2Learning ObjectivesDefine organizational control and explain how it increases organizational effectiveness.Describe the four steps in the control process and the way it operates over time.Identify the main output controls, and discuss their advantages and disadvantages as means of coordinating and motivating employees.Identify the main behavior controls, and discuss their advantages and disadvantages as means of coordinating and motivating employees.Discuss the relationship between organizational control and change, and explain why managing change is a vital management task
3Organizational Control Managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goalsKeeping an organization on track, anticipating events, changing the organization to respond to opportunities and threatsManagers must monitor and evaluate:Is the firm efficiently converting inputs into outputs?Are units of inputs and outputs measured accurately?Is product quality improving?Is the firm’s quality competitive with other firms?Are employees responsive to customers?Are customers satisfied with the services offered?Are our managers innovative in outlook?Does the control system encourage risk-taking?3
4Control Systems Control Systems Formal, target-setting, monitoring, evaluation and feedback systems that provide managers with information about whether the organization’s strategy and structure are working efficiently and effectively.A good control system should:be flexible so managers can respond as needed.provide accurate information about the organization.provide information in a timely manner.4
5Three Types of Control Figure 11.1 Feed forward Controls Used to anticipate problems before they arise so that problems do not occur later during the conversion processGiving stringent product specifications to suppliers in advanceIT can be used to keep in contact with suppliers and to monitor their progressConcurrent ControlsGive managers immediate feedback on how efficiently inputs are being transformed into outputsAllows managers to correct problems as they ariseFeedback ControlsUsed to provide information at the output stage about customers’ reactions to goods and services so that corrective action can be taken if necessaryFigure 11.15
6Control Systems and IT Feedforward control Control that allows managers to anticipate problems before they arise.Giving stringent product specifications to suppliers in advance
7Example – University of Alabama Game-day The University of Alabama provides information for fans to be ready for football game day parking and eventsThis is an example of feedforward control7
8Control Systems and IT Concurrent control Control that gives managers immediate feedback on how efficiently inputs are being transformed into outputs so managers can correct problems as they arise.
9Control Systems and IT Feedback control Control that gives managers information about customers’ reactions to goods and services so corrective action can be taken if necessary.
11The Control ProcessEstablish standards of performance, goals, or targets against which performance is to be evaluated.Managers at each organizational level need to set their own standards.11
12The Control Process Measure actual performance Managers can measure outputs resulting from worker behavior or they can measure the behavior themselves.The more non-routine the task, the harder it is to measure behavior or outputs12
13The Control ProcessCompare actual performance against chosen standards of performanceManagers evaluate whether – and to what extent – performance deviates from the standards of performance chosen in step 113
14The Control ProcessEvaluate result and initiate corrective action if the standard is not being achievedIf managers decide that the level of performance is unacceptable, they must try to change the way work activities are performed to solve the problem
15Three Organizational Control Systems Figure 11.3
16Financial Measures of Performance Profit Ratios –measure how efficiently managers are using the organization’s resources to generate profitsReturn on Investment (ROI) –organization’s net income before taxes divided by its total assetsmost commonly used financial performance measure16
17Financial Measures of Performance Operating margincalculated by dividing a companies operating profit by sales revenueProvides managers with information about how efficiently an organization is utilizing its resources
18Financial Measures of Performance Liquidity ratiosmeasure how well managers have protected organizational resources to be able to meet short-term obligationsLeverage ratiosmeasure the degree to which managers use debt or equity to finance ongoing operations18
19Financial Measures of Performance Activity ratiosShow how well managers are creating value from organizational assetsInventory turnoverDays sales outstanding19
20Organization-Wide Goal Setting Organizational GoalsEach division within the firm is given specific goals that must be met in order to attain overall organizational goals.Goals should be set appropriately so that managers are motivated to accomplish themFigure 11.420
21Output Control Operating Budgets Blueprint that states how managers intend to use organizational resources to achieve organizational goals efficiently.Each division is evaluated on its own budgets for cost, revenue or profit.Managers are evaluated by how well they meet goals for controlling costs, generating revenues, or maximizing profits while staying within their budgets.21
22Effective Output Control Objective financial measuresChallenging goals and performance standardsAppropriate operating budgets
23Problems with Output Control Managers must create output standards that motivate at all levelsShould not cause managers to behave in inappropriate ways to achieve organizational goals23
