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The Importance of Organizational Control To understand the importance of organizational control, consider how it helps managers obtain superior efficiency, quality, responsiveness to customers, and innovation--the four building blocks of competitive advantage.At Caterpillar, for example, investing in operational excellence and collaborating with employees, especially on the issue of safety, continues to reap rewards.If the managers of carmakers consistently measure the number of customer complaints and the number of new cars returned for repairs, or if school principals measure how many students drop out of school or how achievement scores on nationally based tests vary over time, they have a good indication of how much quality they have built into their product--whether it is an educated student or a car that does not break down.For example, when Kimberly-Clark, maker of Kleenex and other products, outsourced logistics at a UK plant to a leading lean organization, it reduced long shifts and overtime for its workers.Before Caterpillar introduced its lean manufacturing principle at its Aurora, Illinois, facility, discovering defects on its medium wheel loader value stream was considered normal.Page 309 To determine how efficiently they are using their resources, managers must be able to accurately measure how many units of inputs (raw materials, human resources, and so on) are being used to produce a unit of output, such as a Toyota vehicle.Absenteeism dropped and productivity improved as staff morale went up. Without a control system in place, managers have no idea how well their organization is performing and how its performance can be improved--information that is becoming increasingly important in today's highly competitive environment.Thus, whether a customer buys a Ford Edge, Toyota Camry, or Honda CRV depends significantly on the design and quality of each car.large image navigator opens in a modal Caterpillar's approach to organizational control helped employees eliminate manufacturing defects and increase performance levels.A control system contains the measures, or yardsticks, that let managers assess how efficiently the organization is producing goods and services.Managers can help make their organizations more responsive to customers, for example, if they develop a control system, such as a CRM system, that allows them to evaluate how well customer-contact employees perform their jobs.Two workers are focused on inspecting large machinery.

The Importance of Organizational Control
To understand the importance of organizational control, consider how it helps managers obtain superior efficiency, quality, responsiveness to customers, and innovation—the four building blocks of competitive advantage.

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To determine how efficiently they are using their resources, managers must be able to accurately measure how many units of inputs (raw materials, human resources, and so on) are being used to produce a unit of output, such as a Toyota vehicle. Managers also must be able to measure how many units of outputs (goods and services) are being produced. A control system contains the measures, or yardsticks, that let managers assess how efficiently the organization is producing goods and services. Moreover, if managers experiment with changing how the organization produces goods and services to find a more efficient way of producing them, these measures tell managers how successful they have been. For example, when Kimberly-Clark, maker of Kleenex and other products, outsourced logistics at a UK plant to a leading lean organization, it reduced long shifts and overtime for its workers. Absenteeism dropped and productivity improved as staff morale went up. Without a control system in place, managers have no idea how well their organization is performing and how its performance can be improved—information that is becoming increasingly important in today’s highly competitive environment.

Today much of the competition among organizations centers on increasing the quality of goods and services. In the car industry, for example, cars within each price range compete in features, design, and reliability. Thus, whether a customer buys a Ford Edge, Toyota Camry, or Honda CRV depends significantly on the design and quality of each car. Organizational control is important in determining the quality of goods and services because it gives managers feedback on product quality. If the managers of carmakers consistently measure the number of customer complaints and the number of new cars returned for repairs, or if school principals measure how many students drop out of school or how achievement scores on nationally based tests vary over time, they have a good indication of how much quality they have built into their product—whether it is an educated student or a car that does not break down. Effective managers create a control system that consistently monitors the quality of goods and services so they can continuously improve quality—an approach to change that gives them a competitive advantage.

Effective organizational control can also increase responsiveness to customers. Managers can help make their organizations more responsive to customers, for example, if they develop a control system, such as a CRM system, that allows them to evaluate how well customer-contact employees perform their jobs. Monitoring employee behavior can help managers find ways to increase employees’ performance levels, perhaps by revealing areas in which skill training or new procedures can allow employees to perform their jobs better. Also, when employees know their behaviors are being monitored, they have more incentive to be helpful and consistent in how they act toward customers. For example, Caterpillar has a lean initiative to bring employees closer to customers so the employees can provide products and services that match customers’ needs. Before Caterpillar introduced its lean manufacturing principle at its Aurora, Illinois, facility, discovering defects on its medium wheel loader value stream was considered normal. Because the defects were discovered, they were fixed before being passed on to the customer. However, the defects were still costing the company lost time and other costs. After the company introduced its lean program at the plant and made it clear that the company was dedicated to eliminating defects, average internal defects fell by 60%.7

A scene inside a manufacturing facility. Two workers are focused on inspecting large machinery. large image navigator opens in a modal
Caterpillar’s approach to organizational control helped employees eliminate manufacturing defects and increase performance levels.

Finally, controlling can raise the level of innovation in an organization. Successful innovation takes place when managers create an organizational setting in which employees feel empowered to be creative and in which authority is decentralized to employees so they feel free to experiment and take control of their work activities. Deciding on the appropriate control systems to encourage risk taking is an important management challenge; organizational culture is vital in this regard. At Caterpillar, for example, investing in operational excellence and collaborating with employees, especially on the issue of safety, continues to reap rewards. In 2021, the company continued to reduce time lost to injuries from previous years.8