Control & Performance Management: Systems, Types, Challenges & Ethics

TAKEAWAYS:

• Control is a closed-loop system: It compares actual performance to standards (via feedforward, concurrent, or feedback loops) and corrects deviations—like Ncell tracking call-drop rates in real time.
• Three control types: Strategic (long-term, e.g., Daraz’s market expansion), tactical (mid-term, e.g., Kathmandu traffic route optimization), and operational (daily, e.g., bank ATM transaction limits).
• Balanced Scorecard > single metrics: Nabil Bank uses financial (ROI), customer (NPS), internal process (loan approval time), and learning/growth (employee training) metrics to avoid tunnel vision.
• Ethics matter: Over-control (e.g., micromanaging Pathao delivery drivers) breeds distrust; under-control (e.g., NEPSE’s lax fraud checks) invites scandals.
• Contingency theory applies: A startup (e.g., Himalayan Java) needs tight operational control, while a mature firm (e.g., Chaudhary Group) relies more on strategic controls.
• Performance ≠ punishment: Feedback should be SMART (Specific, Measurable, Achievable, Relevant, Time-bound)—like Daraz’s "30-day return policy" for customer satisfaction.

1. What Is Control in Management?

Control is the process of monitoring, comparing, and correcting organizational performance to ensure goals are met. It acts like a thermostat:

• Input → Standards (e.g., NTC’s target of 99.5% network uptime).
• Process → Actual performance (e.g., real-time call-drop data).
• Output → Corrective action (e.g., rerouting towers in Kathmandu).

flowchart TD
    A["Standards\n(e.g., 20% YoY growth)"] -->|"Compare"| B["Actual Performance\n(e.g., 18% growth)"]
    B -->|"Deviation?"| C{"Yes/No"}
    C -->|"No"| D["No Action"]
    C -->|"Yes"| E["Corrective Action\n(e.g., cost-cutting)"]
    E --> A

Why it matters:

• Prevents failures: Like how eSewa freezes transactions if fraud patterns exceed 0.1%.
• Adapts to change: Ncell adjusts data plans based on usage trends (e.g., unlimited night browsing).
• Improves efficiency: Daraz uses ABC analysis to control inventory (80% of sales come from 20% of products).

2. Types of Control

Controls are classified by time horizon and level in the organization:

Worked Example: NEPSE’s Market Control

• Strategic: Targets 15% annual growth in listed companies.
• Tactical: Quarterly checks on insider trading reports.
• Operational: Daily monitoring of trade volumes to detect anomalies (e.g., sudden spikes in a single stock).

NEPSE’s control room tracks unusual trading patterns. (Image: Chris Lund, Public domain, via Wikimedia Commons)

3. The Control Process: Step-by-Step

Use this 4-step cycle to design controls (applied by Google’s Project Oxygen for employee performance):

1. Establish Standards

   • Define measurable goals (e.g., "Reduce customer complaint resolution time to <24 hours").
   • Example: Pathao’s target: 95% of orders delivered within 30 minutes.

2. Measure Performance

   • Collect data (quantitative/qualitative).
   • Tools: Surveys (e.g., NTC’s customer satisfaction index), sensors (e.g., Daraz’s warehouse inventory scanners).

3. Compare & Identify Deviations

   • Use control charts (like in Six Sigma) to spot trends.
   • Example: If Ncell’s 4G speed drops below 15 Mbps in 3+ districts, trigger an investigation.

4. Take Corrective Action

   • Immediate: Pause faulty processes (e.g., freeze Khalti transactions if fraud detected).
   • Long-term: Redesign systems (e.g., NTC’s fiber-optic expansion in rural areas).

mindmap
  root((Control Process))
    Establish Standards
      SMART Goals
      Benchmarks
    Measure Performance
      Data Collection
      KPIs
    Compare
      Variance Analysis
      Root Cause
    Corrective Action
      Immediate Fixes
      Process Redesign

4. Essentials of an Effective Control System

A control system fails if it’s too rigid or too lax. Use these 5 principles (tested by Toyota’s Kaizen system):

1. Economical: Cost of control < benefit gained.
   • Example: Daraz spends ~5% of revenue on fraud detection (vs. 20% loss from fraud).
2. Flexible: Adapts to changes (e.g., Ncell’s dynamic pricing during festivals).
3. Forward-looking: Predicts issues (e.g., NTC’s weather-based network stress tests).
4. Objective: Uses data, not gut feelings (e.g., Nabil Bank’s automated loan risk scores).
5. Timely: Acts before damage occurs (e.g., eSewa’s real-time fraud alerts).

Case Study: Himalayan Java’s Quality Control

• Problem: Customer complaints about stale coffee beans.
• Solution:
  • Standard: "Shelf life ≤ 6 months from roast date."
  • Control: RFID tags on every bag + weekly taste tests.
  • Result: 40% drop in returns.

