After reading this chapter, you should be able to:
The CEO and MD of Tata Consultancy Services (TCS), N. Chandrasekaran, is responsible for formulating the company’s global strategy across 44 countries. TCS is India’s largest IT services provider with a workforce of 226,751 professionals. The winner of the “Best CEO of the Year” Award at the Forbes India Leadership Awards 2012, Chandrasekaran was also named the “Pathfinder CEO” of 2012 by the National HRD Network (NHRDN). He is behind several strategic new business initiatives at TCS. The company added new business lines and entered new industry verticals under his careful watch and control. After Chandrasekaran took over the TCS administration in 2009, he reorganized the company into many smaller operational units consisting of 3,000–14,000 employees, each pursuing the best possible growth in their individual domain. Each unit is allowed to manage its own costs and is responsible for its margins. Each of these units has a director who reports to Chandrasekaran. This idea turned out to be an important enabling mechanism for better control of the company’s workforce and also margin levels. Keeping the control initiatives of Chandrasekaran in the background, we shall now discuss about the various aspects of managerial control.
Organizations must influence and control the behaviour of its members if they want to realize their plans and goals effectively. As an important managerial function, control aims at increasing the chances of achieving the organizational goals. Managers, at every level of the organization, develop and apply controlling techniques to regulate the organizational activities and to achieve desired results. Through controlling, managers ensure that things go on in the way they were planned. As such, management controlling involves checking to decide whether organizational activities adhere to an established plan. It also involves taking necessary actions, if there are any deviations from the plans. Controlling also enables managers to modify or redefine the goals and plans to suit new developments and circumstances. Further, controlling enables managers to stay in contact with their subordinates as they perform their tasks and discharge their responsibilities.
Management control is an absolute necessity in any organization that practices decentralization. However, the kind of control system chosen by an organization should fit its strategy well.1 In other words, a management control system should affect and be affected by the development of organizational strategies. Management control is basically a process involving different stages. However, the fundamental aim of this process is to motivate people to accomplish the organizational goals and to influence the chances (probability) that they will act in a desired manner.2 Management control involves activities like planning what the organization should do, coordinating the different activities, communicating information, evaluating the activities and information, deciding the appropriate actions, if necessary, and influencing people to bring about desired behaviour.3
Most definitions of control focus on the influence of members’ behaviour to accomplish the organizational goals and strategies. We shall now look at some definitions of control.
“Management control is the process by which managers influence other members of the organization to implement organization’s strategies.”—Robert N. Anthony4
“Managerial controlling means ensuring that actual performance is in line with intended performance and taking corrective action if necessary.”—Edwin C. Leonard5.
“Management control is the process of ensuring that actual activities conform to planned activities.”—James Stoner6
“Controlling is the process of monitoring, comparing and correcting work performance.”—Stephen P. Robbins7
“Control is any process that helps align the actions of the individuals with the interests of their employing firm.”—Arnold S. Tannenbaum8
“Organizational control is defined as the systematic process through which managers regulate organizational activities to make them consistent with the expectations established in plans and to help them achieve all predetermined standards of performance.”—K. A. Merchant9.
We may define managerial controlling as the process of influencing the behaviour of members with the aim of increasing the chances of their achieving the organizational goal.
Based on the above definitions, the following characteristics of control are derived.
Control is an important activity which ensures that organizational activities are carried out properly and that short- and long-term goals are attained in a time-bound manner. It also has several other uses. They are:
Control seeks to assist the management in steering the organization towards its goals. Managements may have different key result areas (KRAs) for different management control systems. For instance, they may focus on profitability, market position, productivity, product leadership, employee development, employee safety, and public responsibility. In case of employee safety, many organizations adopt proactive health and safety standards to achieve business results and employee motivation. We shall now discuss The Coca-Cola Safety Management system (TCCSHS), a program run by Coca-Cola.
The primary aim of TCCSMS is to guide the company in achieving a safe work environment for its employees. TCCSMS is defined as a rigorous set of operational controls to manage the known aspects and risks of business operations. The controls generally align with the top global requirements and consensus standards. Once the full implementation of operational controls is achieved, it would make sure that the workplace at Coca-Cola meets international standards. The management also ensures that its control systems are constantly updated based on the changes to equipment, structures, processes and procedures.44
Controlling, as a managerial function, is performed through a stepwise process. As shown in Figure 16.1, the basic steps in any controlling process are: (i) establishing standards of performance, (ii) measuring the actual performance, (iii) comparing the actual performance against the standards and (iv) deciding the need for corrective actions. Let us now discuss these steps in detail.
