Management control: The role of discipline

October 28, 2004

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Operational systems all include and require a substantial amount of human activity and interaction. An organisation can be described as a social arrangement for the controlled performance of collective goals. Another way to describe it is as a 'human activity system'. To be successful, there is a need to encourage and ensure a standard of performance from employees. How do we get them to work together to efficiently, effectively, and economically perform the activities needed to produce the goods (or services) to a quality that will fulfil the customer requirement and, vital in a competitive marketplace, keep the customers happy and returning for more?

Human Resource Management
To make an organisation work effectively requires policies aimed at the recruitment, development, retention, and motivation of a suitable labour force. Communication and training are all necessary to ensure that they all know and understand what is required of them. Labour resources have to be deployed and the organisation has to be structured in such a way as to facilitate its effective operations. Systems and procedures have to be put in place to ensure that staff are 'doing the right things' and 'doing things right'.

Management Control Systems
Management control systems consist of rules and procedures put in place to ensure that objectives are achieved and risks guarded against. There is a need for a directing function to make the strategic decisions and to ensure that they are managed and followed through on a day-to-day basis to achieve the organisational objectives. This involves the creation of plans, providing and organising the resources, and supervising the performance of the activities described in the plans. This is part of the command and control process.

Organisations have traditionally been structured in a hierarchical way to facilitate command and control. However, modern organisations frequently need to operate as networks. While subordinates depend on managers for direction, managers and supervisors are increasingly dependent on their subordinates for achieving results in their areas of competence and responsibility. With the de-layering and flattening of organisational structures and increased spans of control, this more flexible approach to management structures can frequently lead to problems of supervision. In addition, in many cultures the hierarchical and formal approach to staff relationships has been replaced by more casual attitudes and less automatic acceptance of authority.

There is always a need for a monitoring and control function to measure the effectiveness of the systems in place, and to ensure that timely, corrective action is taken when things are not going as planned. Such controls and monitoring also need to be applied to the behaviour patterns of the staff operating the systems. In addition, there is also the need to periodically review the systems (and their objectives) to ensure that they remain relevant. Quality management systems aimed at 'saying what we do' and then 'doing what we say' and searching for continuing improvement, are just one formalised approach to achieving consistency of operations and the putting in place of effective control systems.

Discipline
After all the positive motivation, communication, systemisation, training, team working and encouragement, there is a need to ensure correctness and consistency in the personal behaviour and work processes of the labour force. We refer to this as 'discipline'. Discipline can be defined as 'control or order exercised over people'.

In modern organisations we seek to encourage 'self-discipline' to ensure that staff will know what is required of them. The aim is for employees to direct themselves and follow the rules of the system and the culture of the organisation to achieve its objectives with minimal direct supervision. In a perfect world, well-managed, well-organised staff would all be well-motivated and react to being held responsible by acting responsibly.

Positive Approaches to Discipline
Employee discipline is critical in achieving organisational success. Generally, approaches to workplace discipline are positive and constructive, including communication, good systems design, quality management systems, training, motivation and rewards. However, in any organisation there is the need to plan for the negative, exceptional situations that occur when individuals or groups misbehave and break the rules, or do not comply with the expected standards.

Negative approaches to discipline: Disciplinary Procedures
We now move on to how to cope with 'indiscipline'. What does an organisation do when staff do not comply with the standards of behaviour or performance expected and planned for? The approach to managing discipline normally involves positive feedback, the encouragement of staff to do the 'right' things. To this end we set rules detailing the expected standards of behaviour. In addition, there is also the need to specify how deviations from these rules will be dealt with. The threat of sanctions can be used, ie penalties imposed for doing the 'wrong' things, such as breaking an important organisational rule. In this context, organisations speak about 'disciplinary offences' or 'disciplinary hearings' – but this is really a shorthand label. We are really seeking to monitor and control staff behaviour by setting rules and monitoring performance. This way we can readily identify and deal with those exceptional cases where the required order has broken down.

When such a situation occurs, some form of management reaction is required in order to restore the standards of behaviour and working practices to that which is required to achieve organisational objectives. This frequently involves threatening or invoking sanctions or penalties to correct, punish or deter staff from doing the 'wrong' things. This is the system of disciplinary procedures.

But discipline is more than punishment and deterrence. It is a whole system of rules and procedures designed to encourage people to do the right things, to deter them from doing the wrong things and for dealing with staff who do the wrong things. Disciplinary action is planned with the intention to improve the future behaviour of the employee who has broken the rules. It can also influence the behaviour of other staff.

Disciplinary Offences
We can identify many staff actions which may put the achievement of organisational objectives at risk or which pose a threat to its assets or reputation. These include:

inadequate or incompetent work performance
absenteeism
poor timekeeping – late arrival, early departure, too many rest periods
breaking rules – on safety or other aspects of work performance
interfering with the work of others
rudeness to customers or colleagues
improper personal appearance
being under the influence of alcohol or drugs
conflict of interest – too close links with customers or rivals
theft
fraud
damage to goods or property
assault on customers or other staff.

Most organisations now have a formalised approach to disciplinary procedures – both to ensure uniform practice and also to conform to legal requirements. Most countries have laws designed to protect the rights of workers. An inconsistent or unplanned approach to imposing discipline may well lead to legal action being taken against the organisation.

Such action can prove expensive in monetary terms. There is also the cost of management time required to defend the organisation. The reputation of a company can also be damaged if a court judgement is made against it. The standard of behaviour expected of staff should be defined in advance. Actions which may give rise to punitive disciplinary action should be clearly identified together with the consequences that will be imposed if such behaviour is encountered.

