Traditional control methods are based on setting standards and then monitoring performance. These methods fall into three categories such as
- diagnostic control systems
- boundary control systems
- interactive control systems.
The following is a synopsis and explanation of each of
Category 1: Diagnostic Control Systems
Diagnostic control systems “ like budget and performance reports “ aim to ensure that goals are met and that any variances can be easily explained. The principal purpose of the diagnostic control system is to reduce the need for managers to constantly monitor every aspect of the business. To conserve the manager’s time, only those deviations that are significant are brought to the manager’s attention.
Theoretically, employees are left to do the job, while the managers are confident that any grave deviation will appear naturally, in budget reports or employee performance evaluations. The diagnostic control system, however, has one potentially critical flaw: it assumes that that the results reported by the employees (i.e. sales reports, expenditure reports) are accurate and that employees don’t :fudge” results to make it appear as though they are meeting goals or staying within established parameters.
Category 2: Boundary Control Systems
Boundary control systems “establish the rules of the game and identify actions and pitfalls that employees must avoid.” Codes of ethics and business conduct are widely used in the business industry. Rules concerning conduct and ethics are particularly important for any business that has a reputation “build on trust.” For example, Lockheed Martin’s code of ethnics is geared to the personal integrity of all employees, requiring that they conduct themselves with the highest standards whether in their personal lives or in the professional environment.
These codes deal with “doing things right” and “doing the right things”. For example, Lockheed employees must not disclose proprietary company information without proper authorization or they would face federal indictment. Lockheed’s employees also are prohibited from accepting gifts valued at more than $100 from any company that does business with Lockheed.
Category 3: Interactive Control Systems
In the interactive control system, manager control is based upon the questioning of subordinates face to face. Naturally, in larger companies, less direct interaction among personnel is possible. Thus, in large companies, the interactive control systems are implemented by holding weekly meetings among senior management and department heads. Based on reports from each department, management can evaluate strengths and weaknesses (i. e. unexpected volume of sales of a certain product or decreased revenue from another) and adjust their goals and targets accordingly.