The entire control process begins with the establishment of performance standards against which the actual organizational and individual performances are compared. The performance standards should be clear, concrete and measurable in nature. They should also be consistent with the goals and objectives of the organization. Normally, the goals formulated by managers at the time of planning become the standards for controlling process. Performance standards must be stated clearly in definite terms since they become the criteria for managers to evaluate the past, present or future actions of the people.16 Organizations normally decide on the type and form of performance standards depending on what is measured and the managerial levels that are responsible for taking corrective actions. The performance standards are usually generated from within the organization but sometimes they may originate from outside sources too. For instance, the Food Safety and Standards Authority of India (FSSAI) set standards for articles of food under the Food Safety and Standards Act, 2006. Whatever may be the sources, performance standards should be neither unrealistically too high nor too low.
Figure 16.1
The Steps in the Controlling Process
Once the management decides on what is to be measured, it should decide how to measure the performance. In this regard, the management should decide the key performance areas or Key Result Areas (KRAs) that are to be measured. The KRAs refer to those aspects of an organization that need to function effectively so that the organization, as a whole, succeeds in accomplishing its goals and objectives.17 In case of the marketing function, the KRAs can be sales volume, salesperson’s performance, sales expenses and advertising expenses. It may be quantity, quality, cost and productivity for production function. In case of HR function, industrial relations, attrition and absenteeism can be the key indicators. However, the performance standards at higher levels of the management are generally abstract in nature and difficult to be measured.16 For instance, “customer satisfaction” or “employee morale” may become the standard for measuring the success of an organization as a whole. The performance standards of an organization must be fair and consistent. When the standards are not fair and accurate, they cannot serve their intended purpose.
Once the performance standards are established and communicated in time, the next crucial step for managers is to undertake the measurement of actual performance. In this regard, managers need relevant information to determine what the actual performance is. Most performance measures are expressed in quantitative terms (like sales figures or cost of units produced). But there are certain performance measures that cannot be quantified. In such situations, non-numerical data (also called qualitative data) can be used as performance measures.
Generally, performance measurement is a continuous and ongoing activity of organizations. The timing of performance measurement is generally crucial for the success of the control exercises. The nature of product or service can influence the decision regarding when performance measurement is actually undertaken.18 The timing of performance evaluation is often influenced by the time frame of the organizational goals. For instance, the short-term goals need evaluation on a short-term basis. In contrast, the long-term goals may provide a longer time frame for performance evaluation. Any mismatch between the duration of the goals and frequency of performance evaluation may lead to the failure of control exercise.
Managers tend to use one or more of the four approaches to measure the actual performance. These approaches are personal observations, statistical reports, oral reports and written reports.19 The daily, weekly and monthly reports on sales figures measure sales performance. Similarly, product quality, production volumes and unit cost measure production performance. However, some control criteria like employees’ absenteeism and turnover, and employee satisfaction can be used to measure any management situation as people management is the responsibility of all the managers. In any case, measuring performance is not a simple or straightforward task for many jobs in organizations.
At this stage of the controlling process, actual performance is evaluated with the help of the standards set earlier. This is done by comparing the actual performance with the standards with the aim of knowing the performance variations. The actual performance may be more than (positive variation), less than (negative variation) or equal to the standard. It is to be understood clearly that some variation in performance can be anticipated in all organizational activities. Managers normally initiate corrective actions only when the variations exceed the permissible limits or range. Normally, managers will find it easy to make comparisons if the standards are clear and the actual performances are easy to measure.20
Based on the results of the comparisons, managers will determine the need for corrective actions. A simple control equation is useful for better understanding of the need for action.21
Managers normally choose to act in any one of the following three ways after they complete performance evaluation:
After careful analysis of the problems behind the performance deviation, managers could take different corrective actions. For instance, they may provide training, initiate disciplinary actions or decrease monetary benefits, if unsatisfactory work is found to be the reason for performance variation. In any case, managers must first decide whether the situation requires immediate corrective action or basic corrective action. If the performance problem is to be attended immediately to achieve desired performance levels, managers may prefer immediate corrective actions. As against this, if the managers want to know the root cause of performance variations in detail, they should go for basic corrective actions. Basic, corrective actions help managers to know why and how the performance deviated.