Disciplinary Hearings
The vehicle for dealing with breaches of these rules normally involve some formal or informal disciplinary hearing. Remedies arising out of such a disciplinary hearing may be remedial or corrective, eg a warning, retraining, or moving to another job. There may also be a punishment designed to deter the perpetrator and discourage new perpetrators. In reviewing disciplinary systems, the important actions needed in an organisational context are to:

look at what the organisational objective is
review the operational systems set up to achieve them
know how to measure the levels of achievement
look at the risks and costs associated with any staff behaviour which may threaten the achievement of the organisations' objectives.

ACAS Recommendations on Effective Disciplinary procedures
In the UK, the Advisory Council and Arbitration Service (ACAS) was set up as a government body to promote better industrial relations. In the area of discipline ACAS has recommended that effective disciplinary procedures should:

be specified in writing
identify to whom they apply
specify who has the authority to initiate the different types or level of disciplinary action
be fair to all and be seen not to be discriminatory
provide for matters to be dealt with quickly
provide for the recording of proceedings and for evidence to be maintained
indicate which disciplinary actions will be taken for which offences
ensure that workers are informed of the complaints made against them
ensure that workers are given the opportunity to state their case before decisions are reached and to be accompanied by a supporter of their choice
ensure that, except in the most serious cases of gross misconduct, no worker is dismissed for a first breach of disciplinary rules
ensure that disciplinary action is not taken until the case has been carefully considered
provide an explanation of any penalty imposed
provide a right of appeal and specify the procedure to be followed.

A Staged Approach to Disciplinary procedures
A staged approach to management action is normally recommended to ensure that minor transgressions are dealt with speedily and effectively without undue consumption of resources or demotivation of staff. This approach must also ensure that the most serious events are dealt with quickly and effectively. By following a staged and consistent approach, expensive legal action taken against the employer by aggrieved employees should be avoided.

When formal disciplinary proceedings take place, it shows that something is wrong within the organisation. They should be viewed as an exception rather than as a normal event. Each occurrence should be taken not only as a case in its own right, but also as a possible symptom of some structural fault in the organisational environment of recruitment procedures, training or motivation. The general approach should be one of problem resolution – not of crime and punishment.

It is important to demonstrate a consistency of approach across the organisation when a disciplinary offence has been committed, identified, and a course of action embarked upon. Employees should be aware of the consequences of any misbehaviour. The staged approach adopted in most organisations will normally include the following steps:

The informal discussion
This is the most frequently encountered step and should take place immediately, or as soon after the problem event as possible. If the offence or transgression against rules or procedures is of a minor nature, and the employee involved has had a previously good record, then an informal meeting between the employee and his immediate supervisor to discuss the problem can take place. At this meeting, the objective is to agree on what happened, to discuss why it happened and to agree on how to avoid a further occurrence in the future. This may involve the need for action by both parties. Action may include counselling, giving advice, or identifying the need for further training to be provided. Or it may be merely to reinforce and agree on the standard of behaviour to be adopted in the future.

Reprimand or oral warning
In this case, the breach is deemed to be more serious or may be a repeat of a previous offence. The manager or supervisor is effectively drawing the employee's attention to the unsatisfactory behaviour and warning them that further repetition of such behaviour could lead to formal disciplinary proceedings. Again, it is best to adopt a problem-solving approach in agreeing what needs to take place to avoid a repeat of such behaviour.

Although the reprimand and warning does not need to be communicated to the employee in writing, it is good practice to make a note on file of such an event. If there is some future offence which leads to further, more severe disciplinary action, then there may be a need to produce evidence to justify taking further action at some later date.

An official or written warning
This form of warning should be used for more serious breaches of rules or for an employee who has a history of continual breaches of minor rules. A written warning is a serious matter. It seeks to draw the attention of the offending employee to the serious nature and consequences of the breach of conduct. It is also recorded on the employee's file. Such a written document can be used as evidence if further action needs to be taken in the future.

Suspension or lay-off
It may be deemed necessary to suspend the employee (without pay) from work for a period if an offence is judged to be of a serious nature. This action may also be taken if the employee has repeated a previous offence or if there have been repeated problems with the employee. This is designed to punish the employee for non-compliance with organisational standards. It also illustrates the importance that the employer attaches to compliance and is a warning to the transgressor (and others in the organisation) that such behaviour will not be tolerated. Normally, this is the last warning. A repeated offence is normally followed by dismissal.

Demotion
This is where an employee is demoted to a lower salary or position within an organisation. This is a very serious step to take. It is used to signal to all staff the serious view taken of the offence by management. It can be regarded as a form of internal dismissal. Care should be taken before taking this route because such demotion can have negative repercussions for a long period. The employee concerned may feel aggrieved and dissatisfied with their downgraded position or salary. Such feelings will affect their – and possibly their colleague's – motivation and performance.

Dismissal
This is the ultimate disciplinary measure. It should be used only in the most extreme cases. Care must be taken to ensure that the employer has met all legal requirements before resorting to this measure. The dismissal of an employee sends a powerful signal to all other employees. However, unless the organisation is seen by staff as being fair in taking such action, it can lead to poor morale and dissatisfaction, as well as possible legal repercussions.

Legal Framework
Although a formalised procedure for taking disciplinary action is a legal requirement in most countries, the procedure required may vary in detail between organisations and countries. The legal requirements imposed on employers in the European Union are designed to protect the human rights of workers. Employers should ensure that their disciplinary procedures comply with the laws of the countries in which they operate and that managers and staff are trained and supervised to comply with those procedures. The risk is that if proper procedures are not in place, or are not followed, then employers may find themselves involved in expensive legal proceedings as employees are able to seek legal redress.

The author is subject coordinator of ACCA and CAT scheme papers.