Chapter 11 Short Assignment: Organizational Controls BMGT 335: Management and Organization ASSIGNMENT Due Date The assignment is due by 11:59 pm on Sunday of week 9 and is worth 15 points. Case and Questions. The assignment for chapter 11 is a short assignment. Read the case below and answer the four questions at the end of the case. The story is somewhat old, so don’t focus on the pay. However, the issues are very current and relate to good and bad ways to control employee output and activities. Assignment Format Format and Length. The assignment should be at least two double-spaced pages in length. Use one inch margins and Times Roman 12-point font. Grammar, Spelling, Capitalization, and Punctuation. Please review the document titled General Instructions on Assignments before beginning this assignment. Those instructions provide details about other formatting issues as well as grammar, spelling, and punctuation concerns. The document is found under “Course Materials” in the D2L course table of contents. I want the assignment to have no grammatical, spelling, capitalization, or punctuation errors, so be sure to use the spell check and grammar check options on your word processing software. . Plagiarism Check. Also, check your assignment for plagiarism. When you place the assignment in the drop box, you will be able to see how much of your paper is plagiarized (i.e., using someone else’s words). Please read the information about using the originality report found under the Writing Assistance section of the table of contents on the course D2L website. I expect you to use the report so that you do not plagiarize in any assignment. SUBMITTING THE ASSIGNMENT Please submit the assignment as a Microsoft Word file attachment in the drop box by selecting the “Assignments” option from the navigation menu along the top of the page. Once in the assignments area, select “Chapter 11 Assignment.” Attach your Word file by selecting the “Add a File” button, browsing for your file which will be located on your computer, and then selecting the “add”, “upload”, and ultimately the “submit” buttons. Mr. Eden Profits from Watching His Workers Every Move Source: Wall Street Journal, December 1, 1994, p. A11 Ron Eden’s runs a company called Electronic Banking Systems, Inc. Located outside Baltimore, Maryland, EBS provides outsourcing clerical services. It handles the clerical tasks involved in processing donations for groups such as Mothers against Drunk Driving, Green peace, and the National Organization for Women. Most of Eden’s’ employees earn $7 an hour or less doing repetitive tasks such as opening envelopes or recording donation data on a computer. Ron Eden’s is especially proud of the control system he has created to closely monitor his employees. Walking around EBS, you see long lines of people sitting at Spartan desks, slitting open envelopes, sorting contents, and filling out “control cards” that record how many letters they have opened and how long it has taken them. These letter openers must process three envelopes a minute. Nearby, other workers tap keyboards, keeping pace with a quota that demands 8,500 strokes an hour. Jobs are highly specialized and involve extensive repetition. Letter openers only open envelopes and sort contents. Workers in the audit department just compute figures. Data-entry clerks punch in the information that the others have collected. The workroom is silent. Talking is forbidden. The windows are covered. Coffee mugs, personal photos, and other adornments are barred from the worker’s desks. Eden’s wants to remove anything that might distract his workers from the job at hand. For example, commenting on the blocked windows, Eden’s says, “I don’t want them looking out – it’s distracting. They’ll make mistakes.” In his office upstairs, Eden’s sits before a TV monitor that flashes images from eight cameras posted throughout the plant. “There’s a little bit of Sneaky Pete to it,” he admits, using a remote control to zoom in on a document atop a worker’s desk. “I can basically read that and figure out how someone’s day is going.” In addition, his system’s software generates daily reports recording the precise number of keystrokes tapped by each data-entry worker and the number of errors made by each worker. The work floor at EBS resembles an enormous classroom in the throes of exam period. Desks point toward the front, where a manager keeps watch from a raised platform. Other supervisors are positioned toward the back of the room. “If you want to watch someone,” Eden’s explains, “it’s easier from behind because they don’t know you’re watching.” There’s also a black globe hanging from the ceiling, in which cameras are positioned. At EBS, workers handle thousands of dollars in checks and cash. That’s one reason, Eden’s says, for the cameras. It can help deter would-be thieves. But Eden’s concedes that tight observation also helps EBS monitor productivity and weed out workers who don’t keep up. “There are multiple uses,” Eden’s says of surveillance. Eden’s is unapologetic about his control system, including the rule that forbids all talk unrelated to the completion of each task. “I’m not paying people to chat. I’m paying them to open envelopes,” he says. Eden’s offers considerable insight into his philosophy of management when he says, “We don’t ask these people to think – the machines think for them. They don’t have to make decisions.” Answer the following questions: 1. What type(s) of controls is (are) Mr. Eden’s’ using to ensure high worker productivity? Give examples and label the controls. As you label the controls, use the types of controls discussed in the chapter. Remember, in most assignments you are showing that you can take material from the textbook and apply it. 2. What are the advantages of Mr. Eden’s’ control system? 