Approaches to management control system can be classified into six categories. An understanding of these approaches will enable managers to design management control system effectively. As shown in Figure 16.2, these approaches are: (i) bureaucratic and mechanic approach, (ii) cybernetic approach, (iii) agency approach, (iv) human resource approach, (v) contingency approach and (vi) cultural approach.24 Let us now briefly discuss these approaches.
According to this approach, control is a discrete function of the management. Organizations adopt formal policies, practices and procedures to standardize and influence behaviour, evaluate performance, and correct undesirable deviations from the standard. Objectives, rules, hierarchy of authority, reward systems and standardization are a few bureaucratic and mechanic instruments used to implement control system. Employee compliance is the ultimate goal of bureaucratic approach.
According to cybernetic approach, activities related to the control process are actually information-based activities. They are to be seen from an information processing perspective. Goal-setting, budgeting, resource allocation, performance measurement, identification of deviations and corrective actions and reward allocation are all information-based activities. The basic premise of this approach is that “a system’s self-regulating ability is based on feedback loop.” A feedback loop is a section of the control system that allows for self-correction whenever there are differences between the actual output and standard output. As per this approach, corrective actions in case of performance variance will happen as a dynamic process based on the feedback loops.25
Figure 16.2
Approaches to Management Control
According to this approach, each organization is a unit in which principal–agent relationships are primary. The two important agency relationships seen in organizations are shareholders (principal)—top management (agent) relationship and top management (principal)—subordinates (agent) relationship. As per this view, organizations should strive hard to reach commonality of interest between the principals and the agents, resulting in minimized agency costs.
According to this approach, it is necessary to find a good fit between the organization and its members. This is because both the organization and employees benefit out of such good fit. For instance, organizations benefit by getting committed people with creativity and motivation. Individuals benefit by getting meaningful, enjoyable and rewarding jobs. In this approach, organizations are primarily viewed as “coalitions of decision-making individuals.”26 It is therefore necessary to identify, understand and recognize the differences in the capacity and capability of these individuals.
According to this approach, organizations are open systems that should constantly adapt to the changes in internal and external environments. This approach presupposes that there can be no “fit all” control system available that suits all organizations in all situations. This is because the efficacy of a system (organization) is affected by a variety of contingency factors. Generally, the size, scale, technology, leadership style, organizational culture, stage in the organizational life cycle, resource requirements and organizational structure are a few examples of contingency factors that affect an organization.
According to this approach, each organization has certain cultures that help its members to interpret the organizational activities, events, policies, procedures, rules, documents and processes. Usually, the values, norms, traditions, perceptions and beliefs collectively shape the culture of an organization. As per this approach, cultural factors have a significant influence on the control practices of an organization.27 Hence, management must understand how organizational members understand, define, modify and shape the control system.
Since there is no universally-accepted control system available for organizations, it becomes essential for each organization to develop a control system that suits the situation and requirements. Moreover, managements need to establish control at different levels and functional areas. Managers thus use different control methods for supervising and measuring the organizational performance. Generally, the nature of the organization, intended users and the characteristics of problems influence managerial decisions regarding the choice of control methods and systems. Broadly, management control can be classified into internal control and external control.
Internal control refers to people exercising self-control in their work. In other words, internal control takes place when organizational members exercise self-discipline while fulfilling the goals assigned or job expectations. To make internal control effective, managers must ensure that the employees are well aware of the organizational mission and their goals.28 Employees should also be provided with adequate resources for doing their job well. Internal control is better suited for well-motivated, committed and high calibre workforce. It is an effective mechanism for empowering individuals and teams.
External control refers to the imposition of control on the work activities of the organizational members through external rewards and direct supervision. Generally, external control takes place when organizational members are controlled by managers through the administrative system. In external control, the situation within which employee does his/her work is clearly structured to make certain that goals are properly fulfilled. To make external control effective, managers must ensure that: (i) the objectives and performance standards are relatively difficult so that the members put in their best possible efforts (ii) there is no scope available to the members to manipulate the performance measures and objectives set by the managers (iii) the members know about the direct link between performance and rewards.29 External controls can ensure that the members perform their work well because they are aware that their good performance will be rewarded. Though members may fulfil their goals, external control cannot develop a sense of commitment among the organizational members.