24Behavior Control Direct supervision Managers who actively monitor and observe the behavior of their subordinatesTeach subordinates appropriate behaviorsIntervene to take corrective actionMost immediate and potent form of behavioral controlCan be an effective way of motivating employees24
25Problems with Direct Supervision Very expensive because a manager can personally manage only a relatively small number of subordinates effectivelyCan demotivate subordinates if they feel that they are under such close scrutiny that they are not free to make their own decisions
26Management by Objectives Management by Objectives (MBO)formal system of evaluating subordinates for their ability to achieve specific organizational goals or performance standards and to meet operating budgets26
27Management by Objectives Specific goals and objectives are established at each level of the organizationManagers and their subordinates together determine the subordinates’ goalsManagers and their subordinates periodically review the subordinates’ progress toward meeting goals
28Bureaucratic Control Bureaucratic Control Control through a system of rules and standard operating procedures (SOPs) that shapes and regulates the behavior of divisions, functions, and individuals.28
29Problems with Bureaucratic Control Rules easier to make than discarding them, leading to bureaucratic “red tape” and slowing organizational reaction times to problems.People might become so used to automatically following rules that they stop thinking for themselves29
30Clan Control Clan Control The control exerted on individuals and groups in an organization by shared values, norms, standards of behavior, and expectations.30
31Organizational Change Movement of an organization away from its present state and toward some desired future state to increase its efficiency and effectiveness
33Lewin’s Force-Field Theory of Change There are a wide variety of forces arising from the way an organization operates, from its structure, culture, and control systems that make organizations resistant to changeTo get an organization to change, managers must find a way to increase the forces for change, reduce resistance to change, or do both simultaneouslyFigure 11.633
34Evolutionary and Revolutionary Change gradual, incremental, and narrowly focusedconstant attempt to improve, adapt, and adjust strategy and structure incrementally to accommodate changes in the environment
35Evolutionary and Revolutionary Change Rapid, dramatic, and broadly focusedInvolves a bold attempt to quickly find ways to be effectiveLikely to result in a radical shift in ways of doing things, new goals, and a new structure for the organization
36Steps in the Organizational Change Process Figure 11.7
37Implementing the Change Top Down ChangeA fast, revolutionary approach to change in which top managers identify what needs to be changed and then move quickly to implement the changes throughout the organization.
38Implementing the Change Bottom-up changeA gradual or evolutionary approach to change in which managers at all levels work together to develop a detailed plan for change.
39Evaluating the Change Benchmarking The process of comparing one company’s performance on specific dimensions with the performance of other, high-performing organizations.
40Video Case: Using Facebook at Work Why might output control be preferable to behavior control for a manager whose employees use Facebook at work?Do you think employers should have policies to ban or limit using Facebook and similar Web sites purely for entertainment at work?Using Facebook at WorkTeaching Objective: To explore workplace use of social networking sites in terms of organizational controlSummary: Facebook and other social networking sites are hugely popular not only with teens and those in their 20s but also by older people. Their popularity carries over to the workplace, distracts employees, causes lost productivity, and worse. While many employers tolerate Facebook use in the office as long as employees complete their work, others have banned its use.Questions:Why might output control be preferable to behavior control for a manager whose employees use Facebook at work?Output control evaluates performance rather than behavior and measures what is really important. A manager uses clear goals or targets that will best measure each employee’s efficiency, quality, innovation, and responsiveness to customers. If employees are achieving performance goals, the manager may wish to allow leeway for employees occasionally to use Facebook and similar sites. Behavior control through direct or strict supervision of all activities can demotivate subordinates. Banning Facebook or other Web sites could make employees feel that they are under such close scrutiny that they are not free to make their own decisions or trusted enough to get their work done.How could clan control affect employee use of Facebook and other social networking sites?Clan control takes advantage of the power of organizational culture to keep employees focused on what is best for the organization and how to use resources to create value. When employees are motivated to achieve goals, they would be more likely to limit their purely personal distractions like Facebook and other Web sites. A strong, positive culture would also make it less likely that employees would post negative messages about their employer on their Facebook pages.Do you think employers should have policies to ban or limit using Facebook and similar Web sites purely for entertainment at work?There may supporters for both sides of the issue. Some students will probably say that employees should be responsible for their time as long as they complete their work. Some students are likely to point out that banning Facebook would not eliminate time wasting and would cause resentment. A ban would be impossible to carry out unless the company’s server could prevent access to the site or could keep track of how much time individual employees use it.40