Chapter 11 Organizational Control and Change Leanne Powers MHR301 From McGraw-Hill Irwin Contemporary Management

Organizational Control Managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals –Keep an organization on track –Anticipate events –Change the organization to respond to opportunities and threats

Organizational Control Managers must monitor and evaluate: Is the firm efficiently converting inputs into outputs? Is product quality improving? Are employees responsive to customers? Are our managers innovative in outlook?

Control Systems Formal, target-setting, monitoring, evaluation and feedback systems that provide managers with information about how well the organization’s strategy and structure are working.

Types of Control Feedforward Controls –Used in the input stage of the process –Managers can anticipate problems before they arise. Concurrent Controls –Give immediate feedback on how inputs are converted into outputs –Allows managers to correct problems as they arise Feedback Controls –Provide after-the-fact information managers can use in the future

Control Process Steps

Organizational Control Systems

Financial Measures of Performance Financial Controls –Profit ratios Measures of how efficiently managers convert resources into profits —return on investment (ROI). –Liquidity ratios Measures of how well managers protect resources to meet short term debt—current and quick ratios. –Leverage ratios Measures of how much debt is used to finance operations—debt-to-asset and times-covered ratios

Output Control Organizational Goals –Each division within the firm is given specific goals that must be met in order to attain overall organizational goals. Goals should be specific and difficult, but not impossible, to achieve (stretch goals).

Output Control Operating Budgets –A plan of how managers intend to allocate and use the resources they control to attain organizational goals effectively and efficiently.

Behavior Control Direct Supervision –Managers who directly manage can teach, reward, lead by example, and take corrective action as needed. Can be very expensive since only a few workers can be personally managed by one manager and many managers are needed. Close supervision demotivates workers who desire less scrutiny and more autonomy, causing them to avoid responsibility. Direct supervision is difficult to do effectively in complex job settings.

Management by Objectives Management by Objectives (MBO) –A goal-setting process in which managers and subordinates negotiate specific goals and objectives for the subordinate to achieve and then periodically evaluate their attainment of those goals.

Bureaucratic Control Control through a system of rules and standard operating procedures (SOPs) that shapes the behavior of divisions, functions, and individuals.

Clan Control –The control through the development of an internal system of values and norms. Examples: Work dress styles, normal working hours, pride taken in work. –These methods provide control where output and behavioral control does not work. –Strong culture and clan control help worker to focus on the organization and enhance its performance.

Organizational Change

Steps in the Organizational Change Process

Organizational Learning Process through which managers try to increase organizational members’ abilities to understand and appropriately respond to changing conditions