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CHAPTER EIGHT

CONTROL, CHANGE, AND ENTREPRENEURSHIP


OVERVIEW OF THE CHAPTER
This chapter examines the nature of organizational control and describes the four steps of the
control process. It also discusses three types of systems available to managers to control and
influence organizational members: output control, behavior control, and organizational
culture(clan control). Effective management of organizational change is addressed, as ell as
the role of the entrepreneur in the change process.
LEARNING OBJECTIVES
!efine organizational control and identify the main output and behavior controls
managers use to coordinate and motivate employees. ("#$)
Explain the role of clan control or organizational culture in creating an effective
organizational architecture. ("#%)
!iscuss the relationship beteen organizational control and change and explain hy
managing change is a vital management tas&. ("#')
(nderstand the role of entrepreneurship in the control and change process. ("#))
MANAGEMENT SNAPSHOT: CONTROL IS NO LONGER A PROBLEM FOR
ORACLE
#ne of the main advantages of Internet*based control softare is its ability to centralize
management of a company+s idespread operations, thereby alloing managers to easily
compare and contrast the performance of different divisions spread around the globe in real
time. #racle, the second largest independent softare company in the orld after ,icrosoft,
did not have such a system in place and therefore as not experiencing the cost savings that
could result from it. Instead, #racle+s financial and human resources information as located
on seventy different computing systems across the orld.
-ecognizing the irony of the situation, .E# "arry Ellison ordered the implementation of an
Internet*based control system as soon as possible. /is goal as to have all of #racle+s sales,
financial, and human resources information systems consolidated in to locations. This
information as to be made immediately available to all managers ith one clic& of a mouse.
/e also instructed that any paper*based control systems be immediately automated. 0avings
resulted in over 1$ billion a year.
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LECTURE OUTLINE
I. WHAT IS ORGANIZATIONAL CONTROL? (LO1)
.ontrolling is the process hereby managers monitor and regulate ho efficiently and
effectively an organization and its members are performing the activities necessary to achieve
organizational goals.
In controlling, managers monitor and evaluate hether their organization+s strategy
and structure are or&ing as intended, ho they could be improved, and ho they
might be changed if they are not or&ing.
.ontrol involves &eeping an organization on trac& and anticipating events that might
occur.
It is also involved ith &eeping employees motivated, focused upon important
problems facing the organization, and or&ing together to ta&e advantage of
opportunities.
The Importance of Organ!atona" Contro"
2 control system contains the measures or yardstic&s that allo managers to assess
ho efficiently the organization is producing goods and services. 3ithout a control
system in place, managers have no idea ho their organization is performing and ho
its performance can be improved.
#rganizational control is important in determining the 4uality of goods and services
because it gives managers feedbac& on product 4uality. Effective managers create a
control system that consistently monitors the 4uality of goods and services so that they
can ma&e continuous improvements to 4uality.
5y developing a control system to evaluate ho ell customer*contact employees are
performing their 6obs, managers can ma&e their organizations more responsive to
customers. ,onitoring employee behavior can help managers find ays to increase
employees+ performance levels.
.ontrolling can raise the level of innovation in an organization by deciding on the
appropriate control systems to encourage ris& ta&ing.
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Contro" S#$tem$ an% IT
2n effective control system has three characteristics: $) it is flexible enough to allo
managers to respond as necessary to unexpected events, %) it provides accurate
information, and ') it provides managers ith the information in a timely manner.
7e forms of IT have revolutionized control systems because they facilitate the flo
of accurate and timely information up and don the organizational hierarchy and
beteen functions and divisions.
.ontrol systems are developed to measure performance at each stage in the conversion
of inputs into finished goods and services.
* 2t the input stage, managers use feedforward o!"ro# to anticipate
problems before they arise so that problems do not occur later, during the
conversion process. 2t this stage, IT can be used to &eep in contact ith
suppliers, monitor their progress, and control the 4uality of inputs received
from them.
* 2t the co!$er%&o! stage, o!'rre!" o!"ro# gives managers immediate
feedbac& on ho efficiently inputs are being transformed into outputs.
.oncurrent control through IT alerts managers to the need to react 4uic&ly
to the source of the problem. .oncurrent control is at the heart of total
4uality management programs.
