MGMT--Chapter 8 - Control, Change, and Entrepreneurship

Four Steps in the Organizational Change Process

1. Assess the need for change 2. Decide on the change to make 3. Implement the change 4. Evaluate the change

The control process

1. Establish the standards of performance... 2. Measure actual performance 3. Compare actual performance against chosen standards of performance 4. Evaluate the result...

Four Steps in Organizational Control

1.Establish standards, goals, or targets against which performance is to be evaluated. Standards must be consistent with the organization's strategy. 2.Measure actual performance. Managers can measure outputs resulting from worker behavior or they can measure the behavior themselves. 3.Compare actual performance against chosen standards. Managers must decide if performance actually deviates, often, several problems combine creating low performance. 4.Evaluate the result and initiate corrective action if the situation is not being achieved. Standards have been set too high or too low. Workers may need additional training or equipment. This step is often hard since the environment is constantly changing.

MBO

1.Specific goals and objectives are established at each level of the organization. 2.Managers and their subordinates together determine the subordinates' goals. 3.Managers and their subordinates periodically review the subordinates' progress toward meeting goals. There can be no perception of personal biases or political objectives in the process; if employees sense that there is, it could be harmful to the control system.

Top-Down Change

A fast, revolutionary approach to change in which top managers identify what needs to be changed, decide what to do, and then move quickly to implement changes throughout the organization In a top-down change, top managers, perhaps the CEO, determine that the organization needs to make a change to achieve a specific goals. They then ask lower-level managers to implement the process to achieve the change. A revolutionary approach, it is intended to make quick changes and to address problems as they occur.

Management by Objectives (MBO)

A goal-setting process in which managers and each of his or her subordinates negotiate specific goals and objectives for the subordinate to achieve and then periodically evaluate the extent to which the subordinate is achieving those goals

A Good Control System

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

Bottom-Up Change

A gradual or evolutionary approach to change in which managers at all levels work together to develop a detailed plan for change One of the advantages of this type of change, is that it is likely to address any employee resistance.

What kind of controls would you expect to find most used in (a) a hospital, (b) the navy, (c) a city police force? Why?

A hospital would most likely use output and behavior control systems. Ratios such as the number of days outstanding for receivables are used to determine the economic health of the hospital. Operating budgets are used for each department as well as each function (i.e., marketing and advertising) of the hospital. Organizational goals, such as the desire to achieve the best reputation in the treatment of heart disease, are usually established. Behavior controls, such as direct supervision and bureaucratic control, are also very common. Interns and residents of the hospital are regularly monitored to ensure that they are making the correct diagnosis for patients. Bureaucratic controls are evident in the abundance of rules, policies and procedures that are established and must be obeyed. This is done to ensure safety, health and well-being of the employees and patients of the hospital. The navy primarily uses behavior and culture control systems. The behavior of enlisted personnel is constantly monitored and they are expected to follow a plethora of rules, including the way that they should walk, talk, and respond to superiors. There is a deep culture entrenched in the military. Because members of the Navy are representing their country and their arm of the military at all times, there is a high level of behavior that is expected of them, especially when they are in uniform. A city police force uses output, behavior, and clan control systems. Because the city established a budget for the police force, they are under the control of their output. They are expected to keep the crime level below certain levels working within their budget. Behavior controls are used when policemen are expected to follow established procedures in many of their duties. A culture is created within the police force in regards to the way that they fulfill their duties. Because their purpose to protect the people, they should deal with the community in a professional manner and develop a trusting relationship with its members.