The control system of an organization can be classified as operations control, financial control, structural control, strategic control and information control.30 Managements should choose a need-based, goal-oriented organizational control system for effective utilization and control of its human, physical, financial and information resources. We shall now briefly discuss the important organizational control methods, as shown in Figure 16.3.
Operations control deals with the processes adopted by an organization for conversion of resources into products or services. As organizations mostly operate in an open system, they interact with the environments through an input–throughput (process)–output cycle. This calls for control at every phase of the cycle. The three types of control that deal with different phases of input–process–output cycle are feedforward control (preliminary control), concurrent control (screening control) and feedback control (post-action control). These operation controls can be exercised at different points with regard to the conversion process adopted by an organization.31 We shall now see the purposes and characteristics of each of these basic forms of control.
Figure 16.3
Types of Management Control
Feedforward control—When managers implement control even before the actual activity begins, it is called feedforward control. The feedforward control is also known as input control, steering control or preventive control. The main aim of feed-forward control is to solve the problems before they occur. This type of control focuses on the human resources, physical resources and financial resources that become the input for the transformation process. It proactively seeks to minimize or prevent the performance deficiencies through a precautionary control system. The success of feedforward control depends crucially on the ability of managers to anticipate the problems and achieve timely interventions. Feedforward control thus involves asking questions like, “What can we do ahead of time to help our plan to succeed?”32 Preventive maintenance on machinery or due diligence is an example of feedforward control. Generally, efficient cross-functional communication and long-term strategic thinking are essential for feedforward control.
Concurrent control—This control is exercised even when the work activity is in progress. It is also called real-time control and process control. This control concentrates primarily on the present situation. When the performance standards are not met, managers or any other authorized person can stop the work activity in progress and take necessary corrective actions. Thus, the aim of this control is to solve the problem even while it occurs. The well-known form of concurrent control is direct supervision by managers or supervisors. This supervision is also known as “management by walking around.” The merit of this control system is that it ensures that transformation process is functioning properly and that the expected results are achieved. It also makes sure that the work problems are attended to before they become too costly. The strength of this control is that it attempts to eliminate or reduce the delay between the actual performance and feedback on the performance.33 A few examples of concurrent control are display panels on the photocopier machines and computer printers that alert the users in case of malfunctioning, displays on the dashboard of automobiles that warn drivers of impending or actual problems like low fuel or oil, brake problems, engine temperatures, etc.
Feedback control—When control is exercised on the results (outcome) of the work activity it is called feedback control. This control is also called output control, corrective control or post-action control. This is the most popular kind of control in organizations. The primary aim of this control is to identify the undesirable output and apply corrective actions. In feedback control, the information received as feedback is typically fed back into the process for taking necessary remedial actions. Many studies have shown that feedback is capable of improving both individual and organizational performance.34
The underlying principle of feedback control is that everyone can learn from the past experience. Financial statements like income statements and balance sheet are examples of feedback control. The weakness of this control is that there may be a time delay in taking corrective action to solve the problems. For instance, when the income statement reveals loss at the end of the business year, the information may be of no use to the managers as the loss has already occurred. However, post-performance feedback can be an effective input for future planning, goal formulation and revision of input and process designs. Feedback enables managers to take a holistic view of the effectiveness of the planning and execution of the work activities. Feedback control can enhance employee motivation when information on how well they performed in the work is shared with them.35
Financial control deals with the financial resources of an organization. It aims at controlling the inflow and outflow of financial resources. The primary purpose of financial control is to check whether the financial resources are optimally utilized so that the organization controls cost and earns profit. Financial statements, budgets and financial audits play a key role in any organization’s financial control initiatives. We shall now discuss them here.
Financial statements—Financial statements are summaries of monetary data about an organization. Financial statements typically include the balance sheet and the income statement. Balance sheet shows the financial position of the organization at a particular point of time (say, on 31st March) by listing its assets and liabilities. Income statement indicates the results of the organization’s business operations, which may show profit (revenue more than expenses) or loss (expenses more than revenue) during the year.
Financial statements can provide a wealth of information to external parties like shareholders, creditors, government, tax authorities, trade unions, customers and the general public. But they have limited use to managers. This is because financial statements mostly deal with the past period of an organization. Managers therefore prepare ratios (ratio analysis) and cash flow statements based on financial statement data to make decisions and to exercise control over the financial resources. Here, cash flow statements enable managers to find out the sources of cash inflows and the transactions that result in the cash outflow during a specific period (say, an accounting year). Ratio analysis in turn offers multiple benefits to managers. Let us now see how ratio analysis helps in financial controlling activities of managers.