* 2t the output stage, managers use feed(a) o!"ro# to provide information
about customers+ reactions to goods and services so that corrective action
can be ta&en if necessary.
The Contro" &roce$$
The control system, hether at the input, conversion, or output stage, can be bro&en don
into four steps. They are:

0tep $: Establish the standard of performance, goals, or targets against hich
performance is to be evaluated.
0tep %: ,easure actual performance.
0tep ': .ompare actual performance against chosen standards of performance.
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CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
0tep ): Evaluate the result and initiate corrective action if the standard is not being
achieved.
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O'T&'T CONTROL
2ll managers develop a system of output control for their organizations. The three main
mechanisms that managers use to assess output or performance are financial measures,
organizational goals, and operating budgets.
(nanca" )ea$*re$ of &erformance
Top managers use various financial measures to evaluate performance. The most common
financial measures are:
#rofit ratios, hich measures ho efficiently managers are using the organization+s
resources to generate profits. $eturn on investment %$&'(, hich is an organization+s
net income before taxes divided by its total assets, is the most commonly used
financial profit ratio. Gross profit margin is the difference beteen the amount of
revenue generated and the resources used to produce the product. It provides
information about ho efficiently an organization is using its resources. 5oth of these
profit ratios allo managers to assess its competitive advantage.
)i*uidity ratios measure ho ell managers have protected organizational resources
so as to be able to meet short*term obligations. The current ratio (current assets
divided by current liabilities) tells managers hether they have the resources to meet
claims for short*term creditors. The *uic+ ratio tells hether they can pay these claims
ithout selling inventory.
)everage ratios such as the de,t-to-assets ratio and the times-covered ratio measure
the degrees to hich managers use debt or e4uity to finance ongoing operations.
2ctivity ratios provide measures of ho ell managers are creating value from assets.
'nventory turnover measures ho efficiently managers are turning over inventory.
-ays sales outstanding provide information on ho efficiently managers are
collecting revenue from customers.
The ob6ectivity of financial measures of performance is the reason hy so many managers use
them to assess effectiveness and efficiency. 3hen an organization fails to meet performance
standards, managers &no that they must ta&e corrective action.
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Ma!a*e+e!" I!%&*,": Ma)&!* F&!a!&a# F&*'re% Co+e A#&$e
0ome top managers, including ,ichael !ell, ma&e a point of shoing employees exactly ho
their activities affect financial ratios. 2t his company+s boot camp for ne employees, !ell
has been &non to bring financial charts that sho employees ho each minute they devote
to performing a specific 6ob activity, or ho each mista&e made is assembling or pac&aging a
8., affects bottom line profitability. !ell does not care about ho profits or sales gro
individually9 he cares about ho these to figures or& together. :or that reason, he places
heavy emphasis on operating margin ratios.
:inancial information helps managers to evaluate past decisions, but does not tell them
ho to find ne opportunities to build competitive advantage. This is hy
organizational goals are important.
Organ!atona" Goa"$
2fter top managers have set the organization+s overall goals, they then establish
performance standards for the various divisions and functions. These standards specify
for divisional and functional managers the level at hich their units must perform if
the organization is to achieve its overall goals.
!ivisional managers then develop a business* level strategy that they hope ill allo
them to achieve that goal. In consultation ith functional managers, they specify the
functional goals that managers of different functions need to achieve to allo the
division to achieve its goals.
In turn, functional managers establish goals that first*line managers and non*
managerial employees need to achieve to allo the function to achieve its goals.
It is vital that the goals set at each level harmonize ith the goals set at other levels.
2lso, goals should be set appropriately so that managers are motivated to accomplish
them. The best goals are specific difficult goals, often called stretch goals, that ill
challenge and managers+ ability but are not out of reach.
.
Operatng +*%get$
The next step in developing an output control system is to establish operating budgets.
2n operating ,udget is a blueprint that states ho managers intend to use
organizational resources to achieve organizational goals efficiently.
,anagers at one level allocate to subordinate managers a specific amount of resources
to use to produce goods and services. These loer*level managers are evaluated on
their ability to stay ithin the budget and to ma&e the best use of resources.
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"arge organizations often treat each division as a stand*alone responsibility center, and
then evaluate each division+s contribution to corporate performance.
