The process by which management: … ensures that people in the organization carryout organ, Summaries of Organizational Development

Download The process by which management: … ensures that people in the organization carryout organ and more Summaries Organizational Development in PDF only on Docsity!

Wim Van der Stede

Management Control Systems Chapter 1: Management and Control Merchant and Van der Stede: Management Control Systems © Pearson Education Limited 2003

Management control ...

 The process by which management:

– … ensures that people in the organization carry

out organizational objectives and strategies;

– … encourages, enables, or, sometimes “forces”

employees to act in the organization’s best interest.

 Management control includes all the devices / mechanisms

managers use to ensure that the behavior of employees is

consistent with the organization’s objectives and strategies.

Management and its components ...

Management …

• (^) … the process of organizing resources and directing activities for the purpose of organizational objectives.

Process-breakdown … » (^) Objective setting; » (^) Strategy formulation; » (^) Control.

Objective setting ...

Objectives are …

» a necessary prerequisite for any purposeful activities.

 Without objectives, it is impossible …

» to assess whether the employees’ actions are purposive;

» to make claims about an organization’s success.

 Objectives can be …

» financial versus non-financial;

» quantified, explicit versus implicit;

» economic, social, environmental, societal.

Control ...

Strategic control …

» Is our strategy (still) valid?

» Strategy revision -- “intended” vs. “emergent” strategies.

Management Control …

– Are our employees likely to behave appropriately?

» Do they understand what we expect of them?

» Will they work consistently hard and try to do what

is expected of them?

» Are they capable of doing what is expected of them?

Planning and control ...

CONTROL

Strategy Implementation

Management Control

PLANNING

Strategy Formulation

Strategic Control

 predominantly external focus;

 predominantly top-management

responsibility;

 sometimes very unsystematic,

implicit and/or emergent.

 predominantly internal focus;

 relevant for every superior-

subordinate relationship;

 more systematic and rhythmic.

OBJECTIVE SETTING OBJECTIVE SETTING

The basic control problem ...

Management control is about encouraging

PEOPLE to take desirable actions,

» i.e., it guards against the possibilities that employees will

do something the organization does not want them to do,

or, fail to do something they should do.

Hence, management control has a ...

… BEHAVIORAL ORIENTATION!

 If all personnel could always be relied on to do what is

best for the organization, there would be no need for a

management control system.

Recall that ...

Management Control is about taking steps to help

ensure that the employees do what is best for the

organization.

 Three issues:

» Do they understand what we expect of them ...

 Lack of direction

» Will they work consistently hard and try to do what

is expected of them ...

 Lack of motivation

» Are they capable of doing what is expected of them ...

 Personal limitations

Motivational problems ...

When employees ‘choose’ not to perform as

their organization would have them perform.

 Because …

• (^) Lack of goal congruence » (^) Individual goals do not coincide with organizational goals.
• (^) Self-interested behavior » (^) Generally, individuals are prone to being “lazy” ...

 e.g., take long lunches, overspend on things that make

life more pleasant, use of sick leaves when not sick, etc.

» (^) More extreme examples of motivational problems:

 Employee crime (fraud and theft).

Personal limitations …

Sometimes, people are “unable” to do a good job

because of certain personal limitations they have.

 Some examples / causes:

• (^) lack of requisite knowledge, training, experience;
• (^) employees are promoted above their level of competence;
• (^) some jobs are not designed properly;
• (^) etc.

TRAINING

JOB ASSIGNMENT / PROMOTION

JOB DESIGN

Control and “good” control ...

 Again, … management controls include all the devices

managers use to ensure that the behaviors and decisions

of people are consistent with the organization’s objectives

and strategies.

““GOOD CONTROL”GOOD CONTROL” is said to take place when there is …

• (^) a “high” probability that the firm’s objectives will be achieved;
• (^) a “low” probability that major unpleasant surprises will occur. 

Therefore, controls must be: »^ Future-oriented

» Objectives-driven

» Economically desirable

Control can be achieved through ...  Control Problem Avoidance  Management Control Systems » (^) Action Controls; » (^) Results Controls; » (^) People Controls.

Control alternatives …

Controls can focus on:

• (^) the actions taken
• (^) the results produced
• (^) the types of people

employed and their

shared values and

norms.

Or any combination of those ... Or any combination of those ...

ACTION CONTROLS

RESULTS CONTROLS

PEOPLE CONTROLS

Depending on ...

Ability to measure results on important performance dimensions

Knowledge of which specific actions are desirable

High Low

Excellent

Poor

Action Control

and/or

Results Control

Action Control

(e.g., large projects)

Results Control

(e.g., movie director,

SBU-manager)

People Control

(e.g., research lab)