Ratio analysis—Ratios are useful to managers in assessing the financial health of an organization. Ratio analysis involves the comparison of any two related financial data to make meaningful inferences. The rationale behind the preparation of ratio analysis is that a single figure (say, a profit of Rs. 5 million) by itself has little meaning unless it is compared with another relevant figure (say, a capital Rs. 50 million). Now it can be ascertained that the business made a 10% return (profit) on its investment (5 million/50 million x 100). Depending on the information requirements, managers can work out different ratios. The frequently used ratios are as follows:
Budgets—Budgets are the important financial tools used by managers for controlling work activities at almost all levels of the organization. Budget is a financial plan of an organization developed for a specific period of time. Budget may offer information on the estimated revenues and expenses connected with a function (like marketing, production, etc.), a unit or an organization. It may also indicate which work activities are important for the organization and how much of resources need to be allocated to these activities. Budgets are generally formulated before the commencement of the work activities. They become the standards to the managers for measuring, monitoring and controlling the work activities. Budgets can also become the basis for coordinating the different activities of an organization. Budget feedback can serve as inputs for improving both the planning and controlling processes. However, budgets are often viewed as costly and time-consuming exercise. They are also seen as obstacles that can limit the imagination and innovations of people.
Budgets can broadly be classified into operating budgets and financial budgets. Operating budget deals with the physical activities of organizations. Examples of operating budgets are purchase budgets, production budgets, sales budgets and expenses budgets. Financial budget deals with cash receipts and payments, business results and financial status or positions.36 Cash budget, budgeted income statement, budgeted statement of retained earnings and the budgeted balance sheet are the components of financial budgets.
Financial audit—An audit is an independent examination and expression of opinion on the financial statement of an enterprise by an appointed auditor.37 It involves independent verification of an organization’s financial, operational and accounting practices. It also provides assurance on the reliability and fairness of the information in conformity with the standards. Basically, audits are of two types, namely, compliance audits and operational audits.38 Compliance audits confirm the fairness of information against the given standards. Operational audits evaluate the efficiency and effectiveness of a work activity, function, unit, department or the whole organization. Based on the nature of the activities involved, audit can also be classified as external audit and internal audit. Let us now look at these two types of audits.
Many Indian companies have developed well-designed internal control systems based on the nature of their business and the size and complexity of their operations. The presence of a robust internal control system and process ensures smooth conduct of the business as it provides for well-documented policies/guidelines, authorizations and approval procedures. Typically, this internal control system is periodically checked by internal as well as external auditors. The internal control system of 3M India Limited is a case in point.
3M India Limited is the Indian subsidiary of the diversified technology solution provider 3M Corporation, a global innovation company. This company regularly carries out an audit of its offices, factories and key areas of business segments based on the plan approved by the audit committee. The management of this company usually carries out such audits through its own corporate internal audit department to identify any possible deviation to the existing internal control procedure. The reports of the internal auditor are sent to the audit committee as well as to the managing director. The audit reports/observations are periodically reviewed and compliance ensured, if necessary. The summary of the internal audit observations and status of the implementation is presented to the audit committee of the board of directors. The audit committee also reviews the status of implementation of the recommendations on a regular basis and concerns, if any, are reported to the board.45
Structural control—focuses on the effectiveness of the organization’s structural variables or elements in accomplishing the predetermined goals and objectives. Managements may use any one of the four structural control mechanisms for achieving the organizational goals and purposes. They are centralization, formalization, output control and culture control.
Centralization—Managers can exercise stricter control by centralizing the decision-making authority. When decision-making powers are centralized and vested with the managers, they can achieve control over decision-making process. Managers can also achieve control over the decision-making process by insisting that the decision makers obtain their approval for decisions before implementing them.
Formalization—Managers may enforce strict, detailed and formal rules, procedures, policies and guidelines for guiding in the decision-making process in organizations. In this way, they can have close control over the organizational members.
Output control—Managers may control the decision-making process by establishing goals and objectives that will act as measures for decisions.
