Question

In: Operations Management

demonstrate with example how you would apply control process to ensure that revenue goals is achieved

demonstrate with example how you would apply control process to ensure that revenue goals is achieved

Solutions

Expert Solution

Controlling is one of the functions of management which helps to achieve planned results from every person at each level of organization. It helps in measuring the progress towards organizational goals and take corrective actions as and when needed. It is a way of thinking and acting which is reflected in decision-making procedures implemented by business units.

In order to apply the control process,, we have to make sure we can measure and evaluate the progress. In the following steps, we will see via an example how revenue goals are achieved

Control systems consists of four key steps:

1. Establish standards to measure performance:

It is most important to understand what the market is doing and what we can do about it with our core competencies.  Management has to put together a strategy for its own forecast. Thus managers define goals for various departments that include standards of performance to compare with organizational activities. Standards should be SMART(Specific, Measurable, Achievable, Realistic, Time-based).

Consider a life insurance company with 50 employees. We will consider that revenue is primarily achieved with the completion of sales targets. Management has given a quarterly target of the sale of 1500 policies to the revenue department. Last Quarter, a sale of 1200 polices happened with 20 employees. Management has hired five employees and thus, has increased the target from 1200 to 1500 accordingly. So, On an avg, each employee has to sell 10 policies per month.

2. Measure actual Performance:

Once we have got the standards, we have to measure how we are performing. Standards serve as a benchmark to exercise control. Measurement and comparison with standards helps to find out deviations. We need to have reports, metrics, etc for better measurement of actual performance.

In the example we considered, reports are received at the end of one month and Review is done.

We recorded the following deviations from the prescribed standard.

Sl no Number of Employees Actual target received Employee Vintage
1 4 5 policies sold by each old
2 3 4 policies sold by each newly hired

It was found that,4 existing employees have sold 5 policies each. 3 newly hired employees have sold 4 policies each.

3. Compare performance with standards:

Here, we compare actual activities to performance standards. Managers identify whether actual performance has met standards, exceeded them or fall behind. It is the most important step as here mangers find out both, the extent of the deviation and its cause. In a big organization, he has to prioritize which deviation he has to take what type of actions.

Sl no Number of Employees Actual target received Deviation from standard Vintage
1 4 5 policies sold by each 5 old
2 3 4 policies sold by each 6 newly hired

Here, the deviation of non-performing employees was measured and noted down. Manager held a review meeting with them and it was found out that these employees have very little information on product knowledge of some products and sales pitching.

4. Take corrective actions:

Once the cause and extent of deviations are known, managers find out what measures to be taken to curb it. He detects the errors and takes remedial actions for it.

In the example considered, the manager schedules a training session for a week in the next month for all non-performing employees.


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