managing the internal organization. managerial tasks budget appropriate resources establish...
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Managing the Internal Organization
Managerial Tasks
Budget appropriate resourcesEstablish strategy-supportive policiesInstitute “best practices” and strive for continuous improvementInstall appropriate support systemsMotivate and compensate to enhance execution
Linking Budgets to Strategy
Budgets may be established at any organizational levelBudgets are typically for one year or lessBudgets may be expressed in financial terms, units of output, or other quantifiable factors
Linking Budgets to Strategy
Budgets serve four purposes:Help managers coordinate resources and projectsHelp define the established standards for controlProvide guidelines about the organization’s resources and expectationsEnable the organization to evaluate the performance of managers and organizational units
Linking Budgets to Strategy
Type of Budget What Budget Shows
Financial budget Sources and uses of cash
Cash-flow or cash budget All sources of cash income and cash expenditures in monthly, weekly, or daily periods
Capital-expenditures budget Costs of major assets such as a new plant, machinery, or land
Balance-sheet budget Forecast of the organization’s assets and liabilities in the event that all other budgets are met
Linking Budgets to Strategy
Type of Budget What Budget Shows
Operating budget Planned operations in financial terms
Sales or revenue budget Income the organization expects to receive from normal operations
Expense budget Anticipated expenses for the organization during the coming time period
Profit budget Anticipated differences between sales or revenues and expenses
Linking Budgets to Strategy
Type of Budget What Budget Shows
Nonmonetary budget Planned operations in nonfinancial terms
Labor budget Hours of direct labor available for use
Space budget Square feet or meters of space available for various functions
Production budget Number of units to be produced during the coming time period
Linking Budgets to Strategy
StrengthsBudgets facilitate effective operational controls
Budgets facilitate coordination and communication between departments
Budgets establish records of organizational performance, which can enhance planning
WeaknessesBudgets can hamper operations if applied too rigidlyBudgets can be time consuming to developBudgets can limit innovation and change
Policies and Procedures
Provide top-down guidanceHelp align actions and behavior throughout the organizationEnforce needed consistencyChanging them can provide a powerful lever to change corporate culture
Policies and ProceduresDimension
Employee complianceGoal of control approach
Strict rules, formal controls,rigid hierarchy
Directed toward minimum levels of acceptable performance
Tall structure, top-down influence
Directed at individualperformance
Limited and formal
Employee commitment
Group norms, culture, self-control
Directed toward enhancedperformance above andbeyond the minimum
Flat structure, shared influence
Directed at group performance
Extended and informal
Performance expectations
Degree of formality
Organization design
Reward system
Participation
Bureaucratic Control Clan Control
Policies and Procedures
Resistance to control can be overcome by
Designing effective controls that are properly integrated with organizational planning and aligned with organizational goals and standardsCreating controls that are flexible, accurate, timely, and objectiveAvoiding “overcontrol” in the implementation of controls
Policies and Procedures
Resistance to control can be overcome byGuarding against creating controls that reward inefficienciesEncouraging employee participation in the planning and implementing of control systemsDeveloping a system of checks and balances in the control systems through the use of multiple standards and information systems that allow the organization to verify the accuracy of performance indicators
Total Quality Management
QualityThe totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needsQuality is both a relative and absolute conceptQuality is relevant to both products and services
Total Quality Management
Dimensions of Quality1. Performance- A product’s primary operating characteristic. Examples are
automobile acceleration and a television’s picture clarity
2. Features- Supplements to a product’s basic functioning characteristics, such as power windows on a car
3. Reliability- A probability of not malfunctioning during a specified period
4. Conformance- The degree to which a product’s design and operating characteristics meet established standards
5. Durability- A measure of product life
6. Serviceability- The speed and ease of repair
7. Aesthetics- How a product looks, feels, tastes, and smells
8. Perceived quality- As seen by a customer
Total Quality ManagementMalcolm Baldrige AwardNamed after a former secretary of commerce, this prestigious
award is given to firms that achieve major quality improvements
CompetitionQuality has become one of the most important competitive
points in business todayProductivityQuality enhancement programs decrease the number of defects,
reduce resources dedicated to rework, and reduces the need for inspectors as employees become responsible for quality
CostsImproved quality reduces costs from customer returns, warranty,
and lawsuits for faulty products, and lost sales to future customers
Total Quality Management
TQMA strategic commitment by top
management to change its whole approach to business and to make quality a guiding factor in everything the organization does
Commitment to “best practices”Commitment to continuous improvement
Total Quality Management
Tools and TechniquesBenchmarking- the process of learning how and what other firms do in an exceptionally high-quality mannerOutsourcing- subcontracting operations/services to those who can do them cheaper and/or betterStatistical Quality Control (SQC)- a set of statistical techniques that can be used to monitor quality; includes acceptance sampling and in-process sampling
Total Quality Management