Cultural control—“Organizational culture is a system of shared values and beliefs that interact with an organization’s members, structures, and control systems to produce behavioral norms.”39 By establishing a set of shared values and expectations, managers can guide the decision-making process. In this way, organizational culture can help managers in controlling the decision-making process even without any strong base of power. In management of control work, cultural control is often viewed as being a part of specific types of controls like action control and result control.40
Strategic control attempts to identify how effective an organization’s corporate, business and functional strategies are in fulfilling the organizational goal and objectives. This control attempts to make sure that organizations keep effective alignment with their environment that facilitates the achievement of their strategic goals.41 Top-level managers depend on strategic control to gain an operational understanding of the organizations’ various operating units. Strategic control involves effective and continuous control of leadership, technology, human resources, information, structure and operational systems. As a part of strategic control, for example, an organization may analyse whether the existing structure or leadership style accelerates or decelerates the decision-making process of the organization.
Information control has become a necessity in many organizations. Managers need the right information at the right time for making the right decisions about people and physical resources. They also need adequate information for supervising and evaluating the organizational activities. However, they should not be fed with too much information or too little information, as they may not know what exactly is going on.42 Generally, managers use information control to achieve control over all the organizational activities. Now, there is a growing need to tighten the information control mechanisms due to frequent information thefts caused by internal and external security breaches. Managers often rely on computer-based management information system (MIS) to get the necessary information in a timely and need-based manner. MIS is capable of gathering data and converting them into appropriate information useful for managers.
Control is an inherent part of an organization. The success of planning initiatives and goal accomplishment of organizations depends on the effectiveness of the control mechanism. However, the characteristics of effective control may vary with situation and also from one organization to another.
Easily understandable—Proper understanding of a control mechanism by its users is a prerequisite for its success. Generally, the control mechanism must remain simple, straightforward and less complicated at the lower levels of the management. This should enable supervisors to understand and apply them easily and effectively. In contrast, the control mechanism at the top levels of the management can be more sophisticated and in-depth, which may involve the usage of management information system, charts and graphs, and elaborate reports. When the control system is not properly understood by the people who are affected by it, it would cause unnecessary anxiety and frustration in them.
Flexible—The control mechanism must be sufficiently flexible to permit changes, if required. For instance, when a change in product line needs corresponding changes in the raw material requirements, then the control system must be flexible enough to handle the increase or decrease in material requirements. Similarly, when machinery breakdown or material shortage affects the employee performance, managers should recognize the abnormality of the situation and make appropriate changes in the performance standards.
Suitability—The control mechanism should be suitable for the activities carried out. The complexity of the activities should determine the complexity of the control process. A small task performed in a small department may not require an intense and comprehensive controlling. In contrast, large organizations with multiple operations may require complex information system-based control mechanism for effective control. In any case, organizations must ensure the cost-effectiveness of their control mechanism.
Accuracy—The control mechanism must be capable of generating accurate information for decision making by the managers. Inaccurate information understandably leads to inaccurate decisions affecting the interest of the organizations. For instance, salespersons may tend to hedge or manipulate the sales figures to achieve sales targets. Based on such fabricated sales figure, managers will be led to make erroneous decisions.
Timeliness—The control mechanism should be capable of detecting the performance variances without delay. Managers must be informed of such variances at the earliest so that their corrective actions are quick and effective. The control systems that adequately forewarn the managers about the impending performance variation will be the most effective ones.
Accountability—The control system should help the managers to not only detect the performance variation but also indicate clearly the persons responsible for such variations. Besides, it should locate the cause of such variances so that the managers fix accountability clearly and objectively.
Linked to plans and goals—Generally, the goals set as a part of planning process become the standards for controlling. Therefore, there must be a clear and explicit link between planning and control. To make control effective, managers must pay adequate attention to the controlling function (particularly, to developing standards) even while planning the activities. Managers can do an excellent job of linking the planning function with the controlling function by simultaneously working on goal formulation and standards setting.
Principle of exception—The control system must be designed in such a way that only the significant variations that require corrective actions are brought to the notice of the managers. Managers must not be troubled as long as everything is in conformity with the standards. This should enable them to save their time otherwise used for unnecessary supervision and marginally beneficial control reports.
Employees may oppose control for multiple reasons, especially when the purpose and the outcome of such control measures are not known to them clearly. We shall now look at the important reasons for employee resistance.
