Disregard for the System
According to management expert Harry Hatry in his book “Performance Measurement,” putting performance metrics on an employee does not gauge how well the rest of the system works. The employee may be achieving his performance measurement numbers, but he may be putting in an extra effort because of an inefficient order-taking system. On the other hand, the employee might be exceeding performance metrics because the system is extremely efficient. The employee could be even more productive in that circumstance, but without a proper measurement of the systems in place, it can be impossible to tell how much of the performance measurement is the employee, and how much is the system.
Employees might try to manipulate the system and have the metrics work in their favor and that could cause a problem with quality control, states the Association of Chartered Certified Accountants. If no quality control is in place and performance is based solely on achieving performance measurement metrics, then substitutions can be made to reach the numbers that could be inferior. For example, if an inside sales representative is given a metric of having to make 20 outbound phone calls a day, then he might choose to call his friends and family 20 times a day to reach the goal. Rigid quality control of metrics needs to be put in place to help increase the effectiveness of the process.
Performance measurement metrics tend to be one-sided and do not give the whole story of the company and client relationship, according to the British Department of Trade and Industry. The employee might be meeting performance numbers as far as your company is concerned, but no measurement for the quality of the service being offered exists. It is only a measurement in quantity. By the time the drop in quality results in a drop in quantity, the relationship with the customer might already be damaged.
Guidelines for proper control
- Setting performance standards: Managers must translate plans into performance standards. These performance standards can be in the form of goals, such as revenue from sales over a period of time. The standards should be attainable, measurable, and clear.
- Measuring actual performance: If performance is not measured, it cannot be ascertained whether standards have been met.
- Comparing actual performance with standards or goals: Accept or reject the product or outcome.
- Analyzing deviations: Managers must determine why standards were not met. This step also involves determining whether more control is necessary or if the standard should be changed.
- Taking corrective action: After the reasons for deviations have been determined, managers can then develop solutions for issues with meeting the standards and make changes to processes or behaviors.
Timing of Controls
Controls can be categorized according to the time in which a process or activity occurs. The controls related to time include feedback, proactive, and concurrent controls. Feedback control concerns the past. Proactive control anticipates future implications. Concurrent control concerns the present.
Feedback occurs after an activity or process is completed. It is reactive. For example, feedback control would involve evaluating a team’s progress by comparing the production standard to the actual production output. If the standard or goal is met, production continues. If not, adjustments can be made to the process or to the standard.
An example of feedback control is when a sales goal is set, the sales team works to reach that goal for three months, and at the end of the three-month period, managers review the results and determine whether the sales goal was achieved. As part of the process, managers may also implement changes if the goal is not achieved. Three months after the changes are implemented, managers will review the new results to see whether the goal was achieved.
The disadvantage of feedback control is that modifications can be made only after a process has already been completed or an action has taken place. A situation may have ended before managers are aware of any issues. Therefore, feedback control is more suited for processes, behaviors, or events that are repeated over time, rather than those that are not repeated.
Proactive control, also known as preliminary, preventive, or feed-forward control, involves anticipating trouble, rather than waiting for a poor outcome and reacting afterward. It is about prevention or intervention. An example of proactive control is when an engineer performs tests on the braking system of a prototype vehicle before the vehicle design is moved on to be mass produced.
Proactive control looks forward to problems that could reasonably occur and devises methods to prevent the problems. It cannot control unforeseen and unlikely incidents, such as “acts of God.”
With concurrent control, monitoring takes place during the process or activity. Concurrent control may be based on standards, rules, codes, and policies.
One example of concurrent control is fleet tracking. Fleet tracking by GPS allows managers to monitor company vehicles. Managers can determine when vehicles reach their destinations and the speed in which they move between destinations. Managers are able to plan more efficient routes and alert drivers to change routes to avoid heavy traffic. It also discourages employees from running personal errands during work hours.