Tools and TechniquesEmployee empowerment- job enrichment and delegation of authorityTeam building- reinforce individual effort and provide diverse input into decision makingSpeed- the time needed by the organization to get something accomplishedISO 9000- a set of quality standards created by the International Organization for Standardization by which firms can be certified
Information Systems
Characteristics of Useful InformationAccurate- a valid and reliable reflection of reality Timely- information delivered in time for managerial actionComplete- information that tells a complete story, rather than being incomplete or distortedRelevant- meets the needs and circumstances of the individual manager
Information SystemsUser Group System Requirements
Top managers Need information to analyze broader trends in the economy, the business environment, and overall company performance for conducting long-range planning for the entire organization
Middle managers Need summaries and analyses for setting intermediate and long-range goals for depart-ments and projects under their supervision
First-line (operational) managers
Need information to oversee the day-to-day details of their departments or projects
Knowledge workers Rely on information technology to design new products or create new business processes
Information SystemsIssues in Managing in Information Systems (IS)
Integrating Information SystemsUsing Information SystemsManaging Information SecurityUnderstanding Information System Limitations
• IS are expensive and difficult to develop and implement• IS are not suitable for all tasks or problems• Managers sometimes rely on IS too much• Information provided by IS may not be accurate, timely,
complete, or relevant• Managers have unrealistic expectations of the capability IS• IS are subject to sabotage, viruses, or downtime
Information SystemsLeaner Organizations
Direct communication links broaden the span of management, foster simpler organizational structures, and increase productivity
More Flexible OperationsIS can be used to offer greater variety, faster delivery cycles, and the mass-customization of products
Increased CollaborationInternally, network systems help in keep everyone in the organization informedExternally, network systems help build business-to-business relationships
Information SystemsMore Flexible Work Sites
Networks allow workers to be located in places other that the traditional office and still participate in the firm’s operations
Improved Management ProcessesImproved information systems now can quickly furnish information in a convenient, usable format to any member of the organization
Changed Employee BehaviorsPositive Effects- improves individual efficiency through the use of a new technology and the work associated with itNegative Effects- can lead to isolation of people and is a less personal form of communication
Motivation and CompensationEmpowerment and Participation
Empowerment• The process of enabling workers to set their own work
goals, make decisions, and solve problems within their sphere of influence
Participation• The process of giving employees a voice in making
decisions about their workAreas of Participation for Employees
• Making decisions about their jobs.• Decisions about administrative matters (e.g., work
schedules)• Participating in decision making about broader issues of
product quality
Motivation and CompensationTechniques and Issues in Empowerment
Using work teams• Collections of employees empowered to plan, organize,
direct, and control their work
Changing the overall method of organizing the firm by becoming more decentralizedConditions necessary for empowerment
• Organization must be sincere about spreading power to lower levels
• Organization must be committed to empowering workers• Organization must be systematic and patient in its efforts
to empower workers• Organization must be prepared to increase its
commitment to training
Motivation and Compensation
Reinforcement TheoryThe role of rewards as they cause behavior to change or remain the same over timeAssumes that• Behavior that results in rewarding
consequences is likely to be repeated• Behavior that results in punishing
consequences is less likely to be repeated
Motivation and CompensationPositive reinforcement
Strengthens behavior with rewards or positive outcomes after a desired behavior is performed
Avoidance Strengthens behavior by avoiding unpleasant consequences that would result if the behavior is not performed
PunishmentWeakens undesired behavior by using negative outcomes or unpleasant consequences when the behavior is performed
ExtinctionWeakens undesired behavior by simply ignoring or not reinforcing that behavior
Motivation and CompensationReward System
The formal and informal mechanisms by which employee performance is defined, evaluated, and rewarded
Effects of Organizational RewardsEffect of Rewards on Attitudes
• Satisfaction is influenced by how much is received and how much the person thinks should have been received.
• Satisfaction is affected by comparison with others.• The rewards of others are often misperceived• Overall job satisfaction is affected by employee
satisfaction with intrinsic and extrinsic rewards
Motivation and CompensationEffects of Organizational Rewards (cont’d)
Effect of Rewards on Behaviors• Extrinsic rewards affect employee satisfaction and reduce
turnover• Rewards influence patterns of attendance and absenteeism• Employees tend to work harder for rewards based on
performance
Effect of Rewards on Motivation• Employees will work harder when performance will be
measured• Employees will work harder if performance is closely
followed by rewards
Motivation and Compensation
For incentives to be effectivePerformance payoff must be a major part of the total compensationIncentive plan must extend to all members of the organizationSystem must be perceived as fairIncentives must be linked to desired performance
Motivation and Compensation
Performance target outcomes must be within the individual’s controlStrive for immediate reinforcementEmploy non-monetary incentives liberallyDo not reward non-performance