Excessive control—The control mechanism is essential for the smooth functioning of the organization. Specifically, it ensures effective supervision of employees, maintenance of quality, presence of proper safety measurements and observance of technical procedures. However, exercising too much of control over employee behaviour can certainly be harmful as they may feel stressed out. Excessive control may make employees operate more out of fear, than out of willingness to contribute.
Perceived bias—When employees think that the control mechanism lacks objectivity in the fixation of standards, measures and rewards, they are likely to resist such control measures. Similarly, when the employees feel that the rewards are grossly insufficient for their performance, they may resist control initiatives.
Tendency to avoid accountability—Control requires employees to accept responsibility for their work activities. In reality, employees often mistakenly associate accountability with only discipline and punishment. Consequently, they attempt to oppose control to avoid accepting any responsibility. The resistance can be more severe if the managers are not making sure that the employees understand the goals and expectations clearly, and also what is expected of them.
Absence of employees’ participation in the control process—When employees are not involved in the controlling process, they may feel alienated from it. They may also think that all control measures are externally imposed on them. In such a situation, they may resist managers’ efforts to set up a control system.
Inconsistent focus—When there are inbuilt contradictions in the goals, purposes or focus of the controlling function, employees may oppose control if such contradiction will have any negative effect on the organization or individual. For instance, sales target that forces sales people to pursue high pressure tactics to achieve short-term sales target may produce a negative impact on the public image of the organization in the long run.
Organizations may adopt certain measures to reduce and remove employee resistance to its control initiatives. Some of them are discussed here.
Application of MBO techniques—Techniques such as Peter Drucker’s management by objectivies (MBO) can substantially reduce employee resistance to control initiatives. This is because MBO insists that the superior and subordinates jointly set the goals, plan the work activities and also jointly control such activities. In case of controlling, the emphasis of MBO is on the joint review of subordinates’ performance and also a discussion preceding the implementation of corrective actions.
Gaining the confidence of employees through transparent process—Managers can gain employees’ confidence in control mechanism by ensuring that there is transparency and objectivity in every aspect of the controlling process. These aspects are performance standards, measures, evaluation process, remedial actions, etc.
Multiple verification process—Organizations must have more than one standard to ensure accuracy of the performance indicators. When employees attribute their performance failure to some external factors, the management should be able to check the genuineness of the employees’ claim with the help of other standards.43 Suppose a marketing manager claims that he failed to meet sales figure due to inadequate inventory of the products and delivery delays, a well-designed inventory control system can support or dispute such claims.
Essay-type questions
Subtle Resistance to Controlling Measures
Akasah Tubes Limited is an automobile company engaged in the production and distribution of precision-welded ERW and CDW steel tubes, and manufactures speciality cold rolled close annealed (CRCA) strips catering to international standards and high strength tubular components. The major customers of this company are automobile, general engineering, boiler, white goods and fine blanking industries. For the past several decades, this company has enjoyed a near monopoly in the sale of telescopic front fork inner tubes and cylinder bore tubes for shock absorber and gas spring applications. It had carved a niche for itself through innovation and product development. It has also maintained cordiality and harmony in the labour–management relations. It has not faced any serious industrial disputes in the last two decades. However, things have started to change for Akasah Tubes after the entry of a couple of multinational companies in the field. It began to gradually lose its market domination as a result of fierce competition from its rivals. Due to the availability of alternatives, its customers became more demanding about the quality and cost of products. The management of Akasah Tubes clearly realized that a stringent control system is decisive to its survival, growth and adaptation in a highly-competitive business environment.
To facilitate better control as a part of a quality enhancement and cost-reduction drive, the QC department initiated several measures like revamping the work instructions, safety norms, job codes, development of rapid response teams to attend work-related problems, constant evaluation and upgrading the skills of production line employees, introduction of multiple feedback systems for measuring employee performance, close supervision, etc. Through these improved monitoring and measurement initiatives, the management expected to achieve its revised goals relating to product quality and employee performance. Interestingly, employees in the production department adopted a lukewarm approach to these new control measures. Even though they did not put up any explicit resistance to these measures, they began to believe that the managers had become control freaks due to the fall in sales and market share consequent to the entry of strong rivals in the markets. The production line employees believed that controlling measures and structural changes that are more motivating and rewarding (the desired behaviour), but less controlling and monitoring are more effective in achieving the organization’s quality and performance goals. The management is clueless about what needs to be done next.
Questions
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