3. What are the disadvantages of Mr. Eden’s’ control system? 4. What ethical issues, if any, are you concerned about at EBS and why? Chapter 11 Lecture: Organizational Control and Change BMGT 335: Organization and Management PURPOSE OF CHAPTER The first task facing managers is to establish the structure of task and reporting relationships that will allow organizational members to use resources most efficiently and effectively. Issues surrounding structure were discussed in Chapter 10. Structure alone, however, does not provide the incentive or motivation for people to behave in ways that help achieve organizational goals. The managerial functions of organizing and controlling are inseparable, and effective managers must learn to make them work together in a harmonious way. This chapter looks in detail at the nature of organizational control and describes the steps in the control process. It discusses three types of control available to managers to control and influence organizational members—output control, behavior control, and clan control. The chapter ends by addressing the important issue of organizational change. Organizational change is possible only when managers have created a control system that allows them to alter the way people and groups behave. After reading Chapter 11, you should be able to accomplish the following objectives: 1. 2. 3. 4. 5. Define organizational control, and describe the four steps of the control process. Identify the main output controls, and discuss their advantages and disadvantages as means of Identify the main behavior controls, and discuss their advantages and disadvantages as means of coordinating and motivating employees. Explain the role of clan control and organizational culture in creating an effective organizational architecture. Discuss the relationship between organizational control and change, and explain why managing change is a vital management task. ORGANIZATIONAL CONTROL The incredible events of the Enron, Arthur Anderson, and Tyco continue to be in the news and probably will for a few more years. The Federal government’s Justice Department investigated, Congress held hearings, and former employees and stockholders sued the companies. The State of California accused Enron and other energy companies of colluding to create a false power shortage in California and other western states. Billions of dollars are involved as well as the average citizen’s trust in corporations. Other companies have admitted to being less than honest about the worth of their holdings and have readjusting those figures. Even the well-respected GE has been held accountable for its accounting and acquisition strategies during the “legendary” Jack Welch days as well as for the lucrative retirement package provided to Mr. Welch. How can managers control management practices which may be both unethical and illegal such as Andersen’s shredding documents related to Enron’s finances? When you read Chapter 11, be sure you understand the control process in general. Know when feedforward, concurrent, and feedback controls are used in the process of transforming raw materials into finished goods. Also, be able to describe the different output controls and behavior controls. ORGANIZATIONAL CHANGE While the need to adapt to changing circumstances, it is a difficult thing for organizations to do. Organizations tend to formalize procedures and practices to create an efficiently run company. However, when change is needed, many people have a stake in maintaining the status quo, and they resist the change. Organizations have a certain amount of inertia, and it is difficult to overcome. Just look at a company like Sears that has been struggling to change and compete with such juggernauts as Wal-Mart and Target. Be sure you understand the process of creating change in an organization discussed at the end of the chapter. Below is some information about change that may give you a smile. A COMICAL NOTE ON CHANGE A mentioned in the chapter, in order for change to occur the first step is to recognize the need for change (i.e., assess the need for change). That isn’t as easy as it sounds, as demonstrated by the comments below of people we would all agree were fairly intelligent: • • • • • • • • • • • • “X-rays will prove to be a hoax.” (predicted from an eminent nineteenth century physicist) “The (flying) machines will eventually be fast, they will be used in sport, but they are not to be thought of as commercial carriers.” (Octave Chanute, aviation pioneer, 1904) “There is no likelihood man can ever tap the power of the atom.” (Robert Milikan, Nobel Prize in Physics, 1923) “Heavier-than-air flying machines are impossible.” (Lord Kelvin, President, Royal Society, 1895) “This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” (Western Union internal memo, 1876) “Who the hell wants to hear actors talk?” (Harry M. Warner, Warner Bros. Pictures, 1927) “Sensible and responsible women do not want to vote.” (Grover Cleveland, 1905) “Airplanes are interesting toys but of no military value.” (Marshal Ferdinand Foch, professor of strategy, Ecole Superieure de Guerre) “The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?” (David Sarnoff’s associates, in response to his urgings for investment in the radio in the 1920s.) “Everything that can be invented has been invented.” (Charles H. Duell, U.S. Commissioner of Patents in 1899) “I think there is a world market for maybe five computers.” (Thomas Watson, chairman of IBM, 1943.) “There is no reason for any individuals to have a computer in their home.” (Ken Olsen, president, chairman and founder of Digital Equipment Corporation, 1977) Chapter 10 Lecture: Managing Organizational Structure and Culture BMGT 335: Organization and Management PURPOSE OF CHAPTER To organize and control, managers must design an organizational architecture that makes the best use of resources to produce the goods and services customers want. It must also be able to respond to the external environment and all the challenges that it provides. This chapter discusses the various organizational structures, along with the various factors that determine the organizational design choices that managers make. After reading Chapter 10, you should be able to accomplish the following objectives: 1. 2. 3. 4. 5. 6. Identify the factors that influence managers’ choice of an organizational structure. Explain how managers group tasks into jobs that are motivating and satisfying for employees. Describe the types of organizational structures managers can design, and explain why they choose one structure over another. Explain why there is a need to both centralize and decentralize authority. Explain why managers must coordinate and integrate between jobs, functions, and divisions as an organization grows. List the four sources of organizational culture and differentiate between a strong, adaptive culture and a weak, inert culture. ORGANIZATIONAL STRUCTURE Organizational structure is the framework in which the organization defines how tasks are divided, resources are deployed, and departments are coordinated. Organizational structure is about the grouping of tasks and work units and creating the reporting relationships that result from such groupings. The environment as well as a company’s strategy will dictate which types of organizational structures will work best. For instance, if the environment in which a company operates is fairly stable and not too complex, then a functional structure is adequate. It allows for efficient use of resources and technical expertise is kept together in one place (e.g., marketing is in the marketing department, engineering is in the engineering department, etc.). If the environment is complex and a company has many forces within the general and task environments with which it must deal continuously, then a structure that allows more communication across functions like a product team structure may be in order. Be sure to read carefully the descriptions of the various organizational structure forms. Be able to recognize them and explain their advantages. Could you describe the organizational structure of MSUB? INTEGRATING MECHANISMS / COORDINATING FUNCTIONS Be sure to also understand what integrating mechanisms organizations can use to improve the communication across units and increase coordination of various activities. This information is discussed near the end of the chapter. In terms of the communication needs within the structure of an organization, there are two competing forces at play: the need for formalization and the need for flexibility. An organization becomes larger and more complex as it provides a greater array of products or services and interacts with many different groups outside the organization (e.g., suppliers, customers, governmental agencies, scientists, etc.). As this occurs, tasks are subdivided and grouped, new work units and departments are created, and new reporting relationships are formalized. Such organization helps managers keep control over the new work and focuses reporting relationships within this new set of tasks to be accomplished. But such subdividing and regrouping also isolates people and ideas within their own small sections of the company. Engineers at Ford who are studying the safety features of various metals and composite materials that could be used in the body of an automobile may not know much about the work being