* ,anagers may be given a fixed budget and evaluated for the amount of
goods or services they can produce from it (a cost or e0pense ,udget
approach).
* #r managers may be as&ed to maximize the revenues from the sales of
goods and services produced (a revenue ,udget approach).
* #r they may be evaluated on the difference beteen the revenues
generated and the budgeted cost of ma&ing those goods and services (a
profit ,udget approach).
&ro,"em$ -th O*tp*t Contro"
,anagers must be careful that the output standards they create do not cause managers at
loer levels to behave in inappropriate ays to achieve organizational goals. #utput
standards should encourage managers to be most concerned about the long term.

&ro,"em$ Wth O*tp*t Contro"
3hen designing an output control system, managers must be sure that the output
standards they create motivate managers at all levels and do not encourage
inappropriate behavior as a ay to achieve organizational goals.
,anagers primary concern should be long*term effectiveness. Therefore, if
conditions change, it is probably better that top managers communicate to those loer
in the hierarchy that they are aare of the changes ta&ing place and are illing to
revise and loer goals and standards.
,anagers must be sensitive to ho they use output control and constantly monitor its
effects at all levels in the organization. #utput controls should serve as a guide to
appropriate action.
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CONTROL, CHANGE, AND ENTREPRENEURSHIP
+.HA/IOR CONTROL
5ehavior control, along ith output control, is a method of motivating employees. There are
three mechanisms of behavior control that managers can use: direct supervision, management
by ob6ectives, and rules and standard operating procedures.
0rect S*per1$on
The most immediate and potent form of behavior control is direct supervision by
managers. (nder direct supervision, managers actively monitor and observe, teach,
and correct subordinates. !irect supervision re4uires that managers lead by example
and can be a very effective ay of motivating employees.
8roblems are associated ith direct supervision include:
* It is very expensive because a manager can personally manage only a small
number of subordinates effectively. :or this reason, output control is usually
preferred over behavior control.
* !irect supervision can demotivate subordinates if they feel that they are not
free to ma&e their on decisions.
* :or many 6obs direct supervision is not feasible. The more complex a 6ob, the
more difficult it is for a manager to determine ho ell an employee is
performing.
)anagement ,# O,2ect1e$
To provide a frameor& ithin hich to evaluate subordinates+ behavior, many organizations
implement some version of management by ob6ectives (,5#). Management ,y o,2ectives is a
system of evaluating subordinates for their ability to achieve specific organizational goals or
performance standards and to meet operating budgets. It involves three steps.
0tep $3 0pecific goals and ob6ectives are established at each level of the organization.
0tep %3 ,anagers and their subordinates together determine the subordinates+ goals.
0tep '3 ,anagers and their subordinates periodically revie the subordinates+
progress toard meeting goals.
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In companies in hich responsibilities have been decentralized to empoered teams, ,5#
or&s somehat differently. ,anagers as each team to develop a set of goals and
performance targets that the team hopes to achieve. ,anagers then negotiate ith each team
to establish its final goals and the budget the team ill need to achieve them. -eards are
lin&ed to team performance, not to the performance of any one team member.
+*rea*cratc Contro"
3hen direct supervision is too expensive and ,5# is inappropriate, managers may use
bureaucratic control. B'rea'ra"& o!"ro# is control of behavior by means of a
comprehensive system of rules and standard operating procedures (0#8s) that shape and
regulate the behavior of divisions, functions, and individuals.
-ules and 0#8s guide behavior and specify hat employees are to do hen they
confront a problem. It is the responsibility of a manager to develop rules that allo
employees to perform their activities efficiently and effectively.
3hen employees follo the rules, their behavior is standardized;actions are
performed in the same ay time and time again. There is no need to monitor the
outputs of behavior because standardized behavior leads to standardized outputs.
&ro,"em$ -th +*rea*cratc Contro"
3ith a bureaucratic control system in place, managers can manage by exception and intervene
and ta&e corrective action only necessary. /oever, the folloing problems have been
associated ith bureaucratic control, hich can reduce organizational effectiveness. They
are:
Establishing rules is alays easier than discarding them. If the amount of <red tape+
becomes onerous, sluggishness can imperil an organization+s survival.
5ecause rules constrain and standardize behavior, there is a danger that people become
so used to automatically folloing rules that they stop thin&ing for themselves.