Adaptive vs. Inert Culture

Adaptive Culture Culture whose values and norms help an organization to build momentum and to grow and change as needed to achieve its goals and be effective Inert Culture •Culture that leads to values and norms that fail to motivate or inspire employees •Leads to stagnation and often failure over time

Behavioral control

Behavioral control -Direct supervision -Management by objectives Step 1: Specific goals and objectives ... Step 2: Managers and their subordinates together determine... Step 3: Managers and their subordinates periodically review... -Bureaucratic control -Rules and SOP's -Problems with bureaucratic control

Clan control

Clan control -Adaptive culture -Inert culture

Definition of Clan Control

Control exerted on individuals and groups in an organization by shared values, norms, standards of behavior, and expectations

Bureaucratic Control

Control of behavior by means of a comprehensive system of rules and standard operating procedures

Feedforward Control

Control that allows managers to anticipate problems before they arise

Feedback Control

Control that gives managers information about customers' reactions to goods and services so that corrective action can be taken if necessary

What Is Organizational Control?

Controlling Process where managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals Controlling: •Keep employees motivate •Identify problems in organization •Provide changes needed

Organization-Wide Goal Setting

Corporate-level managers set goals for individual divisions that will allow the organization to achieve corporate goals. Divisional managers set goals for each function that will allow the division to achieve its goals. Functional managers set goals for each individual worker that will allow the function to achieve its goals.

Direct Supervision

Direct Supervision involves managers who: •Actively monitor and observe the behavior of their subordinates •Teach subordinates the behaviors that are appropriate and inappropriate •Intervene to take corrective action as needed Direct supervision, such as mentoring, can motivate and promote efficient and effective behavior within the organization.

Intrapreneurs

Employees of existing organizations who notice opportunities for product or service improvements and are responsible for managing the development process Intrapreneurs have left companies when their ideas were underappreciated or ignored. The text points out the experiences of Hewlett and Packard, and Rod Canion to illustrate this.

Dynamic between entrepreneurship and management

Entrepreneurship originates from having an idea and activities to make those ideas into a reality bearing the risk of business and ownership whereas management is an ongoing process of getting things done given the circumstances and challenges while making dynamic changes in the organization while not bearing the risk of ownership in a more decentralized environments as opposed to entrepreneurship.

Three types of control

Feedforward control, Concurrent control, and Feedback control -Feedforward control -Concurrent control -Feedback control

Output conto

Financial measures of performance (See Table 8.1 on page 269) -Profit ratios -Liquidity ratios -Leverage ratios -Activity ratios Organizational goals Operating budgets Problems with output control

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

Concurrent Control

Give managers immediate feedback on how efficiently inputs are being transformed into outputs so that managers can correct problems as they arise

Organizational Goals

Goals should be specific and difficult but attainable. Stretch Goals Goals that challenge and stretch managers' ability but are not out of reach and do not require an impossibly high expenditure of managerial time and energy One of managers' tasks is to determine if a goal is too difficult or too easy to obtain. And they must determine if their employees, or subordinate managers have the capabilities to meet the goal.

How do output control and behavior control differ?

In an output control system managers must first choose the set of goals or output performance standards or targets that they think will best measure efficiency, quality, innovation, and responsiveness to customers for their organization. Then they measure whether or not the performance goals and standards are being achieved at the four main levels in an organization (corporate, divisional, functional, and individual levels). As its name insinuates, behavior control systems involve providing mechanisms to ensure that workers behave in ways that make the structure work. It concentrates on controlling the behavior of the workers opposed to their output or results. The three kinds of behavior control systems are direct supervision, monitoring progress toward goals, and bureaucratic control.

Why is it important for managers to involve subordinates in the control process?

It is very important to involve subordinates in the control process in order to achieve success in any organization. If subordinates are involved in setting the goals and standards, they will feel a sense of ownership toward them, which will motivate them to work to achieve those goals. They will be more committed to goals that they helped to design. It will also help to ensure that unrealistic goals are not created.

What is the relationship between organizing and controlling

Management function 'organizing' is implementation which means the optimum use resources for achieving the aims. On the other hand, management function 'controlling or monitoring' means checking the progress of achieving objectives and giving feedback.

What kind of output controls will best facilitate positive interactions both within the teams and among the teams?

