OrganizationalControl and Culture

OrganizationalControl and Culture

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Karishma’s Dilemma

• Supervisor of an Engineering firm in Pune

• Morale in her office quite low, recently

• The workers have gone back to 9.00 a.m to 5 p.m work schedule after being on flexi time for nearly two years

• Directive came down allowing to place her office on flexi time, she spelled out her rules carefully to people

Contd.,

• All employees were to work during the core period from 10.am to 2 p.m.

• They could work the rest of the eight hour day at anytime between 6 a.m to 6 p.m

• Everything went along well for a long time• Morale was high, and all the work seemed

to get done• In November 2008, the chief factory

manager

Contd.,

• In November 2008, the chief factory manager found that Karishma’s workers were averaging seven hours a day

• Some of them had been working only during the core period for more than 2 months

Contd.,

• When Karishma's departmental head received the factory manager’s report, he told Karishma to return the office to regular working hours

• Karishma was upset and disappointed with her people

Discuss!!!!!!!!!

• Control is the process of monitoring activities to ensure that they are being accomplished as planned and correcting any significant deviations.

Organizational ControlOrganizational Control

• Managers must monitor & evaluate:– Are we efficiently converting inputs into

outputs?– Is product quality improving?– Are employees responsive to customers?– Are our managers innovative in outlook?

Control SystemsControl Systems

•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 ControlThree Types of Control

InputsInputsInputsInputs OutputsOutputsOutputsOutputsConversionConversionProcessProcess

ConversionConversionProcessProcess

Feed forwardFeed forwardControl Control

Feed forwardFeed forwardControl Control

ConcurrentConcurrentControl Control

ConcurrentConcurrentControl Control

FeedbackFeedbackControl Control

FeedbackFeedbackControl Control

Control TypesControl Types– Feedforward: use in the input stage of the process.

– Managers anticipate problems before they arise.– Managers can give rigorous specifications to suppliers to

avoid quality

– Concurrent: gives 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: provides after the fact information

managers can use in the future.– Customer reaction to products are used to take

corrective action in the future.

The Control Process

Objectives Standard Measure

actualperformance

Compareactual

performancewith standard

Is standardbeing attained?

Is varianceacceptable?

Is standardacceptable?

Revisestandard

Donothing

Donothing

Identifycause of variation

Correctperformance

No

No

No

Yes

Yes

Yes

Control Process StepsControl Process StepsEstablish standards of performance, goals, or Establish standards of performance, goals, or

targets against which performance is evaluated.targets against which performance is evaluated.

Measure actual performanceMeasure actual performance

Compare actual performance Compare actual performance against chosen standardsagainst chosen standards

Evaluate results and take corrective actionEvaluate results and take corrective actionwhen the standard is not being achieved.when the standard is not being achieved.

1.

2.

3.

4.

The Goal-Setting ProcessThe Goal-Setting Process

Corporate level managers set goals for Corporate level managers set goals for individual decisions to allow organizationindividual decisions to allow organization

to achieve corporate goals.to achieve corporate goals.

Divisional managers set goals for Divisional managers set goals for each function to allow the divisioneach function to allow the division

to achieve its goals.to achieve its goals.

Functional managers set goals for Functional managers set goals for each worker to allow the functioneach worker to allow the function

to achieve its goals.to achieve its goals.

Organizational Control SystemsOrganizational Control Systems

Output Output ControlControl

Behavior Behavior ControlControl

Culture or Clan Culture or Clan ControlControl

Financial Measures or performanceFinancial Measures or performanceGoalsGoals

Operating budgets Operating budgets

Direct supervisionDirect supervisionManagement by Objective (MBO)Management by Objective (MBO)

Rules & Standard Operating ProceduresRules & Standard Operating Procedures

ValuesValuesNormsNorms

SocializationSocialization

Tools of Control

• Financial Control

• Production control

• Organizational Control

• Inventory Control

• Quality Control

Output Control SystemsOutput Control Systems– Financial Controls are objective and allow

comparison to other firms.• Profit ratios--measures how efficiently managers

convert resources into profits.– Return on Investment (ROI) is the most common.

• Liquidity ratios -- measure how well managers protect resources to meet short term debt.

– Current & quick ratios.• Leverage ratios -- show how much debt is used to

finance operations.– Debt-to-asset & times-covered ratios.

• Activity ratios -- measures how managers create value from assets.

– Inventory turnover, days sales outstanding.

Output Control SystemsOutput Control Systems– Organizational Goals: after corporate financial

goals are set, each division is given specific goals that must be met to attain the overall goals.

– Operating budgets: a blueprint showing how managers can use resources.

– Each division is often evaluated on its own budgets for cost, revenue or profit.

Output Control ProblemsOutput Control Problems

– Managers must create output standards that motivate at all levels.

– Be careful of creating short-term goals that motivate managers to forget the future.

• It is easy to cut costs by dropping R&D now but it leads to future disaster.

– If standards are too high, workers may follow unethical behavior to attain them.

• Increase sales regardless of issues. This can be done by skipping safe production steps.

Behavior Control SystemsBehavior Control Systems

Managers must motivate and shape employee behavior to meet organizational goals.

– Direct Supervision: managers who directly manage workers and can teach, reward, and correct.

• Very expensive since only a few workers can be managed by 1 manager.

• Can demotivate workers who desire more autonomy.• Hard to do in complex job settings.

Management by Objectives Management by Objectives

– Management by Objectives (MBO): evaluates workers by attainment of specific objectives.

• Goals are set at each level of the firm.• Goal setting is participatory with manager AND

worker.• Reviews held looking at progress toward goals.

– 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

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

• Rules and SOPs tell the worker what to do.• Standardized actions so outcomes are predictable.

Strategic Point Control

• Emphasis on measuring the performance and checking deviations in respect of key result areas which are highly critical to the success of a firm

Management by Exception

• Focuses attention on exceptionally serious deviations from the plans and standards

Characteristics of an Effective Control System

• Suitable• Simple• Selective• Sound and Economical• Flexible• Forward-Looking• Objective and Impersonal• Responsibility for failures• Acceptable

Contingency Factors

Organization size

Small

Large

Informal, personal, management by walking around

Formal, impersonal, extensive rules and regulation

Position and levelHigh

Low

Many criteria

Few, easy-to-measure criteria

HighDegree of

decentralizationLow

Increased number and breath of controls

Reduced number of control

Organizational culture

Open and supportive

Threatening

Informal, self-control

Formal, externally imposed controls

Importance of an activity

High

Low

Elaborate, comprehensive controls

Loose, informal controls

Benefits of Control System

• Increases Productivity• Reduces defects and mistakes• Helps meet deadlines• Facilitates communication• Improves safety• Lowers costs• Give workers control over their

environment