Innovation is incompatible ith the use of extensive bureaucratic control.
5ureaucratic control is most useful hen organizational activities are routine and
hen employees are ma&ing programmed decisions. It is less useful here
nonprogrammed decisions have to be made and managers have to react 4uic&ly to
changes.
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:or many of the most significant organizational activities, output control and behavior control
are inappropriate, for the folloing reasons:
2 manager cannot evaluate the performance of or&ers such as doctors, research
scientists, or engineers by observing their behavior on a day*to*day basis.
-ules and 0#8s are of little use in telling a doctor ho to respond to an emergency
situation or a scientist ho to discover something ne.
#utput controls such as the amount of time a surgeon ta&es for each operation or the
costs of ma&ing a discovery are very crude measure of the 4uality of performance.
II. ORGANIZATIONAL C'LT'R. AN0 CLAN CONTROL (LO3)
&rgani5ational culture is another control system that regulates and governs employee
attitudes and behavior. It is the shared set of beliefs, expectations, values, norms, and or&
routines that influence ho members of an organization relate to each other and or& together
to achieve organizational goals.
Clan control is the control exerted on individuals and groups in an organization by
shared values, norms, standards of behavior, and expectations. #rganizational culture
is not an externally imposed system9 rather, employees internalize organizational
values and norms. -ather, employees internalize organizational values and norms, and
then let these values and norms guide their decisions and actions.
&rgani5ational culture is an important source of control for to reasons: $) it ma&es
control possible in situations here managers cannot use output or behavior control,
and %) hen a strong and cohesive set of organizational values and norms is in place,
employees focus on thin&ing about hat is best for the organization in the long run.
Ma!a*er a% a Per%o!: Ja+e% Ca%e- Crea"e% a C'#"'re for UPS
(80 employs over %=>,>>> people and is the most profitable company in its industry. 0ince
its founding in $?>@ by Aames E. .asey, (80 has developed a culture that has been a model
for competitors, such as :edEx and the (.0. 8ostal 0ervice. :rom the beginning, .asey made
efficiency and economy the company+s driving values. "oyalty, humility, discipline,
dependability, and intense effort ere established as the &ey norms and standards (80
employees should adopt. (80 has alays gone to extraordinary lengths to develop and
maintain these values and norms in its or&force.
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The company+s operating systems are sub6ect to intense scrutiny by the company+s ',>>>
industrial engineers, ho are constantly on the loo&out for ays to measure outputs and
behaviors to improve efficiency. :or example, they time every part of the truc& drivers+ 6ob,
and as a result, truc& drivers are instructed ith extraordinary detail on ho to perform each
component of their 6ob. Its search to find the best set of output controls leads (80 to
constantly develop and introduce the latest in IT into the company+s operations, particularly in
materials management. (80 also offers a consulting service to other companies in the area of
global supply chain management to teach other companies ho to pursue its values of
efficiency and economy.
A%apt1e an% Inert C*"t*re$
,any researchers and managers believe that employees of organizations go out of their ay
to help their organization because the organization has a strong and cohesive organizational
culture, i.e., an adaptive culture.
2daptive cultures are those hose values and norms that help an organization to build
momentum, gro, and change as needed to achieve its goals and be effective.
In contrast, inert cultures are those that lead to values and norms that fail to motivate
or inspire employees. They lead to stagnation and often failure over time.
-esearchers have found that organizations ith strong adaptive cultures invest in their
employees and demonstrate their commitment to them. 2n example of such
investment and commitment is emphasizing the long*term nature of the employment
relationship, trying to avoid layoffs, developing long*term career paths for employees,
and investing heavily in training and development to increase employee value to the
organization. 2lso, employee reards are lin&ed directly to employee and
organizational performance.
#ther organizations, hoever, develop cultures ith values that do not reflect a
commitment to protecting and increasing the orth of their human resources. In a
company ith an inert culture, poor or&ing relationships fre4uently develop beteen
the organization and its employees. Instrumental values of non*cooperation, laziness,
and loafing are prevalent and or& norms of output restriction are common.
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2n adaptive culture develops an emphasis on entrepreneurship, respect for employees,
and uses an organizational structure that empoers employees and motivates them to
succeed. In contrast, in an inert culture, employees are content to be told hat to do
and have little incentive or motivation to perform beyond minimum or&
re4uirements.
