Organizational Control and Change McGraw-Hill/Irwin Contemporary Management, 5/e Copyright © 2008 The McGraw-Hill Companies, Inc. All rights reserved. chapter eleven

THE FUNDAMENTALS OF CONTROLLING Controlling – Process of ensuring that organizational activities are going according to plan. The steps are: 1.Set Standards 2.Measure performance 3.Compare measured performance to standards 4.Take corrective action if necessary Example: A salespeople had a standard to sell 15 vehicles for the month and only sold 12 cars. His performance fell short of the standard by 3. Correction is called for…either in performance or in the standard

Steps in Controlling 1.Set Standards, such as those related to… * Profitability* Customer Satisfaction * Expenses* Employee attitudes * Productivity* Social responsibility * Sales #’s or $’s* Inventory 2.Measure Performance 3.Compare Measured Performance to Standards 4.Take Corrective Action– bring performance up to standard First, make sure standards are good ones and measurements are accurate Before correcting the problem, look for symptoms to the problem.

11-4 Control Process Steps Figure 11.2

Value of Management Control Managers use information generated from controlling processes to: Prevent crises. Standardize outputs. Appraise employee performance. Revise plans to reflect current reality. Protect the organization’s assets.

What Makes Controlling Difficult? Faulty planning. Lack of communication within the organization. Lack of training. Lack of motivation. Unforeseen forces outside the organization, such as government regulation or a competitive action.

The Timing of Control Precontrol (aka “Feedforward Control”) – Takes place before the work is performed  Creating policies, procedures, and rules to prevent behavior that will cause poor performance Concurrent Control – Takes place while the work is being performed  Relates to employees, equipment, and facilities  Example: visually inspecting if shelves are stocked Feedback Control – Takes place after the work is performed  Would include reviewing sales, profits, or expenses.

11-8 The Timing of Control Figure 11.1

Managing Employee Reaction to Controls Guidelines for lessening negative reactions: 1.Make sure the standards and associated controls are attainable yet challenging. 2.Involve employees in the control-setting process. Many behavioral problems associated with controls result from a lack of understanding of the nature and purpose of the controls. 3.Use controls only where needed. Periodically evaluate the need for different controls.

11-10 Three Organizational Control Systems Figure 11.3

Output Control: Budgets Type of Budget Revenue and expense budget Cash budget Capital expenditure budget Balance sheet budget Purpose  Provides detail for revenue and expense plans  Forecasts cash receipts & payments  Outlines specific expenditures for building, equipment, etc.  Forecasts the status of assets, liabilities, and net worth at the end of the budget period. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

11-12 Output Control 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 set appropriately so that managers are motivated to accomplish them Remember, Divisional goals flow down from high-level Org goals which flow down from the Mission Statement

11-13 Behavior Control Direct supervision – managers must actively monitor and observe the behavior of their subordinates –Teach subordinates appropriate behaviors (train and mentor) –PPPP –Can be an effective way of motivating employees

11-14 Problems with Direct Supervision Very expensive because a manager can personally manage only a relatively small number of subordinates effectively Can demotivate subordinates if they feel that they are under such close scrutiny that they are not free to make their own decisions

11-15 Behavior Control - MBO Management by Objectives (MBO) –formal system of evaluating subordinates for their ability to achieve specific organizational goals or performance standards and to meet operating budgets –Should use SMART Objectives!

11-16 Management by Objectives MBO STEPS 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

11-17 Clan Control –The control exerted on individuals and groups in an organization by shared values, norms, standards of behavior, and expectations.

11-18 Organization Change Movement of an organization away from its present state and toward some desired future state to increase its efficiency and effectiveness

11-19 Organizational Change

11-20 Steps in the Organizational Change Process Figure 11.7

11-21 Implementing the Change Top Down Change –A fast, revolutionary approach to change in which top managers identify what needs to be changed and then move quickly to implement the changes throughout the organization. Q. What can go wrong with Top Down Change?

11-22 Implementing the Change 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.

11-23 Evaluating the Change Benchmarking –The process of comparing one company’s performance on specific dimensions with the performance of other, high-performing organizations.