Hard vs Soft Monitoring and Control

Hard monitoring and control mechanisms rely on quantitative measures of activity or achievement, and reward or punishment systems that are directly linked to those measures. Hard monitoring/control mechanisms are appropriate in circumstances where an employee’s output or performance levels are easily defined and measured, and are critical to the success of an organization. Budgetary control is a form of hard monitoring and control with which nearly all managers are obliged to work. For obvious reasons, it is critical that managers do not spend organizational resources too freely, and spending is easily measured in monetary terms. Budget overspends are usually penalized in some way, if only with the displeasure of senior management. Hard mechanisms are based on the principle that employees must be closely monitored, and constantly offered incentives in order to optimize their performance.

Soft monitoring and control mechanisms, as the name suggests, are less clearly defined. They are based on the principle that properly selected and trained employees do not need constant attention from senior management in order to perform well, and indeed will perform better if not directly monitored or controlled. Soft mechanisms are particularly appropriate when employee achievements are difficult to define, or where variations in activity or output are not critical. Customer service is an area in which soft monitoring mechanisms are often advocated. Although customer satisfaction can be monitored and linked to employee reward schemes, this often creates an adversarial relationship between customers and service staff. Better results can often be achieved by relying on employees’ natural predisposition to offer good service. The emphasis of this approach is on mechanisms which motivate the employees to achieve as highly as possible, and support mechanisms such as training programmes, which enable them to do their job to the best of their ability.

Performance vs Diagnostic Monitoring

A further distinction should be made between monitoring mechanisms that provide an indication of corporate performance, and those that serve as a diagnostic tool. Performance indicators such as profitability and customer satisfaction measure the effects of a company’s actions, providing feedback on its success or failure. As such, they are useful to senior management, shareholders and other stakeholders in providing reassurance that the company is successful, or warning that a change of strategy is needed. Those within the company who are responsible for managing success or reacting to failure will benefit from diagnostic monitoring, such as service quality measurement and cost benefit analysis. These measures look in more depth at actions of the company and their effect on the customer and allow managers to learn from failures and identify the causes of success.

A comprehensive monitoring system must include both diagnostic and performance monitoring mechanisms. The latter provide a strategic snapshot for senior managers, as well as summary information for interested stakeholders, whilst the former provide the information necessary to remedy problems and effect continuous improvement.