Managers and each team should be given organizational goals that are challenging and require them to "stretch." Each team could be evaluated on the time taken from the start of the project till the website is up and running. Revenues generated by individual websites, or click-through or page-view statistics could also be used to control output. The teams can also be set timelines or budgets within which to complete their projects, and be evaluated on the basis on whether they achieve those goals.

Organizational Control and Change

Managers must balance the need for an organization to improve the way it currently operates and the need for it to change in response to new, unanticipated events.

Problems with Output Control

Managers must create output standards that motivate at all levels. Standards should not cause managers to behave in inappropriate ways to achieve organizational goals.

Entrepreneurship

Mobilization of resources to take advantage of an opportunity to provide customers with new or improved goods and services An entrepreneur might be successful in coming up with a marketable idea, but if he or she does not have the management skills to create a successful long-term strategy, the idea might fail.

Organization Change

Movement of an organization away from its present state and toward some desired future state to increase its efficiency and effectiveness

Operating Budgets

Operating Budget A blueprint that states how managersintend to allocate and use the resources they control to attain organizational goals effectively and efficiently Lower-level managers are evaluated for their ability to stay within the budget and to make the best use of available resources

What is organizational culture, and how does it affect the way employees behave?

Organizational culture is the shared set of beliefs, expectations, values, norms, and work routines that influences how members of an organization relate to one another and work together to achieve organizational goals. An organizational culture can be adaptive or inert. An adaptive culture controls employee attitudes and behaviors. They help an organization to grow and change as needed to achieve its goals. In adaptive cultures, employees often receive rewards linked directly to their performance. It develops an emphasis on entrepreneurship and respect for the employee. By contrast, inert cultures are those that lead to values and norms that fail to motivate or inspire employees. The employment practices are based on short-term employment. Employees are not often rewarded for their performance and have little incentive to improve their skills. Poor working relationships develop between the organization and employees, and values of noncooperation and laziness are common. The employees are content to be told what to do and have little motivation to perform beyond minimum work requirements.

Entrepreneurs

People who notice opportunities and take responsibility for mobilizing the resources necessary to produce new and improved goods and services

Problems with bureaucratic control

Problems with Bureaucratic Control •Rules easier to make than to discard, leading to bureaucratic "red tape" and slowing organizational reaction times to problems •Loss of flexibility, new ideas, and creative problem solving Bureaucratic control can stifle employees' creative thinking and new ideas.

Benchmarking

Process of comparing one company's performance on specific dimensions with the performance of other high performing organizations

Financial Measures of Performance

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 or equity is used to finance operations—debt-to-asset and times-covered ratios Activity Ratios Measures of how efficiently managers are creating value from assets—inventory turnover, days sales outstanding ratios.

The importance of organizational control

The importance of organizational control ... helps obtain the four building blocks of competitive advantage -Managers must determine how efficiently resources are being used -Increase the quality of goods and services -Help organizations to be more responsive to customers -Raise the levels of innovation

Organizational culture

The shared set of beliefs, expectations, values, norms, and work routines that influences how members of an organization relate to one another and work together to achieve organizational goals Like society, organization's also have acceptable values and norms that employees follow. We are often unaware that we are following these, as they become part of the fabric that ties society, organizations together.

Rules and SOP's

They are written set of rules is what is known as a standard operating procedure. Standard operating procedures are written, step-by-step instructions that describe how to perform a routine activity.

Three components are the essence of effective output control

Three components are the essence of effective output control. •Objective financial measures •Challenging goals and performance standards •Appropriate operating budgets

Three Organizational Control Systems

Type of control Output control Financial measures of performance Organizational goals Operating budgets Behavior control Direct supervision Management by objectives Rules and standard operating procedures Organizational culture/clan control Values Norms Socialization

Organizational Learning

•Process through which managers try to increase organizational members' abilities to understand and appropriately respond to changing conditions •Impetus for change •Can help members make decisions about changes Issues may occur between desired performance and actual performance. Managers can determine whether change is needed by using performance measures.