Bridging the gap between theory and practice, this soon-to-be classic provides the basis for assessing the benefits of advanced control - covering auto-tuning, model predictive control, optimization, estimators, neural networks, fuzzy control, simulators, expert systems, diagnostics, and performance assessment. Show less. View More. Back to Table of Contents. Computer Simulation Risks Joe M. Open Share Save. Click here to Expand all. Click here to Collapse all. View Section, Front Matter. View Section, Table of Contents. View Section, 1. View Section, 2. Setting the Foundation.
View Section, 3. APC Pathways. View Section, 4. Evaluating System Performance. View Section, 5. Abnormal Situation Management.
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View Section, 6. Automated Tuning. View Section, 7. Fuzzy Logic Control. View Section, 8. Properties Estimation.
View Section, 9. Nor is it realistic to think that managers can achieve control by simply hiring good people, aligning incentives, and hoping for the best. Fortunately, the tools to reconcile the conflict between creativity and control are at hand. Most managers tend to define control narrowly—as measuring progress against plans to guarantee the predictable achievement of goals. Such diagnostic control systems are, however, only one ingredient of control.
Each of the four control levers has a distinct purpose for managers attempting to harness the creativity of employees. Diagnostic control systems allow managers to ensure that important goals are being achieved efficiently and effectively. Beliefs systems empower individuals and encourage them to search for new opportunities.
Boundary systems establish the rules of the game and identify actions and pitfalls that employees must avoid. Interactive control systems enable top-level managers to focus on strategic uncertainties, to learn about threats and opportunities as competitive conditions change, and to respond proactively.
Diagnostic control systems work like the dials on the control panel of an airplane cockpit, enabling the pilot to scan for signs of abnormal functioning and to keep critical performance variables within preset limits. Most businesses have come to rely on diagnostic control systems to help managers track the progress of individuals, departments, or production facilities toward strategically important goals.
Managers use these systems to monitor goals and profitability, and to measure progress toward targets such as revenue growth and market share. Periodically, managers measure the outputs and compare them with preset standards of performance. Feedback allows management to adjust and fine-tune inputs and processes so that future outputs will more closely match goals. But diagnostic control systems are not adequate to ensure effective control. In fact, they create pressures that can lead to control failures—even crises.
Whether managers realize it or not, there are built-in dangers when empowered employees are held accountable for performance goals—especially for difficult ones—and then left to their own devices to achieve them.
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For example, Nordstrom, the upscale fashion retailer known for extraordinary customer service, recently found itself embroiled in a series of lawsuits and investigative reports related to its sales-per-hour performance-measurement system. Used to track the performance of its entrepreneurial salespeople, the system was designed to support the service orientation for which Nordstrom is famous.
But without counterbalancing controls, the system created the potential for both exemplary customer service and abuse. Some employees claimed that first-line supervisors were pressuring them to under-report hours on the job in an attempt to boost sales per hour. I recently conducted a study of ten newly appointed chief executive officers to understand better how they used measurement and control systems to implement their agendas.
Within the first months of taking charge, many of the new CEOs established demanding performance goals for division managers and increased the rewards and punishments associated with success and failure in achieving those goals.
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In response to the pressures, several division managers manipulated financial data by creating false accounting entries to enhance their reported performance. The managers were fired, but not before they had inflicted damage on their organizations. In one memorable case, a retail company had been making inventory and mark-down decisions based on the falsified data, a practice that resulted in significant losses. These are not isolated incidents. The Big Six accounting firms have observed a substantial increase in errors and fraud over the past five years as organizations downsize and reduce the resources devoted to internal controls.
With the elimination of many middle management jobs, basic internal controls, such as segregation of duties and independent oversight, have often been sacrificed.
The CEO was recently named a finalist for Ernst & Young Global's 12222…
Once goals are established and people have performance targets on which their rewards will be based, many managers believe they can move on to other issues, knowing that employees will be working diligently to meet the agreed-upon goals. Companies have used beliefs systems for years in an effort to articulate the values and direction that senior managers want their employees to embrace. Typically, beliefs systems are concise, value-laden, and inspirational.
Senior managers intentionally design beliefs systems to be broad enough to appeal to many different groups within an organization: salespeople, managers, production workers, and clerical personnel.
Because they are broad, beliefs statements are often ridiculed for lacking substance. If employees suspect that managers are going through the motions of the latest fad, cynicism will set in. Indeed, some managers adopt missions and credos not out of any real commitment but because they seem fashionable.
However, managers who use their missions as living documents—as part of a system to guide patterns of acceptable behavior—have discovered a powerful lever of control. Managers throughout the organization recognize the value that senior managers place on the exercise and respond accordingly. However, businesses have become much more complex in recent years, making it more difficult for individuals to comprehend organizational purpose and direction.
Moreover, in many businesses, downsizing and realignment have shattered strongly held assumptions about the values and foundations of businesses and their top-level managers. Employees no longer know whom to trust. At the same time, their expectations for meaningful careers have risen as education levels have increased. Without a formal beliefs system, employees in large, decentralized organizations often do not have a clear and consistent understanding of the core values of the business and their place within the business.
In the absence of clearly articulated core values, they are often forced to make assumptions about what constitutes acceptable behavior in the many different, unpredictable circumstances they encounter. Beliefs systems can also inspire employees to create new opportunities: they can motivate individuals to search for new ways of creating value.
We all have a deep-seated need to contribute—to devote time and energy to worthwhile endeavors. But companies often make it difficult for employees to understand the larger purpose of their efforts or to see how they can add value in a way that can make a difference. Effective managers seek to inspire people throughout their organizations by actively communicating core values and missions. But they are only part of the answer. Think of them as the yang of Chinese philosophy—the sun, the warmth, and the light. Opposing them are dark, cold boundaries—the yin—which represent the next lever of control.
The answer is the latter. Telling people what to do by establishing standard operating procedures and rule books discourages the initiative and creativity unleashed by empowered, entrepreneurial employees. Telling them what not to do allows innovation, but within clearly defined limits. Unlike diagnostic control systems which monitor critical performance outcomes or beliefs systems which communicate core values , boundary systems are stated in negative terms or as minimum standards.