Managers face a number of challenges in designing control systems that provide accurate feedback in a timely, economical fashion that is acceptable to organization members. Most of these challenges can be traced back to decisions about what needs to be controlled and how often progress to be measured. Trying to control too many elements of operations too strictly can annoy and demoralize employees, frustrate their managers, and waste valuable time, energy, and money. Furthermore, managers may focus on easy-to-measure factors, such as the number of people served in a restaurant, and ignore harder-to-measure factors, such as diner satisfaction. Yet diner satisfaction could be more important in the long run than the number of people served in a given period. Most of these problems can be avoided by an analysis that identifies key performance areas and strategic control points.
Identifying key performance areas:
Key performance or key result areas (KRAs) are those aspects of the unit or organization that must function effectively for the entire unit or organization to succeed. These areas usually involve major organizational activities or groups of related activities that occur throughout the organization or unit. These key performance areas, in turn help define the more detailed control systems and standards.
In today’s organizations, many KRAs are cross-functional. An organization might define KRAs for a team focused on customer service in terms of the customers’ response to a satisfaction survey. At Deere, managers might consider research and development KRAs.
One small business that uses satisfaction surveys with selected consumers is Schnaubelt Shorts, a Coraopolis, Pennsylvania, company that designs cycling clothes for women. Schnaubelt seeks out active cyclists to try but its products and complete satisfaction surveys. After pinpointing states with large numbers of cyclists, it hand picked active cyclists to serve as “leaders” in each state. Each leader in turn selected 10 more women to evaluate Schnaubelt products. The women, ranging from dirt bikers to racers, serve as product samplers and still out surveys on products.
Identifying strategic control points:
In addition to key performance areas, it is also important to determine the critical points in the system where monitoring or information collecting should occur. Once such strategic control points can be located, the amount of information that has to be gathered and evaluated can be reduced considerably.
The most important and useful method of selecting strategic control points is to focus in the most significant elements in a given operation. Usually only a small percentage of the activities, events, individuals, or objects in a given operation will account for a high proportion of the expense or problems that managers will have to face. For example, 10 percent of a manufacturer’s products may well yield 60 percent of its sales; 2 percent of an organization’s employees may account for 80 percent of its employee grievances; and 20 percent of the police precincts in a city may account for 70 percent of the city’s violent crimes.
Another useful consideration is the identification of places where change occurs in a productive process. For example, in an organization’s system for filling customer orders, a change occurs when the purchase order becomes an invoice, when an inventory item becomes an item to the shipped, or when the item to be shipped becomes part of a truckload. Since errors are more likely to be made when such changes occur, monitoring change points is usually a highly effective way to control an operation.