Before managers can determine what must be done to make an organization more effective and efficient, they must measure current organizational performance.9 However, before they can take such a measurement, they must establish some unit of measure that gauges performance and observe the quantity of this unit as generated by the employee whose performance is being measured.10

• How to Measure. A manager who wants to measure the performance of five janitors, for example, first must establish units of measure that represent janitorial performance—such as the number of floors swept, the number of windows washed, or the number of lightbulbs changed. After designating these units of measure, the manager has to determine the number of each of these units accomplished by each janitor. The process of determining both the units of measure and the number of units associated with each janitor furnishes the manager with a measure of janitorial performance.

• What to Measure. Managers must always keep in mind that a wide range of organizational activities can be measured as part of the control process. For example, the amounts and types of inventory on hand are commonly measured to control inventory, whereas the quality of goods and services being produced is commonly measured to control product quality. Performance measurements can relate as well to various effects of production, such as the degree to which a particular manufacturing process pollutes the atmosphere.

The degree of difficulty in measuring various types of organizational performance, of course, is determined primarily by the activity being measured. For example, it is far more difficult to measure the performance of a highway maintenance worker than it is to measure the performance of a student enrolled in a college-level management course.

Once managers have taken a measure of organizational performance, their next step in controlling is to compare this measure against some standard. A standard is the level of activity established to serve as a model for evaluating organizational performance.11 The performance evaluated can be that of the organization as a whole or that of some individuals working within the organization.12 In essence, standards are the yardsticks that determine whether organizational performance is adequate or inadequate.13

Studying operations at General Electric (GE) will give us some insights into the different kinds of standards managers can establish. GE has established the following standards:

1. Profitability standards—In general, these standards indicate how much money GE would like to make as profit over a given period—that is, its return on investment. Increasingly, GE is using computerized preventive maintenance on its equipment to help maintain profitability standards. Such maintenance programs have reduced labor costs and equipment downtime and have thereby helped raise company profits.

2. Market position standards—These standards indicate the share of total sales in a particular market that GE would like to have relative to that of its competitors. GE market position standards were set by company chairman John F. Welch, Jr., in 1988, when he announced that henceforth, any product his company offers must achieve the highest or second-highest market share compared to similar products offered by competitors, or that product will be eliminated or sold to another firm.

3. Productivity standards—How much various segments of the organization should produce is the focus of these standards. Management at GE has found that one of the best ways to convince organization members to commit themselves to increasing company productivity is simply to treat them with dignity and make them feel part of the GE team.

4. Product leadership standards—GE intends to assume a leading position in product innovation in its field. Product leadership standards indicate what must be done to attain such a position. Reflecting this interest in innovation, GE has pioneered the development of synthetic diamonds for industrial use. In fact, GE is considered the leader in this area, having recently discovered a method for making synthetic diamonds at a purity of 99.9 percent. In all probability, such diamonds will eventually be used as a component of super-high-speed computers.

5. Personnel development standards—Standards in this area include the type of training programs that GE personnel should undergo in order to properly expand their skill sets. GE’s commitment to sophisticated training technology indicates the seriousness with which the company takes personnel development standards. Company training sessions are commonly supported by sophisticated technology such as large-screen projection systems, computer-generated visual aids, combined video and computer presentations, and laser videos.

6. Employee attitudes standards—These standards indicate what types of attitudes GE managers should strive to inculcate in GE employees. Like many other companies today, GE is trying to create in its employees positive attitudes toward product quality.

7. Social responsibility standards—GE recognizes its responsibility to make contributions to society. Standards in this area outline the levels and types of contributions management believes GE should make. One recent activity that reflects GE’s social responsibility standards is the renovation of San Diego’s Vincent de Paul Joan Kroc center for the homeless, which was accomplished by work teams made up of GE employees. These teams painted, cleaned, and remodeled a building to create a better facility for some of San Diego’s disadvantaged citizens.

8. Standards reflecting the relative balance between short- and long-range goals—These standards express the relative emphasis that should be placed on attaining various short- and long-range goals. GE recognizes that short-range goals exist to enhance the probability that long-range goals will be attained.

Successful managers pinpoint all the important areas of organizational performance and establish corresponding standards in each area.14 Managers at American Airlines, for example, have set two specific standards for appropriate performance of its airport ticket offices: (1) At least 95 percent of the posted flight arrival times should be accurate, meaning that actual arrival times do not deviate more than 15 minutes from the posted times, and (2) at least 85 percent of customers coming to the airport ticket counter should not have to wait more than 5 minutes to be serviced.

After actual performance has been measured and compared with established performance standards, the next step in the controlling process is to take corrective action, if necessary. Corrective action is managerial activity aimed at bringing organizational performance up to the level of performance standards.15 In other words, corrective action focuses on correcting the organizational mistakes that are hindering organizational performance. Before taking any corrective action, however, managers should make sure that the standards they are using were properly established and that their measurements of organizational performance are valid and reliable.16

• Recognizing Problems. At first glance, it seems a fairly simple proposition that a manager should take corrective action to eliminate a problem—any factor within an organization that is a barrier to organizational goal attainment.17 In practice, however, it often proves difficult to pinpoint the problem that is causing some undesirable organizational effect. Let us suppose that a performance measurement indicates that a certain worker is not adequately passing on critical information to fellow workers. If the manager is satisfied that the communication standards are appropriate and that the performance measurement information is both valid and reliable, the manager should take corrective action to eliminate the problem causing this substandard performance.

• Recognizing Symptoms. What exactly is the problem causing substandard communication in this situation? Is it that the worker is not communicating adequately simply because he or she doesn’t want to communicate? Is it that the job makes communication difficult? Is it that the worker does not have the necessary training to communicate in an appropriate manner? Before attempting to take corrective action, the manager must determine whether the worker’s failure to communicate is a problem in itself or is a symptom—a sign that a problem exists.18 For example, the worker’s failure to communicate adequately could be a symptom of inappropriate job design or a cumbersome organizational structure.

Once the problem has been properly identified, corrective action can focus on one or more of the three primary management functions of planning, organizing, and influencing. That is, corrective action can include such activities as modifying past plans to make them more suitable for future organizational endeavors, making an existing organizational structure more suitable for existing plans and objectives, or restructuring an incentive program to ensure that efficient producers are rewarded more than inefficient producers. Note that because planning, organizing, and influencing are closely related, it is likely that the corrective action taken in one area will necessitate some corresponding action in one or both of the other two areas.

Many organizations use technology to help support their controlling activities. At discount retailer Stein Mart, for example, store managers use Oracle Retail, a suite of merchandising and planning tools, to help them minimize merchandising errors and take necessary corrective action. Stein Mart management recently purchased and implemented the Oracle system to help the company carry out its goals of delivering fresh merchandise to every store and gaining a thorough understanding of its unique customer base.19