Transcript Managing the Internal Organization

Managing the Internal
Organization
Managerial Tasks
Budget appropriate resources
Establish strategy-supportive policies
Institute “best practices” and strive for
continuous improvement
Install appropriate support systems
Motivate and compensate to enhance
execution
Linking Budgets to Strategy
Budgets may be established at any
organizational level
Budgets are typically for one year or
less
Budgets 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 projects
Help define the established standards for control
Provide guidelines about the organization’s
resources and expectations
Enable 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
Capital-expenditures budget
Balance-sheet budget
All sources of cash income and cash
expenditures in monthly, weekly, or daily
periods
Costs of major assets such as a new plant,
machinery, or land
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
Strengths
Budgets facilitate
effective operational
controls
Budgets facilitate
coordination and
communication between
departments
Budgets establish records
of organizational
performance, which can
enhance planning
Weaknesses
Budgets can hamper
operations if applied too
rigidly
Budgets can be time
consuming to develop
Budgets can limit
innovation and change
Policies and Procedures
Provide top-down guidance
Help align actions and behavior
throughout the organization
Enforce needed consistency
Changing them can provide a powerful
lever to change corporate culture
Policies and Procedures
Bureaucratic Control
Employee compliance
Dimension
Goal of control approach
Strict rules, formal controls,
rigid hierarchy
Degree of formality
Directed toward minimum
levels of acceptable
performance
Performance expectations
Tall structure, top-down
influence
Directed at individual
performance
Limited and formal
Organization design
Reward system
Participation
Clan Control
Employee commitment
Group norms, culture,
self-control
Directed toward enhanced
performance above and
beyond the minimum
Flat structure, shared
influence
Directed at group
performance
Extended and informal
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 standards
Creating controls that are flexible, accurate,
timely, and objective
Avoiding “overcontrol” in the implementation of
controls
Policies and Procedures
Resistance to control can be overcome by
Guarding against creating controls that reward
inefficiencies
Encouraging employee participation in the
planning and implementing of control systems
Developing 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
Quality
The totality of features and characteristics
of a product or service that bear on its
ability to satisfy stated or implied needs
Quality is both a relative and absolute
concept
Quality is relevant to both products and
services
Total Quality Management
Dimensions of Quality
1. 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 Management
Malcolm Baldrige Award
Named after a former secretary of commerce, this prestigious award
is given to firms that achieve major quality improvements
Competition
Quality has become one of the most important competitive points in
business today
Productivity
Quality enhancement programs decrease the number of defects,
reduce resources dedicated to rework, and reduces the need for
inspectors as employees become responsible for quality
Costs
Improved quality reduces costs from customer returns, warranty, and
lawsuits for faulty products, and lost sales to future customers
Total Quality Management
TQM
A 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 Techniques
Benchmarking- the process of learning how and
what other firms do in an exceptionally highquality manner
Outsourcing- subcontracting operations/services to
those who can do them cheaper and/or better
Statistical 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 Techniques
Employee empowerment- job enrichment and
delegation of authority
Team building- reinforce individual effort and
provide diverse input into decision making
Speed- the time needed by the organization to get
something accomplished
ISO 9000- a set of quality standards created by
the International Organization for Standardization
by which firms can be certified
Information Systems
Characteristics of Useful Information
Accurate- a valid and reliable reflection of reality
Timely- information delivered in time for
managerial action
Complete- information that tells a complete story,
rather than being incomplete or distorted
Relevant- meets the needs and circumstances of
the individual manager
Information Systems
User 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 departments 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 Systems
Issues in Managing in Information Systems
(IS)
Integrating Information Systems
Using Information Systems
Managing Information Security
Understanding Information System Limitations
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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 Systems
Leaner Organizations
Direct communication links broaden the span of
management, foster simpler organizational structures, and
increase productivity
More Flexible Operations
IS can be used to offer greater variety, faster delivery cycles,
and the mass-customization of products
Increased Collaboration
Internally, network systems help in keep everyone in the
organization informed
Externally, network systems help build business-to-business
relationships
Information Systems
More 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 Processes
Improved information systems now can quickly furnish
information in a convenient, usable format to any member of
the organization
Changed Employee Behaviors
Positive Effects- improves individual efficiency through the
use of a new technology and the work associated with it
Negative Effects- can lead to isolation of people and is a less
personal form of communication
Motivation and Compensation
Empowerment 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 work
Areas 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 Compensation
Techniques 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 decentralized
Conditions necessary for empowerment
• Organization must be
levels
• Organization must be
• Organization must be
empower workers
• Organization must be
training
sincere about spreading power to lower
committed to empowering workers
systematic and patient in its efforts to
prepared to increase its commitment to
Motivation and Compensation
Reinforcement Theory
The role of rewards as they cause behavior
to change or remain the same over time
Assumes 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 Compensation
Positive 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
Punishment
Weakens undesired behavior by using negative outcomes or
unpleasant consequences when the behavior is performed
Extinction
Weakens undesired behavior by simply ignoring or not
reinforcing that behavior
Motivation and Compensation
Reward System
The formal and informal mechanisms by which employee
performance is defined, evaluated, and rewarded
Effects of Organizational Rewards
Effect 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 Compensation
Effects 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 effective
Performance payoff must be a major
part of the total compensation
Incentive plan must extend to all
members of the organization
System must be perceived as fair
Incentives must be linked to desired
performance
Motivation and Compensation
Performance target outcomes must be
within the individual’s control
Strive for immediate reinforcement
Employ non-monetary incentives
liberally
Do not reward non-performance