accomplished by the engineers in another part of the company who are trying to increase the horsepower of electric/gas hybrid engines. Each set of engineers has a "full plate" of work and doesn't have the time or the incentive to worry about what the other engineers are doing. Their performance is being judged by the success they have on their respective projects, be it safety engineering or engine design. Such focusing of workgroups and reporting relationships on specific tasks helps formalize the organization structure and makes an organization efficient. However, such organization can ultimately work against the effectiveness of the whole organization. So, as an organization becomes larger and more complex, its subunits tend to become more formalized and focused on a small portion of the whole organization's set of tasks to be accomplished. Within those subunits, be they workgroups, departments, or divisions of the company, the communication tends to flow vertically.     Subunit 1 Subunit 2 Subunit 3 Subunit 4     However, the organization needs to stay flexible to promote innovation and to adapt to changes in the environment. This requires that different sections of the organization stay in touch with one another to share in research results, ideas, marketing insights, etc. It is easy to stay in touch when the company is small. The engineer working on the safety of certain materials can speak with the engineer working on engine design by simply walking down the hall or meeting at lunch because they work in the same building. When the organization is much larger, there needs to be some type of coordinating mechanisms put into place to facilitate such sharing of information. Figure 10.8 in chapter 10 shows different types of integrating mechanisms that can be used to facilitate the communication of information between work units in a large organization. Sony's creation of the Walkman portable stereo in the late 1970s occurred due to the integrating role of an honorary chairman who saw a connection between work being done by engineers working on smaller headphones and work being done by engineers working on creating a small tape recorder. In the 1980s, the Walkman series of products became some of the most profitable for Sony. The importance of the successful functioning of these integrating mechanisms in today's rapidly changing business environment cannot be overstated. JOB DESIGN I want you to understand the difference between the concepts of job simplification, job enlargement and job enrichment. The example below illustrates how a job might be designed if it focused on these different concepts. Cameron works for a company which manufactures personal computers. Three potential job designs are illustrated below: In Job 1, Cameron reports to a work station on the computer assembly line. A partially assembled circuit board passes in front of him on a conveyor belt every 90 seconds. He adds 2 pieces to each board and lets the conveyor take the unit to the next work station. Quality control is handled at a separate station at the end of the line. Cameron works by himself in a quiet setting. In Job 2, Cameron works on the same assembly line. Now, however, a circuit board comes to his station every 12 minutes, and he performs a greater number of tasks. He adds several pieces to the board, adds a frame, and installs several electric switches. Periodically, Cameron changes stations with one of the other workers and does a different set of tasks on earlier or later stages of the same circuit board. In all other respects, the work setting is the same as in the first job described. In Job 3, Cameron is part of a team responsible for completely assembling circuit boards for the computers. The team has a weekly production quota but makes its own plans for the speed and arrangement of the required assembly processes. The team is also responsible for inspecting the quality of the finished boards and for correcting any defective units. These duties are shared among the members and are discussed at team meetings. Cameron has been selected by the team as its plant liaison. In addition to his other duties, he works with people elsewhere in the plant to resolve any production problems and achieve plant-wide quality objectives. Jobs 1, 2, and 3 respectively illustrate the concepts of job simplification, job enlargement, and job enrichment. Only Job 3 adds elements to the work that used to be handled by management (e.g., setting weekly production quota). The concept of job enlargement and job enrichment manifest themselves in the Job Characteristics Model developed by Hackman and Oldham. Five elements are proposed as increasing the motivating and satisfying potential of a job. However, one element is missing in the model. Hackman and Oldham proposed that something called growth need strength needed to be present in the individual or the model would not work. Growth need strength is the desire to be the best you can at something. It is the idea of wanting to have personal growth opportunity. Hackman and Oldham state that adding the elements of the Job Characteristics Model to a job will only increase a worker’s motivation and job satisfaction if the worker exhibits high growth need strength. If the worker does not exhibit high growth need strength, then the worker will merely believe that his or her job has become more busy rather than more enriched when such elements as task significance and autonomy are increased in the job. Be sure that you understand the different characteristics (e.g., skill variety, task identity, etc.) that can be added to a job to enrich it and increase a worker's motivation, satisfaction, and performance. CHAPTER 11 Organizational Control and Change ©G.LIUDMILA/Shutterstock ©McGraw-Hill Education. 