Controlling for Organizational Performance

2. 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.

3. 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.

4. 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).

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

6. CONTROL PROCESS
Step 1. Setting up of
(target) standards
Step 2. Measuring
Actual Performance
Step 3. Comparing
Actual Performance
Against the
Standard
Step 4. Analyzing
deviations
Step 5. Taking
Managerial Action

7. 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.

8. 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.

9. 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.

10. 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.

11. Deviations outside this range need attention.

12. 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

13. 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.

14. 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

15. 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

16. 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.

17. 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.

18. Measures of Organizational
Performance
All managers must know which measures will give them the
information they need about organizational performance.
organizational productivity
organizational effectiveness
industry and company rankings

19. 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.

20. 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.

21. 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

22.  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.

23. Feedforward
controls
• input
• Anticipates
problems
• preliminary or
preventive controls,
attempt to identify
and prevent
deviations in the
standards before
they occur.
Concurrent
controls
• processes
• Corrects problems
as they happen
• monitor ongoing
employee activity to
ensure consistency
with quality
standards.
Feedback
controls
• output
• Corrects problems
after they occur
• involve reviewing
information to
determine whether
performance meets
established
standards.
Types of Control

24. Tools For Monitoring And Measuring
Organizational Performance
Financial
Controls
Information
Controls
Balanced
Scorecard
Approach
Benchmarking
Best Practices
Approach

25. 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.

26. 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.

27. 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

28. 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.

29. 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.

30. Thank You !