5. Challenges to Effective Control

Even the best systems face hurdles. Here’s how Nepal’s businesses handle them:

6. Performance Management Systems

Controls ≠ performance management. The latter is proactive and people-focused. Two key models:

A. Balanced Scorecard (BSC)

Developed by Kaplan & Norton, used by Nabil Bank to track:

• Financial: Net profit margin (target: 12%).
• Customer: Net Promoter Score (NPS > 60).
• Internal Processes: Loan approval time (<7 days).
• Learning & Growth: Employee training hours (>40/year).

graph TD
    A["Vision: Be Nepal's Most Trusted Bank"] --> B["Financial\n(Profitability)"]
    A --> C["Customer\n(Satisfaction)"]
    A --> D["Internal\n(Efficiency)"]
    A --> E["Learning\n(Innovation)"]
    B -->|"KPI"| F["ROI > 10%"]
    C -->|"KPI"| G["NPS > 60"]
    D -->|"KPI"| H["Loan processing: <7 days"]
    E -->|"KPI"| I["Employee upskilling: 40 hrs/year"]

B. Objectives and Key Results (OKRs)

Used by Google and Daraz to set ambitious goals:

• Objective: Increase repeat customers.
• Key Results:
  • 30% of users log in weekly (current: 15%).
  • Average order value rises by 20% (current: $12).

Comparison Table:

7. Ethical Issues in Control

Control can backfire if it violates ethics. Common dilemmas in Nepal:

1. Surveillance Overreach

   • Example: Ncell tracking user locations to "optimize" networks → Privacy violation.
   • Solution: Opt-in policies + anonymized data.

2. Bias in Performance Reviews

   • Example: Chaudhary Group promoting "favorites" over merit.
   • Solution: Blind evaluations + 360-degree feedback.

3. Whistleblower Retaliation

   • Example: Employees at NEPSE fired for reporting insider trading.
   • Solution: Anonymous reporting channels (like eSewa’s fraud hotline).

Case Study: Kathmandu Traffic Police’s Ethical Dilemma

• Control: Use speed cameras to fine violators.
• Ethical Issue: Low-income drivers disproportionately affected.
• Solution: Install cameras near accident hotspots and offer free safety workshops.

In the Real World

1. Ncell’s Network Control

   • Idea: Concurrent control (real-time monitoring).
   • How: Uses AI-driven predictive analytics to reroute traffic before congestion occurs. During Dashain, they preemptively increase tower capacity in Lalitpur by 30%.
   • Impact: Reduced call drops by 45% during festivals.

2. Daraz’s Inventory Control

   • Idea: ABC analysis (prioritizing high-value items).
   • How: Tracks sales data to classify products:
     • A (20% items, 80% sales): Stocked in multiple warehouses (e.g., Samsung phones).
     • B (30% items, 15% sales): Moderate stock (e.g., kitchenware).
     • C (50% items, 5% sales): Minimal stock (e.g., niche electronics).
   • Result: 25% lower storage costs.

3. Nabil Bank’s Loan Control

   • Idea: Feedback control (post-loan monitoring).
   • How: After approving a business loan, they:
     1. Set a repayment threshold (e.g., 90% on time).
     2. Use automated alerts if payments miss deadlines.
     3. Offer financial coaching before penalizing.
   • Impact: Default rates dropped from 8% to 3% in 2 years.

Exam Tip

1. Case Analysis (40% of marks)

   • Structure:
     1. Identify the control type (strategic/tactical/operational).
     2. Highlight deviations (e.g., "Heathrow’s Terminal 5 cost overrun by 20%").
     3. Suggest corrective actions (e.g., "Implement a phase-wise budget review system").
   • Example Question: "TGSS’s profitability is declining. Analyze using control theory."
     • Answer:
       • Problem: Tactical control (sales targets) failing.
       • Root Cause: Over-reliance on online ads (high CAC) vs. low LTV.
       • Fix: Shift to strategic control (long-term brand building) + operational (personalized recommendations).

2. Diagrams = Easy Marks

   • Draw control process flowcharts or balanced scorecard maps.
   • Example: For "essentials of control," sketch a thermostat analogy (set point = standards, sensor = measurement, heater/cooler = corrective action).

3. Link to Nepal

   • Always tie answers to local examples:
     • NTC: Use for operational control (network uptime).
     • NEPSE: Use for strategic control (market regulations).
     • Pathao/Khalti: Use for ethical control (data privacy).

4. Avoid Common Mistakes

   • ❌ Saying "control is only about punishment." ✅ Instead: "Control is proactive (feedforward) and corrective (feedback)."
   • ❌ Ignoring contingency theory. ✅ Always ask: "Does this control fit the org’s size/culture?" (e.g., tight controls for startups vs. loose for multinationals).

Final Visual Summary:

classDiagram
    class ControlSystem {
        +Establish Standards()
        +Measure Performance()
        +Compare()
        +Correct()
    }
    class BalancedScorecard {
        +Financial
        +Customer
        +Internal
        +Learning
    }
    class EthicalControl {
        +Privacy
        +Fairness
        +Transparency
    }
    ControlSystem --> BalancedScorecard : "Uses"
    ControlSystem --> EthicalControl : "Must Include"