What do managers measure?

What managers’ measure is probably more critical to the control process than how they measure. The selection of the wrong criteria can result in serious dysfunctional consequences. Besides, what we measure determines, to a great extent, what people in the organization will attempt to excel at. For example, assume that your instructor has required total at 10 writing assignments from the exercises at the end of each textbook chapter. But, in the grade computation section of syllabus you notice that these assignments are not scored. In fact, when you ask your professor about this, she replies that these writing assignments are for your own enlightenment and do not affect your grade for the course; grades are solely a function of how well you perform on the three exams. We predict tat you would not surprisingly exert most if not all of your effort toward doing well on the three exams.

Some control criteria are applicable to any management situation. For instance because all managers by definition direct the activities of others criteria such as employee satisfaction or turnover and absenteeism rates can be measured. Most managers have budgets for their area of responsibility set in monetary units (dollars, pounds, rupees, francs, lire and so on). Keeping costs within budget is, therefore a fairly common control measure. However any comprehensive control system needs to recognize the diversity of activities among managers. For example, a production manager in an electrical bulb manufacturing plant might use measures of the quantity of bulbs produced per day, bulbs produced per labor hour, scrap rate, or percentage of rejects returned by customers. On the other hand, the manager of an administrative unit in a government agency might use number of document pages produced per day, number of orders processed per hour, or average time required to process service calls. Marketing managers often use measures such as per cent of market held, number of customer visits per salesperson or number of customer impressions per advertising medium.

As you might imagine some activities are more difficult to measure in quantifiable terms, it is more difficult for instance for a manager to measure the performance of a medical researcher or a middle school counselor than of a person who sells life insurance. But most activities can be broken down into objective segments that allow for measurement. The manager needs to determine what value a person, department or unit contributes to the organization and then convert the contribution into standards.

Most jobs and activities can be expressed in tangible and measurable terms. When a performance indicator cannot be stated in quantifiable terms, managers should look for and use subjective measures. Certainly, subjective measures have significant limitations. Still, they are better than having no standards at all and ignoring the control function. If an activity is important the excuse that it is difficult to measure is adequate . In such cases managers should use subjective performance criteria. Of course any analysis or decisions made on the basis of subjective criteria should recognize the limitations of the data.

How do managers compare actual performance to planned goals?

Range of variation

The acceptable parameters of variance between actual performance and the standard

The comparing step determines the degree of discrepancy between actual performance and the standard. Some variation performance can be expected in all activities; it is therefore critical to determine the acceptable range of variation. Deviations beyond this range become significant and should receive the manager’s attention. In the comparison stage, managers are particularly concerned with the size and direction of the variation.