Presentation on theme: "Control and Entrepreneurial Activity. E Organizations need control systems Policies, procedures, and rules are needed to ensure order, achieve coordination,"— Presentation transcript:
E Organizations need control systems Policies, procedures, and rules are needed to ensure order, achieve coordination, and maintain efficiency Policies, procedures, and rules are needed to ensure order, achieve coordination, and maintain efficiency Control systems have historically placed a heavy emphasis on efficiency. Control systems have historically placed a heavy emphasis on efficiency. Efficiency v. effectiveness Efficiency: minimizing the amount of expenditures or resources needed to accomplish a task Efficiency: minimizing the amount of expenditures or resources needed to accomplish a task Effectiveness is concerned with ensuring that the correct tasks are being accomplished Effectiveness is concerned with ensuring that the correct tasks are being accomplished Doing things right (efficiency) v. doing the right things (effectiveness) Doing things right (efficiency) v. doing the right things (effectiveness)
E Control system – Formal and informal mechanisms that help individuals regulate what they do with themselves and other resources on the job Implies a carefully constructed and well- integrated set of items A set of control mechanisms evolves, with components subject to change
E The various control measures and mechanisms can be grouped into four general categories: Simple control Simple control Direct supervision by the manager over subordinates Technological control Technological control Technology-based techniques that production/service deliverable processes Bureaucratic/administrative control Bureaucratic/administrative control Formal rules and procedures outlined by company Concertive/cultural control Concertive/cultural control Cultural norms, shared values, and beliefs held within the firm
E Budgets Purchasing policies Hiring rules Annual employee, dept, and division reports Performance reviews Strategic and operational plans Financial and resource audits Financial statements Informal norms/behavior rules
E “Trust problem” Increasing control mechanisms may make employees feel “micro-managed” or “untrusted” Increasing control mechanisms may make employees feel “micro-managed” or “untrusted” “Slowness problem” Moderate controls = efficiency Moderate controls = efficiency High controls = slow/inefficient High controls = slow/inefficient “Means-end problem” Managers can become so concerned with enforcing controls they forget what the controls are for Managers can become so concerned with enforcing controls they forget what the controls are for “Efficiency-Effectiveness problem” Controls improve efficiency, but hurt effectiveness Controls improve efficiency, but hurt effectiveness
E A control system can be characterized by a variety of attributes: Degree of formality and prescriptiveness Degree of formality and prescriptiveness Desire for conformance and compliance Desire for conformance and compliance Degree of rigidness Degree of rigidness Desire for consistency Desire for consistency Use of coercive power Use of coercive power Distribution of discretion Distribution of discretion Degree of horizontal interaction and communication Degree of horizontal interaction and communication Level of detail Level of detail
E The principal outcomes sought through control efforts include: Risk reduction Risk reduction Elimination of uncertainty Elimination of uncertainty Highly efficient operations Highly efficient operations Goal conformance Goal conformance Specific role definitions Specific role definitions Unfortunately, outcomes such as these tend to be inconsistent with entrepreneurship
E ENT Consistent outcomes: Risk tolerance Risk tolerance Management of uncertainty Management of uncertainty Enlightened efficiency Enlightened efficiency Goal congruence Goal congruence Role flexibility Role flexibility
E Administrative Domain Entrepreneurial Domain Tight, extremely detailed Centralized Stress conformity Inflexible, no discretion Formal Rule and procedure based Emphasis on feedback Loose with broad guidelines Decentralized Decentralized Flexible, allow discretion Informal People/comm. based Emphasis on feed forward Dimensions of Control and Entrepreneurship
E A core principle in the entrepreneurial philosophy of control requires that managers give up control to gain control To give up control is to empower Doesn’t mean to give up complete control
E Over what specific activity, responsibility, or requirement is management giving up control? Does the employee have or can he/she obtain the proper information to exercise control over the activity or behavior? Is it clear that this is a real and permanent relinquishment of control, with no second- guessing?
E What specific impact on behavior is management attempting to have? Over what variables is control being gained, and how is it manifested?
E Less control does not guarantee entrepreneurship Control is vital for sustained entrepreneurship Control is vital for sustained entrepreneurship The real issue is the nature and intent of the controls and how they are used The real issue is the nature and intent of the controls and how they are used Control levels varies with the type of entrepreneurship the company seeks Incremental innovation can occur in more tightly controlled environment Incremental innovation can occur in more tightly controlled environment discontinuous innovation requires extensive autonomy discontinuous innovation requires extensive autonomy
E Moderate to intermediate levels of formality encourage entrepreneurial thinking and yet maintain some control over individuals A level of slack is deliberately designed into cost controls and budgeting The dual needs for fiscal accountability and individual experimentation suggest a need for intermediate levels of budgetary control, as opposed to very loose or very tight controls
E There is a need for control and moderation – managing slack involves a fine balancing act If there is an abundance of easily available money for projects and ideas – huge amounts of money will be wasted -- Likewise -- If controls on resources are too tight, the incentive to innovate will disappear
E special seed and venture capital funds There is a need to provide financial support for entrepreneurial initiatives in the form of special seed and venture capital funds that are separate from operational budgets. Opportunity review boards Opportunity review boards – empowered to provide staged investments, from fairly-easy- to-get seed money for initial research to increasingly larger amounts that are tied to the achievement of specific development targets.
E Intracapital – a resource bank account awarded to employees who successfully pursue entrepreneurship within the company