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 Education. Learning Objectives 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 means of coordinating and motivating employees. 5. Discuss the relationship between organizational control and change, and explain why managing change is a vital management task. ©McGraw-Hill Education. Organizational Control Organizational control • Managers monitor and regulate how efficiently and effectively an organization and its members are performing the activities necessary to achieve organizational goals. ©McGraw-Hill Education. Control Systems and IT (1 of 4) Control systems • Formal, target-setting, monitoring, evaluation, and feedback systems that provide managers with information about whether the organization’s strategy and structure are working efficiently and effectively ©McGraw-Hill Education. Figure 11.1 Three Types of Control Access the text alternative for these images. ©McGraw-Hill Education. Copyright © McGraw-Hill Education. Permission required for reproduction or display. Control Systems and IT (2 of 4) Feedforward control • Control that allows managers to anticipate problems before they arise • Giving stringent product specifications to suppliers in advance ©McGraw-Hill Education. Example – University of Alabama Gameday The University of Alabama provides information for fans to be ready for football game day parking and events. This is an example of feedforward control. ©McGraw-Hill Education. Control Systems and IT (3 of 4) Concurrent control • Control that gives managers immediate feedback on how efficiently inputs are being transformed into outputs so managers can correct problems as they arise ©McGraw-Hill Education. Example – Achieving Competitive Excellence (ACE) United Technologies Corporation uses ACE to get employees involved in identifying and solving design and quality problems and finding better ways to assemble its products to increase quality and reduce costs. Problems are correct on an ongoing basis. This is an example of concurrent control. ©McGraw-Hill Education. Control Systems and IT (4 of 4) Feedback control • Control that gives managers information about customers’ reactions to goods and services so corrective action can be taken if necessary ©McGraw-Hill Education. Control Process Steps Access the text alternative for these images. ©McGraw-Hill Education. Copyright © McGraw-Hill Education. Permission required for reproduction or display. The Control Process (1 of 4) 1. Establish standards of performance, goals, or targets against which performance is to be evaluated. • Managers decide on the standards of performance, goals, or targets that they will use in the future to evaluate the performance of the entire organization or part of it. ©McGraw-Hill Education. The Control Process (2 of 4) 2. Measure actual performance. • Managers measure outputs resulting from worker behavior or measure the behavior themselves. • The more non-routine the task, the harder it is to measure behavior or outputs. ©McGraw-Hill Education. The Control Process (3 of 4) 3. Compare actual performance against chosen standards of performance. • Managers evaluate whether, and to what extent, performance deviates from the standards of performance chosen in step 1. ©McGraw-Hill Education. The Control Process (4 of 4) 4. Evaluate the result and initiate corrective action if the standard is not being achieved. • If managers decide that the level of performance is unacceptable, they must try to change the way work activities are performed to solve the problem. ©McGraw-Hill Education. Three Organizational Control Systems Type of Control Output control Behavior control Clan control ©McGraw-Hill Education. Mechanisms of Control Financial measures of performance Organizational goals Operating budgets Direct supervision Management by objectives Rules and standard operation procedures Values Norms Socialization Copyright © McGraw-Hill Education. Permission required for reproduction or display. Financial Measures of Performance (1 of 4) Profit ratios • Measure how efficiently managers are using the organization’s resources to generate profits Return on investment (ROI) • Organization’s net income before taxes, divided by its total assets • Most commonly used financial performance measure ©McGraw-Hill Education. Financial Measures of Performance (2 of 4) Operating margin • Calculated by