Organizational Control What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management Chapter 13 Organizational Control

LEARNING OBJECTIVES LEARNING OBJECTIVES What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management LEARNING OBJECTIVES LEARNING OBJECTIVES After studying the chapter, you should be able to: Define organizational control, and describe the four steps of the control process. Define the main output controls, the main behaviour controls and organizational culture in terms of the impact on the motivation of employees. Discuss the advantages and disadvantages of using output controls, behaviour controls and organizational culture as a means to coordinate and motivate employees. Recognize appropriate situations where organizational control, behaviour control and organizational culture should be used to motivate employees so that an organization can achieve high performance.

What Is Organizational Control? Output Behavior The Role of Culture Culture & The 4 Activities of Management CHAPTER OUTLINE What Is Organizational Control? The Importance of Organizational Control Control Systems The Control Process Output Control Financial Measures of Performance Organizational Goals Operating Budgets Problems with Output Control

The Role of Culture Organizational Control What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management CHAPTER OUTLINE Behaviour Control Direct Supervision Management by Objectives Bureaucratic Control Problems with Bureaucratic Control The Role of Culture Organizational Control Output and Behaviour Controls: The Underlying Assumption Getting Control of the Innovative, Flexible Organization Culture and the Four Activities of Management

Managers must monitor and evaluate: What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management Managers 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?

A good control system should: What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management CONTROL SYSTEM Formal, target-setting, monitoring, evaluation and feedback systems that provide managers with information about how well the organization’s strategy and structure are working. 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.

THREE TYPES OF CONTROL Culture & Output What is Organizational Control Behavior The Role of Culture Culture & The 4 Activities of Management THREE TYPES OF CONTROL

Feedforward Control Concurrent Control TYPES OF CONTROL What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management TYPES OF CONTROL Feedforward Control Used in the input stage of the process Managers can anticipate problems before they arise. Managers can give rigorous specifications to suppliers to avoid quality problems with inputs. Concurrent Control Give immediate feedback on how inputs are converted into outputs Allows managers to correct problems as they arise Managers can see that a machine is becoming out of alignment and fix it.

Feedback Controls TYPES OF CONTROL What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management TYPES OF CONTROL Feedback Controls Provide after-the-fact information managers can use in the future Customers’ reactions to products are used to take corrective action in the future.

Establish standards of performance, goals, or targets What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management CONTROL PROCESS STEPS Establish standards of performance, goals, or targets Measure actual performance Compare actual performance against chosen standards Evaluate Result and Initiate Corrective Action if Needed Step 1 Step 2 Step 3 Step 4

What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management THE CONTROL PROCESS 1. Establish standards, goals, or targets against which performance is to be evaluated. Managers at each organizational level need to set their own standards. Standards must be consistent with the strategy of the organization (i.e., for a low cost strategy, standards should be focused closely on reducing costs).

2. Measure actual performance What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management THE CONTROL PROCESS 2. Measure actual performance Managers can measure outputs resulting from worker behaviour or they can measure the behaviour themselves. The more non-routine the task, the harder it is to measure performance or output, causing managers to measure an employee’s behaviour (e.g., that an employee comes to work on time) rather than the employee’s output.

3. Compare actual performance against chosen standards. What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management THE CONTROL PROCESS 3. Compare actual performance against chosen standards. Does performance actually deviate from standard? If so, by how much?. 4. Evaluate result and take corrective action. Standards may have been set too high or too low. Workers may need additional training or equipment. This step is hard when environment is constantly changing.

THREE STEPS OF PLANNING Figure 7.1

SIX STEPS IN DECISION MAKING Recognize the need for a decision Step 1 Generate Alternatives Step 2 Assess Alternatives Step 3 Choose among Alternatives Step 4 Implement the choose Alternatives Step 5 Step 6 Learn from feedback

THREE ORGANIZATIONAL CONTROL SYSTEMS What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management THREE ORGANIZATIONAL CONTROL SYSTEMS

FINANCIAL MEASURE OF PERFORMANCE What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management FINANCIAL MEASURE 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.

