Slide 3.1
Chapter 3: Action, Personne Personnel, l, and Cultural Cultural Controls
Slide 3.2
Action controls
Ensure that employees perform (or do not perform) certain actions known to be beneficial (or harmful) to the organization
Prevention / detection – Most action controls are aimed at preventing undesirable behaviors
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Effectiveness of action controls
They are usable and effective only when managers: – Know what actions are desirable » Difficult in highly complex and uncertain task environments (e.g., research engineers or top-level managers) – Have the ability to make sure that the desirable actions occur » For example, effectiveness of organizational procedures?
Slide 3.4
Behavioral constraints
Physical – Locks, passwords, limited access, etc.
Administrative – Restriction of decision-making authority – Separation of duties, etc.
Slide 3.5
Preaction reviews
Scrutiny of action plans, investment proposals, budgets – Review and approval – Part and parcel in (capital) budgeting processes, which are otherwise mainly a results control mechanism
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Action accountability
Holding employees accountable for the actions they take
It requires: » Defining what actions are (un)acceptable » Communicating these definitions to employees
For example, work rules, policies and procedures, codes of conduct
» Observing or otherwise tracking what happens
»
Direct observation/supervision
Periodic tracking (e.g., mystery shoppers)
Evidence of actions taken (e.g., activity reports)
[Rewarding good actions, or ] punishing actions that deviate
Slide 3.7
Redundancy
Assigning more people (or machines) to a task than necessary – For example, “backup” people or facilities
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Pros and cons of action controls PRO
CON
The most direct form of control
Only for „routine‟ jobs
Tend to lead to documentation of the accumulation of knowledge as to what works best
May discourage creativity, innovation and adaptation
May cause sloppiness
May cause negative attitudes
– Organizational memory
An efficient way of coordination – That is, they increase the predictability of actions and reduce the amount of inter-organizational information flows to achieve a coordinated effort
– For example, little opportunity for creativity and selfactualization
Sometimes very costly
Slide 3.9
Personnel/cultural controls
“People controls” (for short) ensure that employees: » Will control their own behaviors – Personnel control – Self monitoring
» Will control each other – Cultural controls – M u t u a l monitoring
People controls are part of virtually every management control system, and indispensable in … “flatter and leaner organizations with empowered employees”
Slide 3.10
Personnel controls
Personnel controls build on employees‟ natural tendencies to control themselves, because most people … – have a conscience that leads them to do what is right – find self-satisfaction when they do a good job and see their organization succeed
Labels ... – Self-control – Intrinsic motivation – Ethics and morality – Trust and atmosphere – Loyalty
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Implementing personnel controls
Generally, it is about … “… f i n d i n g t h e r i g h t p e o p l e , g i v i n g t h em a g o o d
w o r k e n v i r o n m e n t an d t h e n e c es s a r y r e s o u r c e s ”
Selection and placement » Finding the right people to do a particular job
Training » Give employees a greater sense of professionalism » Create interest in the job by helping employees to understand their job better
Job design + provision of necessary resources » So that motivated and qualified employees have a high probability of success (e.g., equipment, staff support, freedom from interruption)
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Cultural controls
Cultural controls or mutual monitoring tap into social pressure and group norms and values
Cultural controls are effective because members of a group have emotional ties and a sense of responsibility to one another
Cultures are built on shared ... – – – – – –
traditions norms beliefs ideologies attitudes ways of behaving
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Ways to shape culture
Codes of conduct » Codes of ethics; corporate credos, mission statements, etc. » Formal written documents with broad statements of corporate values, commitments to stakeholders, and the ways in which top management would like the firm to function » Fundamental guiding principles of the company
Group-based rewards » For example, profit-sharing, employee ownership of company stock
» These are cultural controls (although of a results control nature) because the link between group (individual) performance and rewards is stronger (weaker)
Slide 3.14
Ways to shape culture (continued)
Intra-organizational transfers » Improve the socialization of individuals in an organization and alleviate the formation of incompatible goals and perspectives » Improve identification with the organization as a whole as opposed to subunit identification
Physical and social arrangements » For example, office plans, interior decor, dress codes and vocabulary, etc.
Tone at the top » Top management statements must be consistent with the culture they are trying to create, and importantly, their behaviors should be consistent with their statements
Slide 3.15
Start with people controls
People controls … » Must always be relied on to a certain extent » Have relatively few harmful side-effects » Involve relatively low out-of-pocket costs
However, it is rare that people controls will be sufficient; hence, in most cases, it is necessary to supplement them with …
» Action controls » Results controls
