Controls, control, and management
The probability of an event’s being meaningful is a much more important datum than the event itself.
We are rapidly acquiring great capacity to design controls in business and in other social institutions, based on a great improvement in techniques, especially the ability to process and analyze large masses of data very fast. What does this mean for “control”? Especially, what are the requirements for these greatly improved controls to give better control to management? For, in the task of a manager, controls are purely a means to an end; the end is control. If we deal with a human being in a social institution, controls must become personal motivation that leads to control. A translation is required before the information yielded by the controls can become grounds for action -the translation of one kind of information into another, which we call perception. In the social institution there is a second complexity, a second “uncertainty principle.” It is almost impossible to prefigure the responses appropriate to a certain event in a social situation.
But a control-reading “profits are falling” does not indicate, with any degree of probability, the response “raise prices,” Jet alone by how much; the control-reading “sales are falling” does not indicate the response “cut prices,” and so on. The event itself may not even be meaningful. But even if it is, it is by no means certain what it means.
Overage Executives
Stay out of decisions if one won’t be around to help bail out the organization.
An employer should have in place a policy for the over-sixties in managerial and professional ranks. The basic rule, and one that should be clearly established and firmly enforced, is that people’ beyond their early sixties should ease out of major managerial responsibilities. It is a sensible rule for anyone, and not only for the executive, to stay’ out of decisions n one won’t be around to help bail out the company when the decisions cause trouble a few years down the road -as most of them do. The older executive should move into work one performs on one’s <own rather than be the “boss.” This way, he or she specializes and concentrates on one major contribution, advises, teaches, sets standards, and resolves conflicts, rather than works as a “manager.” The Japanese have “counselors,” and they work very effectively, sometimes well into their eighties.
Controls: neither objective nor neutral
The act of measurement changes both the event the observer.
In any social situation of the kind we deal with in enterprise, the act of measurement is neither objective nor neutral. It is subjective and of necessity biased. It changes both the event and the observer. Events in the social situation acquire value by the fact that they are being singled out for the attention of being “controlled” signals that it is considered to be important. Controls in a social institution such as a business are goal-setting and value-setting. They are not “objective”. They are of necessity moral. Controls create vision. They change both the events measured and the observer. They endow events not only with meaning but with value. And this means in our control system?”
Controls should focus on results
What today’s organization needs are synthetic sense organs for the outside.
Every social institution exists to contribute to society, economy, and individual. In consequence results exist only on the outside in economy, in society, and with the customer. It is the customer only who creates a profit. Everything inside a business creates only a “cost center.” But results are entrepreneurial. Yet we do not have adequate, let alone reliable, information regarding the “outside.” The century of patient analysis of managerial, inside phenomena, events and data, the century of patient, skillful work on the individual operations and task within the business, has no counterpart with respect to the entrepreneurial job. We can easily record and therefore quantify efficiency, that is, efforts. It is of little value to have the most efficient engineering department if it designs the wrong product. And it mattered little, I daresay, during the period of IBM’s great expansion in the fifties and sixties how “efficient” its operations were; its basic entrepreneurial idea was the right, the effective one.
The outside, the area of results, is much less accessible than the inside.
The central problem of executives in the large organization is their insulation from the outside. What today’s organization therefore needs are synthetic sense organs for the outside. If modern controls are to make a contribution, it would be, above all, here.
Controls for non measurable events
A balance between the measurable and the non measurable is a central and constant problem of management.
Business, like any other institution, has important results that are incapable of being measured. Any experienced executive know companies or industries that are bound for extinction because they cannot attract or hold able people. This, every experienced executive also knows, is a more important fact about a company or an industry that last year’s profit statement. Yet the statement cannot be defined clearly let alone “quantified.” It is anything but “intangible”; it is very “tangible” indeed. It is just non measurable. And measurable results will not show up for a decade.
A balance between the measurable and the non measurable is therefore a central and constant problem of management and a true decision area. Measurements that do not spell out the assumptions with respect to the non measurable statements that are being made – misdirect, therefore. They actually misinform. Yet the more we can quantify the truly measurable areas, the greater the temptation to put all-out emphasis on those the greater, therefore, the danger that what looks like better controls will actually mean less control if not a business out of control altogether.
The ultimate control of organizations
People act as they are being rewarded or punished.
There is a fundamental, incurable, basic limitation to controls in a social institution. A social institution is comprised of persons, each with own purpose, his own ambitions, his own ideas, his own needs. No matter how authoritarian the institution, it has to satisfy the ambitions and needs of its members, and do so in their capacity as individuals through institutional rewards and punishments, incentives, and deterrents. The expression of this may be quantifiable – such as a raise in salary. But the system itself is not quantitative in character and cannot be quantified.
Yet here is the real control of the institution. People act as they are being rewarded or punished. For this, to them, rightly, is the true expression of the values of the institution and of its true, as against its professed, purpose and role. A system of controls that is not in conformity with this ultimate control of the organization, which lies in its people decisions, will therefore at best be ineffectual. At worst it will cause never-ending conflict and will push the organization out of control. In designing controls for an organization, one has to understand and analyze the actual control of the business, its people decisions. One has to realize that even the most powerful “instrument board” complete with computers is secondary to the rewards and punishments, of values and taboos.