Managing the Internal Organization

1. Managing the Internal Organization

2. 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

3. 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

4. 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

5. Linking Budgets to Strategy

6. Linking Budgets to Strategy

7. Linking Budgets to Strategy

8. 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 Linking Budgets to Strategy

9. 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

10. Bureaucratic Control Dimension Clan Control Goal of control approach Employee compliance Employee commitment Degree of formality Group norms, culture, self-control Strict rules, formal controls, rigid hierarchy Directed toward minimum levels of acceptable performance Directed toward enhanced Performance expectations performance above and beyond the minimum Organization design Flat structure, shared influence Tall structure, top-down influence Reward system Directed at group performance Directed at individual performance Participation Limited and formal Extended and informal Policies and Procedures

11. 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

12. 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

13. 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

14. 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

15. 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

16. 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

17. Total Quality Management • Tools and Techniques • Benchmarking- the process of learning how and what other firms do in an exceptionally high-quality 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

18. 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

19. 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

20. Information Systems

21. Information Systems • Issues in Managing in Information Systems (IS) • Integrating Information Systems • Using Information Systems • Managing Information Security • Understanding Information System Limitations • 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

22. 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

23. 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

24. 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

25. 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 sincere about spreading power to lower levels • Organization must be committed to empowering workers • Organization must be systematic and patient in its efforts to empower workers • Organization must be prepared to increase its commitment to training

26. 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

27. 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

28. 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

29. 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

30. 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

31. 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