III. ORGANIZATIONAL CHANG. (LO4)
There is a fundamental need to balance to opposing forces in the control process. #n one
hand, adopting the right set of output and behavior controls is essential for improving
efficiency. #ne the other hand, hoever, employees also need to feel that they have the
autonomy to depart from routines as necessary to increase effectiveness because the
environment is dynamic and uncertain.
,any researchers believe that the highest performing organizations are those that are
constantly changing and thus have become experienced at it. :or this reason, it is vital
that managers develop the s&ills necessary to mange change effectively. 0everal
experts have proposed a model that managers can follo to implement change
successfully.
Organ!atona" change is the movement of an organization aay from its present
state and toard some desired future state to increase its efficiency and effectiveness.
A$$e$$ng the Nee% for Change
#rganizational change can affect practically all aspects of organizational functioning,
including organization structure, culture, strategies, control systems, and groups and
teams, human resource management system, as ell as critical organizational
processes such as communication, motivation, and leadership.
It can also bring alterations in the ay that managers carry out the critical tas&s of
planning, organizing, leading, and controlling, and the ays they perform their
managerial roles.

!eciding ho to change an organization is a complex matter because change disrupts
the status 4uo and poses a threat to many, prompting some employees to resist
attempts to alter or& relationships and procedures.
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#rganizational learning, the process through hich managers try to increase the ability
of organizational members to understand and appropriately respond to changing
conditions, can be an important impetus for change.
2ssessing the need for change calls for to important activities: recogni5ing that there
is a pro,lem and identifying its source. 0ometimes the need for change is obvious, but
at other times, problems develop gradually, ma&ing it more difficult to recognize that
change is needed.
To discover the source of organizational problems, managers need to loo& both ithin
and outside of the organization.
0ec%ng On the Change To )a5e
#nce managers have identified the source of the problem, they must decide hat they thin&
the organization+s ideal future state ould be and begin engagement in planning ho they are
going to attain the organization+s future state.
This step also includes identifying obstacles or sources of resistance to change.
#bstacles to change are found at the corporate, divisional, departmental, and
individual levels of the organization.
.orporate*level changes, even seemingly trivial ones, may significantly affect ho
divisional and departmental managers behave. :or this reason, an organization+s
present strategy and structure can be poerful obstacles to change.
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3hether a company+s culture is adaptive or inert also can facilitate or obstruct change.
#rganizations ith entrepreneurial, flexible cultures are much easier to change that are
organizations ith more rigid cultures.
The same obstacles to change exist at the divisional and departmental levels as ell.
!ivision managers may differ in their attitudes toard changes proposed by top
managers, and if their interests and poer seem threatened, ill resist those changes.
,anagers at all levels usually fight to protect their poer and control over resources.
2t the individual level, people are often resistant to change because change brings
uncertainty and stress.
,anagers must recognize and ta&e into consideration potential obstacles that can ma&e
change a slo process. Improving communication and empoering employees by
inviting them to participate in the planning for change can help to overcome resistance
and allay fears. In addition, managers can sometimes overcome resistance by
emphasizing group or shared goals such as organizational efficiency and effectiveness.
The larger and more complex an organization, the more complex the change process
is.
Imp"ementng the Change
Benerally managers introduce and manage change from the top don or from the bottom up.
Top %o-n6change is implemented 4uic&ly. Top managers identify the need for
change, decide hat to do, and then move 4uic&ly to implement the changes
throughout the organization.
+ottom6*p change is typically more gradual. Top managers consult ith middle and
first line managers, and then over time, managers at all levels or& to develop a
detailed plan for change. 2 ma6or advantage of bottom*up change is that it can co*opt
resistance to change from employees.
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.1a"*atng the Change
The last step in the change process is to evaluate ho successful the change effort has been in
improving organizational performance.
(sing such measures as mar&et share, profits, or the ability of managers to meet their
goals, managers can compare ho ell an organization is performing after the change
ith its performance prior to the change.
,anagers also can use ,enchmar5ng, hich is the comparison of their performance
on specific dimensions ith the performance of high performing organizations, to
decide ho successful a change effort has been. 5enchmar&ing is a &ey tool in total
4uality management.
