below acceptable levels. For example, Michigan-based Metalloy, a 60-year-old, family-run metal-casting com- pany, signed a contract to make engine seal castings for NOK, a big Japanese auto parts maker. Metalloy was satisfied when its first 5,000-unit production run yielded 4,985 acceptable castings and only 15 defective ones. NOK, however, was quite unhappy with this performance and insisted that Metalloy raise its standards. In short, global quality standards in most industries are such that customers demand near perfection from their suppliers. A properly designed control system can help managers like those at Metalloy stay better attuned to rising standards. Limiting the Accumulation of Error Small mistakes and errors do not often seri- ously damage the financial health of an organization. Over time, however, small errors may accumulate and become very serious. For example, Whistler Corporation, a largeAdapt to environmental change Limit the accumulation of error Control helps the organization Cope with organizational complexity Minimize costs FIGURE 14.1 The Purpose of Control Control is one of the four basic management functions in organizations. The control function, in turn, has four basic purposes. Properly designed control systems can fulfill each of these purposes.radar detector manufacturer, was once faced with such rapidly escalating demand that quality essentially became irrelevant. The defect rate rose from 4 percent to 9 percent to 15 percent and eventually reached 25 percent. One day, a manager started paying more attention to this and realized that 100 of the plant's 250 employees were spending all their time fixing defective units and that $2 million worth of inventory was awaiting repair. Had the company adequately controlled quality as it responded to increased demand, the problem would never have reached such proportions. Similarly, a routine quality-control inspection of a prototype of Boeing's 787 Dreamliner revealed that a fastener had not been installed correctly. Closer scrutiny then revealed that literally thousands of fasteners had been installed incorrectly in each prototype under construction. As a result, the entire project was delayed several months. If the inspection process had been more rigorous, the error would likely have been found and corrected much earlier, rather than accumulating into a major problem for Boeing*