Proper use of Reports and Procedures

Management by self-control requires complete rethinking concerning use of reports, procedures and forms.

Reports and procedures are necessary tools. But few tools can be so easily misused, and few can do as much damage. For reports and procedures, when misused, cease to be tools and become malignant masters.

There are three common misuses of reports and procedures. The first is all too common belief that procedures are instruments of morality. They are not; their principle is exclusively that of economy. They never decide what should be done, only how it might be done most expeditiously. Problems of right conduct can never be “proceduralized” (surely the most horrible word in the bureaucrat’s jargon); conversely, right conduct can never be established by procedure.

The second misuse is to consider procedures a substitute for judgment. Procedures can work only where judgment is no longer required, that is in the repetitive situation for whose handling the judgment has already been supplied and tested. Our civilization suffers from a superstitious belief in the magical effect of printed forms. And the superstition is most dangerous when it leads us into trying to handle the exceptional, non-routine situation by procedure. In fact, it is the test of a good procedure that it quickly identifies the situations that even in the most routine of processes, do not fit the pattern but require special handling and decision based on judgment.

But the most common misuse of reports and procedures is as an instrument of control from above. This is particularly true of those that aim at supplying information to higher management, the “forms” of everyday business life. The common case of the plant manager who has to fill out twenty forms to supply accountants, engineers or staff people in central office with information he himself does not need is only of thousands of examples. As a result the man’s attention is directed away from his own job. The things he is asked about or required to do for control purposes , come to appear to him as reflections of what the company wants of him, become to him the essence of his job; while resenting them, he tends to put effort into these things rather than into his own job. Eventually, his boss, too, is misdirected, if not hypnotized, by the procedure.

A large insurance company, a few years ago, started a big program for the “improvement of management”. To this end it built up a strong central-office organization concerned with such things as renewal ratios, claim settlement costs, sales methods, etc. This organization did excellent work – top management learned a lot about running an insurance company. But actual performance has been going down ever since. For the managers in the field spend more and more time filing out reports, less and less doing their work. Worse still, they soon learned to subordinate performance to a “good showing” Not only did performance go to pieces, spirit suffered even more. Top management and its staff experts came to be viewed by the field managers as enemies to be out smarted or at least kept as far away as possible.

Similar stories exist ad infinitum – in every industry and in companies of every size. To some extent the situation is caused by the fallacy of the staff” concept will be discussed. But, above all it is the result of the misuse of procedures as control.

One of the leading company presidents tells the following story on himself. Fifteen years ago he bought for his company a small independent plant in Los Angeles. The Plant had been making a profit of $250,000 a year; and it was purchased on that basis. When going through the plant with the owner – who stayed on as plant manager, the president asked: How do you determine your pricing? That’s easy the former owner answered we just quote ten cents per thousand less than your company does. The next question was, how do you control your costs? That’s easy was the answer; we know what we pay for raw materials and labor and what production we ought to get for the money. The final question was how do you control overheads?. We don’t bother about it was the answer.

The president they can certainly save a lot of money here by introducing thorough controls. But a year later the profit of the plant was down to $125,000; sales had remained the same and prices had remained the same; but the introduction of complex procedures had eaten up half the profit.

Reports and procedures should be kept to a minimum and used only when they save time and labor. They should be as simple as possible. With the advent of system computerization to certain extent rationalization is inculcated thereby unnecessary reports and procedures are automatically controlled.