I/. .NTR.&R.N.'RSHI&7 CONTROL7 AN0 CHANG.
Entrepreneurs are the people ho bring about change to companies and industries
because they see ne and improved ays to use resources to create products
customers ill ant to buy.
Entrepreneurs assume the ris& associated ith starting a ne business, hich is
substantial since many ne businesses fail. They receive all of the returns or profits
associated ith the ne business venture.
Employees of existing organizations ho notice opportunities for product or service
improvements and are responsible for managing the development process are &non
as ntraprene*r$.
There is an interesting relationship beteen entrepreneurs and intrapreneurs. ,any
intrpreneurs become dissatisfied hen their employers decide not to support their ne
product ideas and development efforts. Cery often they leave their employer to found
ne ventures that may compete ith the company they left.
:re4uently, founding entrepreneurs lac& the s&ill, patience, or experience to engage in
the difficult or& of management. Therefore, they must hire managers ho can create
an operating and control system that ill help the ne venture to prosper.
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/. S'))AR8 AN0 R./I.W
L.CT'R. .NHANC.RS
Lect*re .nhancer 9.1
ANTICI&ATING TH. N..0 TO CHANG.
,a6or shifts in the competitive landscape may seem to appear overnight, but in reality, they
usually evolve 4uietly over a number of years. .E#s usually have enough time to adapt to
the shift once they observe uncertainty creep into the competitive picture, but only if they are
illing to em,race the need for change.
In order to ma&e prudent decisions regarding change ithin an organization, a manager must
first understand ho the entire industry in changing, according to 2nita ,cBahan, a professor
at 5oston (niversity+s 0chool of ,anagement. 2s a result of extensive research, she has
identified four distinct tra6ectories of change that industries evolve along D radical,
progressive, creative, and intermediating. !r. ,cBahan asserts that if .E#s understand the
change tra6ectory of their industry, they can then determine hich change strategies are most
appropriate for their individual company. 5elo is a description of each..
$adical Change3 -adical change occurs hen an industry+s core assets and core activities are
both threatened ith obsolescence. (nder this scenario, the &noledge and brand capital built
up in the industry erode, as do customer and supplier relationships. !uring the $?E>s and
$??>s, an estimated $?F of (.0. industries ent through some stage of radical change. 2
good example is the travel business. The core activities and core assets of travel agencies
came under fire as the airlines implemented systems to enhance direct price competition (such
as 025-E and other reservations systems) and as the agencies+ clients turned to eb*based
systems that offered ne value, such as Expedia, #rbitz, and Travelocity.
#rogressive Change3 3hen neither core assets nor core activities are threatened, the
industry+s change tra6ectory is progressive. #ver the past tenty years, this has been by far
the most common tra6ectory, ith about )'F of (.0. industries changing in this manner. 2n
example is the commercial airline industry. Innovators li&e 0outhest and Aet5lue succeeded
not because of the incumbents+ strengths became obsolete but because the upstart firms had
smart insights about ho to optimize efficiency.
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'ntermediating Change3 ,anaging a company that is experiencing intermediating change is
extraordinarily difficult. 2lthough the core activities of industries on this change tra6ectory
are threatened, the core assets of these industries, such as &noledge, brand capital, or
patents, can retain most of their value, if they are used in ne ays. ,anagement+s challenge,
therefore, is to find ne and sometimes unconventional ays preserve valuable assets and
extract value from core resources hile simultaneously restructuring &ey relationships. In the
music industry, for instance, recording companies are beginning to sell their services a la carte
to aspiring musicians rather than ma&ing huge investments in the artists upfront and incurring
all the costs of artist development. The customer and the activities have changed, but the core
resource, the recording companies+ ability to develop ne artists, retains its value.
Creative Change3 In industries on a creative change tra6ectory, relationships ith customers
and suppliers are generally stable, but assets turn over constantly. The film production
industry is a good example. "arge production companies en6oy ongoing relationships ith
actors, agents, theater oners and cable television executives. 3ithin this netor&, they
produce and distribute ne films all of the time. This combination of unstable assets (ne
films) and stable relationships (ith buyers and suppliers) ma&es it possible to deliver
superior performance over the long term.
