STATISTICAL AND OPERATIONAL CONTROL-measures of performance

OPERATIONAL CONTROL

Operational control systems are designed to ensure that day-to-day actions are consistent with established plans and objectives. It focuses on events in a recent period. Operational control systems are derived from the requirements of the management control system. Corrective action is taken where performance does not meet standards. This action may involve training, motivation, leadership, discipline, or termination.

Algorithm for operational control

Determine What to Control: The first step in the control process is determining the major areas to control. Managers usually base their major controls on the organizational mission, goals and objectives developed during the planning process. Managers must make choices because it is expensive and virtually impossible to control every aspect of the organizations

Set Control Standards: The second step in the control process is establishing standards. A control standard is a target against which subsequent performance will be compared. Standards are the criteria that enable managers to evaluate future, current, or past actions. They are measured in a variety of ways, including physical, quantitative, and qualitative terms

Measure Performance: Once standards are determined, the next step is measuring performance. The actual performance must be compared to the standards. Many types of measurements taken for control purposes are based on some form of historical standard.

Compare Performance to Standards: The comparing step determines the degree of variation between actual performance and standard. If the first two phases have been done well, the third phase of the controlling process comparing performance with standards should be straightforward. However, sometimes it is difficult to make the required comparisons (e.g., behavioral standards). Some deviations from the standard may be justified because of changes in environmental conditions, or other reasons.

Take Corrective Action: The final step in the control process is determining the need for corrective action. Managers can choose among three courses of action: (1) they can do nothing (2) they can correct the actual performance (3) they can revise the standard. When standards are not met, managers must carefully assess the reasons why and take corrective action. Moreover, the need to check standards periodically to ensure that the standards and the associated performance measures are still relevant for the future.

Evaluation Techniques for Operational Control

Financial techniques Network techniques Management by objective

Strategic control

Strategic control is concerned with tracking a strategy as it is being implemented, detecting problems or changes in its underlying premises, and making necessary adjustments Characterized as a form of steering control

Types of Strategic Control

Premise control Strategic surveillance Special alert control Implementation control

Premise Control

Premise control is designed to check systematically and continuously whether the premises on which the strategy is based are still valid Environmental factors

Industry factors

Strategic Surveillance

Strategic surveillance is designed to monitor a broad range of events inside and outside the firm that are likely to affect the course of its strategy Strategic surveillance must be kept as unfocused as possible Despite its looseness, strategic surveillance provides an ongoing, broad-based vigilance in all daily operations

Special Alert Control

A special alert control is the thorough, and often rapid, reconsideration of the firms strategy because of a sudden, unexpected event A drastic event should trigger an immediate and intense reassessment of the firms strategy and its current strategic situation Crisis teams Contingency plans

Implementation Control

Strategy implementation takes place as series of steps, programs, investments, and moves that occur over an extended time Implementation control is designed to assess whether the overall strategy should be changed in light of the results associated with the incremental actions that implement the overall strategy