The basis of management control theory, are used in this book, is the concept of the control loop. A simple example of a control loop is that of a loading dock attendant using hand signs to help a truck driver park at the dock. In this case, the attendant is the manager, the truck driver is the person (actor) responsible for carrying out the task, and parking the truck is the task. For each action taken by the driver, the dock attendant evaluates the outcome (position of the truck), compares that outcome with the desired outcome (the truck property parked at the dock), decides what corrective action the driver must take, and signals the driver to take the selected corrective action (gives the driver feedback). This sequence is repeated until the truck is docked. The loop is closed when the attendant advises the driver to change direction, and the loop is repeated until the truck is properly docked.
If the dock attendant's supervisor watched this process and then told the attendant not to direct the trucks so close to the dock in the future, a second loop would be created between the attendant and the supervisor. Personnel may be involved in multiple control loops, as managers in some loops and actors in other loops.
There are six elements in a control loop:
1. input: the data on which the manger must base selected actions
2. analysis: the manipulations that must be performed on the input before it can be used for decision making
3. decision making: the process of comparing the analyzed data with the appropriate standards to determine if the manager needs to intervene to alter the process being monitored
4. intervention: the action taken by the manager to alter the outcome of the process being monitored
5. evaluation: the comparison of the actual effect of the intervention with the desired effect
6. feedback: the modification of the management strategy based on the evaluation of the effect of the intervention of the outcome of the process
The simplest management control loops, such as the driver-attendant loop, contain only Steps 1 through 4. In this example, Steps 5 and 6 were added when the supervisor became involved in the loop. The driver-attendant-supervisor loop spans three management levels; in a large business the control loops may reach through many levels of management.
The most important consideration in analyzing management control loops is to determine if they are closed. For a loop to be closed, the manager must be given information about the changes the manager's interventions produce in the actor's performance and the manager must modify the intervention strategy accordingly. If there is no feedback of information about the outcome of the management activities, the manager may engage in counter productive intervention strategies without being aware of their adverse consequences. For example, a hospital administrator might deny patients access to their medical records unless they have a letter from an attorney, without knowing whether this encourages patients to sue the hospital on the assumption that the hospital is covering up something.
The nature of control loops is best illustrated through a detailed analysis of their component parts.
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