Company LOGO Control: Organizational and Economic Approaches Kathleen M. Eisenhardt Department of Industrial Engineering and Engineering management, Stanford University Presenter: Wen Zheng

Contents Conclusion Discussion Empirical Theory Introduction

 This paper want to explore control variables for organization design Introduction Theory Empirical Discussion Conclusion

 This paper want to explore control variables for organization design Introduction Theory Empirical Discussion Conclusion Reward structure Task characteristics Information system

 This paper want to explore control variables for organization design  Organization design often focus on structure solution. Introduction Theory Empirical Discussion Conclusion Reward structure Task characteristics Information system

 This paper want to explore control variables for organization design  Theoretical Integration  Empirical Test Introduction Theory Empirical Discussion Conclusion

Introduction Theory Empirical Discussion Conclusion Control Strategy Performance Evaluation Control Behavioral based control Outcome based control Social or “people” based Control Information Characteristics Task Programmability Outcome measurability Thompson(1967) Ouchi (1979)

Introduction Theory Empirical Discussion Conclusion PerfectImperfect High Behavior or outcome control Outcome control Low Behavior control Socialization “Clan” control  Adapted from Ouchi (1979) Outcome Task

Introduction Theory Empirical Discussion Conclusion Agency Problem Incomplete information Behavior Control Outcome Control Complete Information Determine the optimal contract for the Agent Services - Behavior measurement -Risk sharing -Outcome measurement Assumptions: -Uncertain outcome and risk averse agent -Effort averse agent

 Concerned with determinants of control strategy  Rational  Efficiency oriented  Information based  Distinguish between behavior and outcome based control Introduction Theory Empirical Discussion Conclusion

Introduction Theory Empirical Discussion Conclusion OA Cost Compare ability to measure behaviors Compare costs of behavior control and outcome control Reward Control is a measurement and evaluation process Control is a measurement, evaluation, and reward process Social or ”People” Control Assume divergent performances for effort of workforce Possible to reduce divergent preferences through social control Role of Information Task characteristics determine the information available Information is a purchasable commodity Uncertainty Control determined by measurement issue Control determined by measurement and risk bearing issues

Introduction Theory Empirical Discussion Conclusion Task Characteristics -Task Programmability Information System -Behavior Measurement -Outcome Measurement Uncertainty Control Strategy -Behavior based -outcome based

Introduction Theory Empirical Discussion Conclusion Task Characteristics -Task Programmability Information System -Behavior Measurement -Outcome Measurement Uncertainty Control Strategy -Behavior based -outcome based

Introduction Theory Empirical Discussion Conclusion Task Characteristics -Task Programmability Information System -Behavior Measurement -Outcome Measurement Uncertainty Control Strategy -Behavior based -outcome based

Introduction Theory Empirical Discussion Conclusion Task Characteristics -Task Programmability Information System -Behavior Measurement -Outcome Measurement Uncertainty Control Strategy -Behavior based -outcome based

 Sample: 95 specialty stores in a Suburban Bay Area shopping center Introduction Theory Empirical Discussion Conclusion

 Sample: 95 specialty stores in a Suburban Bay Area shopping center  Definition: Stores with less than 8,000 square feet of selling space  Characteristics: Size, turnover, promotion  Reason: Provide a relative large number of comparable organizations which are conveniently located Provide a setting in which a normative and efficiency model should be descriptively accurate Social or “people ” control is not relevant Introduction Theory Empirical Discussion Conclusion

 Task Programmability  Behavior Measurement  Outcome Uncertainty  Cost of outcome Measurement  Control  Alternative Explanations Introduction Theory Empirical Discussion Conclusion

 Task Programmability  Behavior Measurement  Outcome Uncertainty  Cost of outcome Measurement  Control  Alternative Explanations Introduction Theory Empirical Discussion Conclusion  Preliminary interview  The amount of service in selling process. (less programmable)  Service  Product  Selling time  Training time

 Task Programmability  Behavior Measurement  Outcome Uncertainty  Cost of outcome Measurement  Control  Alternative Explanations Introduction Theory Empirical Discussion Conclusion  Preliminary interview  Physical limitations on observation of salespeople by management  Selling Space Square footage of the store  Total number of store employees  Number of salespeople per store supervisor (managers, assistant managers

 Task Programmability  Behavior Measurement  Outcome Uncertainty  Cost of outcome Measurement  Control  Alternative Explanations Introduction Theory Empirical Discussion Conclusion  Secondary source  Three measures  Number of competitors in the San Francisco SMSA by merchandise category.  Failure rates in 1975 by merchandise category  Failure rates in 1979 by merchandise category

 Task Programmability  Behavior Measurement  Outcome Uncertainty  Cost of outcome Measurement  Control  Alternative Explanations Introduction Theory Empirical Discussion Conclusion  Depend on the cost of the outcome measurement system.  The number of stores in the store chain.  The dichotomous ownership variable

 Task Programmability  Behavior Measurement  Outcome Uncertainty  Cost of outcome Measurement  Control  Alternative Explanations Introduction Theory Empirical Discussion Conclusion  Behavior based vs. outcome based reward structures.  Outcome based: Commission, commission against law and salary plus commission  Behavior based: Salary or hourly rate compensation

 Task Programmability  Behavior Measurement  Outcome Uncertainty  Cost of outcome Measurement  Control  Alternative Explanations Introduction Theory Empirical Discussion Conclusion  Talbert and Bose (1978)  Sex composition  Price  Type (specialty vs. department)  Location (city vs. suburbs)

Introduction Theory Empirical Discussion Conclusion ConstructInternal Consistency Convergent validity Discriminant validity Task Programmability **4 of 96 Behavior Measurement ***0 of 54 Outcome Uncertainty **0 of 54 Cost of Outcome Measurement **0 of 20 Note: 1. Measured by Standardized Cronbach Alpha 2. Measured by Range of correlations 3. Measured by # cross construct correlations>within correlations construct 4. Significant level: * 0.1 **0.05 ***0.01

 Correlation Matrix  Discriminant Analysis Introduction Theory Empirical Discussion Conclusion

 Discriminant Analysis Classification Table (N=54) Introduction Theory Empirical Discussion Conclusion

 Humanist/attributionist argument that salient extrinsic reward diminishes intrinsic motivation should be used cautiously outside of the experimental laboratory.  Responsibility need not match controllability. Introduction Theory Empirical Discussion Conclusion

 Job Design----Simple and Routine job  Invest in information System  Outcomes based control---Simple evaluation scheme, a flexible job content  Employ people whose preference coincide with those of management----selection, training and socialization Introduction Theory Empirical Discussion Conclusion

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