Page 386 - Business Principles and Management

Chapter 14 • Implementing and Controlling

14.4 Gathering and Using Performance Information

Goals Terms
• Describe three corrective actions • just-in-time (JIT)
managers can take as part of inventory controls
controlling performance.
• Discuss several important areas
of cost control in businesses.

Taking Corrective Action

When managers discover that performance is not meeting standards, they can
take three possible actions:

1. Take steps to improve performance.
2. Change policies and procedures.
3. Revise the standard.

If managers have planned carefully, they should be reluctant to change stan-
dards. In the blanket-manufacturing business discussed earlier, managers should
know from past experience whether producing 25 blankets a day is reasonable.
Only under unusual circumstances (major equipment breakdown, problems with
suppliers, employee strikes, etc.) would the blanket managers reduce the standard.
However, failure to meet the goal of 1,000 blankets by the specified date will not
please the customer and may result in a loss of sales.
Most often, managers need to improve performance of activities when
standards are not being met. This usually means making sure that the work
is well organized, that supplies and materials are available when needed, that
equipment is in good working order, and that employees are well trained and
motivated.
Occasionally, standards are not met because activities cannot be accomplished
as planned, or policies and procedures are not appropriate. This is likely to happen
when a business begins a new procedure, starts to use new equipment, or has other
major changes. In this situation, managers may need to change the policies or pro-
cedures that are not working in order to meet the standards. Process improvement
discussed earlier usually results in policy or procedure changes.
Finally, when the managers have explored all possibilities to improve perfor-
mance and it still does not meet the standards, they need to evaluate the standards
themselves. Planning is usually not exact. Conditions can change between the time
plans and standards are developed and the time activities are performed. Managers
cannot expect that all standards will be appropriate. Managers like to raise stan-
dards when they believe workers can achieve higher performance. It is difficult
to make the decision to reduce standards, but that may be necessary from time to
time. If a group of new employees is doing the task, performance standards may
need to be reduced until the employees have had the necessary training and oppor-
tunity to perfect their skills.

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