DISCUSSION MAN2021

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CHAPTER 8 Organizational Control and Change

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Learning Objectives 1

1. Define organizational control, and explain how it increases organizational effectiveness.

2. Describe the four steps in the control process and the way it operates over time.

3. Identify the main output controls, and discuss their advantages and disadvantages as means of coordinating and motivating employees.

4. Identify the main behavior controls, and discuss their advantages and disadvantages as a means of managing and motivating employees.

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Learning Objectives 2

5. Explain how organizational culture or clan control creates an effective organizational architecture.

6. Discuss the relationship between organizational control and change and explain why managing change is a vital management task.

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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.

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Control Systems and Technology

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.

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Topics for Discussion 1

What is the relationship between organizing and controlling? [LO 8-1]

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Control 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.

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Three Types of Control

Figure 8.1

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Types of Control 1

Feedforward Control:

• Control that allows managers to anticipate problems before they arise.

Concurrent Control:

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

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Types of Control 2

Feedback Control:

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

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Four Steps in Organizational Control

Figure 8.2

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Topics for Discussion 2

What kind of controls would you expect to find most used in (a) a hospital, (b) the navy, (c) a city police force? Why? [LO 8-1, 8-2, 8-3]

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Three Organizational Control Systems

Figure 8.3

Type of control: Mechanisms 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.

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Financial Measures of Performance 1

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.

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Financial Measures of Performance 2

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.

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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

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Organization-Wide Goal Setting

Figure 8.4

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Operating Budgets 1

Operating Budget:

• A blueprint that states how managers intend 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.

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Operating Budgets 2

Three components are the essence of effective output control:

1. Objective financial measures.

2. Challenging goals and performance standards.

3. Appropriate operating budgets.

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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.

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Behavior Control 1

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.

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Behavior Control 2

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.

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Management by Objectives

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.

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Topics for Discussion 3

How do output control and behavior control differ? [LO 8-1 8-2, 8-3]

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Behavior Control 3

Bureaucratic Control:

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

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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.

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Topics for Discussion 4

What is organizational culture, and how does it affect the way employees behave? [LO 8-4]

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Organizational Culture and Clan Control 1

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.

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Organizational Culture and Clan Control 2

Clan Control:

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

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Adaptive versus 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.

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Organizational Control and Change Figure 8.5

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Organizational Change 1

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

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Four Steps in the Organizational Change Process

Figure 8.6

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Organizational Change 2

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.

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Organizational Change 3

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.

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Organizational Change 4

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.

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Topics for Discussion 5

Why is it important for managers to involve subordinates in the control process? [LO 8-3, 8-4]

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Organizational Change 5

Benchmarking:

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

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BE A MANAGER

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

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© 2021 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom.

No reproduction or further distribution permitted without the prior written consent of McGraw Hill.