dividing a company’s operating profit by sales revenue • Provides managers with information about how efficiently an organization is utilizing its resources ©McGraw-Hill Education. Financial Measures of Performance (3 of 4) Liquidity ratios • Measure how well managers have protected organizational resources to be able to meet short-term obligations Leverage ratios • Measure the degree to which managers use debt or equity to finance ongoing operations ©McGraw-Hill Education. Financial Measures of Performance (4 of 4) Activity ratios • Show how well managers are creating value from organizational assets Inventory turnover • Measures how efficiently managers are turning inventory over so excess inventory is not carried Days sales outstanding • Reveals how efficiently managers are collecting revenue from customers to pay expenses ©McGraw-Hill Education. Organizationwide Goal Setting Access the text alternative for these images. ©McGraw-Hill Education. Copyright © McGraw-Hill Education. Permission required for reproduction or display. Operating Budgets Operating budgets • Blueprint that states how managers intend to use organizational resources to achieve organizational goals efficiently ©McGraw-Hill Education. Effective Output Control Objective financial measures Challenging goals and performance standards Appropriate operating budgets ©McGraw-Hill Education. Problems with Output Control Managers must create output standards that motivate at all levels. These should not cause managers to behave in inappropriate ways to achieve organizational goals. ©McGraw-Hill Education. Behavior Control Direct supervision • Managers who actively monitor and observe the behavior of their subordinates • Teaches subordinates appropriate behaviors • Intervenes to take corrective action • Most immediate and potent form of behavioral control • Can be an effective way of motivating employees ©McGraw-Hill Education. 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 ©McGraw-Hill Education. Management by Objectives (1 of 2) Management by objectives (MBO) • A goal-setting process in which a manager 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 ©McGraw-Hill Education. Management by Objectives (2 of 2) 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. ©McGraw-Hill Education. Bureaucratic Control Bureaucratic control • Control by means of a comprehensive system of rules and standard operating procedures (SOPs) that shapes and regulates the behavior of divisions, functions, and individuals ©McGraw-Hill Education. Problems with Bureaucratic Control Rules are easier to make than discard, leading to bureaucratic “red tape” and slowing organizational reaction times to problems. People might become so used to automatically following rules that they stop thinking for themselves. ©McGraw-Hill Education. Clan Control Clan control • The control exerted on individuals and groups in an organization by shared values, norms, standards of behavior, and expectations ©McGraw-Hill Education. Organizational Change Organizational change • Movement of an organization away from its present state and toward some desired future state to increase its efficiency and effectiveness ©McGraw-Hill Education. Figure 11. 5 Organizational Control and Change Access the text alternative for these images. ©McGraw-Hill Education. Copyright © McGraw-Hill Education. Permission required for reproduction or display. Figure 11. 6 Lewin’s Force-Field Theory of Change Access the text alternative for these images. ©McGraw-Hill Education. Copyright © McGraw-Hill Education. Permission required for reproduction or display. Evolutionary and Revolutionary Change (1 of 2) Evolutionary change • Gradual, incremental, and narrowly focused • Constant attempt to improve, adapt, and adjust strategy and structure incrementally to accommodate changes in the environment ©McGraw-Hill Education. Evolutionary and Revolutionary Change (2 of 2) Revolutionary change • Rapid, dramatic, and broadly focused • Involves a bold attempt to quickly find ways to be effective • Likely to result in a radical shift in ways of doing things, new goals, and a new structure for the organization ©McGraw-Hill Education. Figure 11.7 Four Steps in the Organizational Change Process Access the text alternative for these images. ©McGraw-Hill Education. Copyright © McGraw-Hill Education. Permission required for reproduction or display. Implementing the Change (1 of 2) 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 ©McGraw-Hill Education. Implementing the Change (2 of 2) 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 ©McGraw-Hill Education. Evaluating the Change Benchmarking • The process of comparing one company’s performance on specific dimensions with the performance of other, high-performing organizations • Example: Xerox benchmarking against L.L.Bean, John Deere, and Proctor & Gamble ©McGraw-Hill Education. Video: Starbucks How important is quality control to Starbucks’s success? What quality control steps does Starbucks take? ©McGraw-Hill Education.
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