FINANCIAL MEASURE OF PERFORMANCE (Cont’d) What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management FINANCIAL MEASURE OF PERFORMANCE (Cont’d) Financial Controls (cont’d) Activity ratios Measures of how efficiently managers are creating value from assets— inventory turnover, days sales outstanding ratios.

What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management 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).

ORGANIZATION- WIDE GOAL SETTING What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management ORGANIZATION- WIDE GOAL SETTING

What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management Operating Budgets state how managers intend to allocate and use the resources they control. 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.

Objective financial measures What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management ESSENCE OF EFFECTIVE OUTPUT CONTROL Objective financial measures Challenging goals and performance standards Appropriate operating budgets Most organizations develop sophisticated output control systems

PROBLEMS WITH OUTPUT CONTROL What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management PROBLEMS WITH OUTPUT CONTROL Managers must create output standards that motivate at all levels. They must be careful not to create short-term goals that motivate managers to ignore the future. Example: Cutting costs by curtailing research and development (R&D) now may lead to a loss of competitiveness in the future. If standards are set too high, workers may engage in unethical behaviours to attain them. Example: Attempting to increase output regardless of product quality issues caused by omitting steps in the production process.

What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management Direct Supervision Actively monitor, observe, teach, reward, lead by example, and take corrective action as needed. can be very expensive can de-motivate workers who desire less scrutiny and more autonomy difficult to do effectively in complex job settings

MANAGEMENT BY OBJECTIVES What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management 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. Specific goals are set at each level of the firm. Goal setting is participation with manager and worker Periodic reviews of subordinates’ progress toward goals are held Pay raises and promotions are tied to goal attainment Teams are also measured in this way with goals and performance measured for the team.

Bureaucratic Control BUREAUCRATIC CONTROL What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management BUREAUCRATIC CONTROL Bureaucratic Control Control through a system of rules and standard operating procedures (SOPs) that shapes the behaviour of divisions, functions, and individuals. Rules and SOPs tell the worker what to do (standardized actions) so outcomes are predictable. There is still a need for output control to correct mistakes. Bureaucratic control is best used for routine problems in stable environments.

Problems with Bureaucratic Control What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management BUREAUCRATIC CONTROL Problems with Bureaucratic Control Rules easier to make than discarding them, leading to bureaucratic “red tape” and slowing organizational reaction times to problems. Firms become too standardized and lose flexibility to learn, to create new ideas, and solve to new problems. Less useful in complex, changing situations

ORGANIZATIONAL CULTURE What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management ORGANIZATIONAL CULTURE Organizational Culture The set of internalized values, norms, standards of behaviour, and common expectations that control the ways in which individuals and groups in an organization interact with each other and work to achieve organizational goals.

OUTPUT & BEHAVIOR CONTROLS: THE UNDERLYING ASSUMPTION What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management OUTPUT & BEHAVIOR CONTROLS: THE UNDERLYING ASSUMPTION To use output and behaviour controls, the organization must know what is to be done in every situation an employee might face. Every situation: Has been anticipated Is clearly understood Has an optimal reaction Governing behaviour with standard procedures is nearly impossible if need innovation and flexibility to compete.

GETTING CONTROL OF THE INNOVATIVE, FLEXIBLE ORGANIZATION What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management GETTING CONTROL OF THE INNOVATIVE, FLEXIBLE ORGANIZATION Organizational culture can be used as a control system Broad guidelines for desired behaviours are internalized. Allows flexibility and innovation, consistent with company values and norms. Can provide control where output and behavioural control does not work.

Culture of innovative, flexible organizations: Planning What is Organizational Control Output Behavior The Role of Culture Culture & The 4 Activities of Management Culture of innovative, flexible organizations: Planning High level of involvement from all areas Focus on innovation, creativity Organizing Organic, flexible structures with teams Flat with decentralized authority Leading Leading by example Leaders take risks, celebrate success, openly discuss failure Controlling Long term goals and flexible MBO programs

SUMMARY Culture & Output What is Organizational Control Behavior The Role of Culture Culture & The 4 Activities of Management SUMMARY

THE END Culture & Output What is Organizational Control Behavior The Role of Culture Culture & The 4 Activities of Management THE END