!r. ,cBahan arns that the four change tra6ectories are not evenly distributed among
industries. 0urprising, radical change affects less than one*fifth of all industries, despite the
amount of attention given to it. ,ore prevalent are progressive and intermediating change. 5y
understanding of these tra6ectories, a manager can avoid the looming fear of industry change
by anticipating ho change ill unfold in their industry and ho to ta&e advantage of
opportunities as they emerge.
7dapted from 89o: 'ndustries Change;, ,y 7nita McGahan, 9arvard <usiness $evie:, &cto,er 66", p. 8/.
Lect*re .nhancer 9.3
'SING TH. .:IT INT.R/I.W AS A CONTROL S8ST.)
:eedbac& on problems is the only ay to prevent them from recurring. #ne often*overloo&ed
ay of getting this feedbac& from employees is through the exit intervie. Intervies ith
employees ho voluntarily leave the organization serve a dual purpose. :or the employee,
exit intervies are a chance to say many things they haven+t been able to say before. :or
employers, the intervies can be an excellent source of information. ,any companies,
hoever, do not conduct exit intervies or conduct them ineffectively.
Jones and George, Essentials of Contemporary Management, Third Edition 8-11
CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
2 good exit intervie should consist of structured and unstructured 4uestions. If the employee
is counting on a reference, he or she may be unilling to be too truthful. To put the employee
at ease and get honest information, some human resource professionals recommend riting
the reference in advance and letting the employee &no at the beginning of the intervie.
Then 4uestions such as the folloing can be used to get honest information about the
company as a hole.
G=hat did you li+e most a,out :or+ing here>; This helps gain insight into ho the employee
perceives the corporate culture. 2t 2THT one of the ansers most fre4uently heard is that
they appreciated the benefits pac&age. 3hen exiting employees mention this, it reaffirms to
the company that the investment in benefits is paying off.
8=hat do you feel good a,out having accomplished>; This helps determine hat
responsibilities gave the employee a sense of accomplishment.
8'f you :ere in charge here, :hat :ould you change>; This 4uestion is used to give the
employee a chance to figuratively change the or& environment. 8repare for a candid anser.
8=hat ,est helped you achieve your goals>; This is here managers find out hich
employee*support systems are or&ing and hich are not. If, for example, the vice president+s
open door policy as useful in getting some pro6ect underay, the policy could be
encouraged among other senior management.
8=hat did you disli+e a,out the :or+ environment here>; 2n exit intervie survey at a
5oston hospital shoed that tenty percent said they had problems ith the or& schedule
and $= percent said they disli&ed their direct supervisor. This information encouraged hospital
administrators to implement schedule alternatives and management training for supervisors.
:inally, the exit intervie information should be used. ,anagers at 2THT produce a tice*
yearly, in*depth analysis of exit*intervie findings, hich are presented to the 0enior Cice
8resident of /uman -esources. The information is used to reexamine policies, ma&e
suggestions for change, and generally help retain s&illed employees. 0ome of the best ideas
have come from people ho are leaving.
Jones and George, Essentials of Contemporary Management, Third Edition 8-18
CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
Lect*re .nhancer 9.4
TH. CONTROL .:&.RI).NTS
'n ?earch for E0cellence, the 8eters and 3aterman study of 2merica+s excellent corporations,
recounted an experiment conducted by an industrial psychologist. The sub6ects ere given
some difficult puzzles to solve and some rather dull proofreading to do. 3hile they attempted
these chores, a raucous audiotape consisting of one person spea&ing 0panish, to people
spea&ing 2rmenian, a mimeograph machine running, a chattering typeriter, and street noise
ran in the bac&ground. /alf the sub6ects ere given a button they could push to suppress the
noise. The other half ere not. Those ith buttons to push solved five times more puzzles
and made one*4uarter as many proofreading errors as those ho had no button. The nes as
that never once (and the experiment as repeated several times) did anyone ever push his or
her button. The mere fact that people perceived that they had a modicum of control over their
destiny;the option of pushing the button;led to an enormous improvement in performance.
In the follo*up boo&, 7 #assion for E0cellence, another experiment is described, this one at
Edison, 7e Aersey, site of a :ord ,otor assembly plant. They had begun an experiment that
parallels the one in the lab. Every person on the line in the huge facility as given access to a
button that he or she could push to shut don the line;4uite a gutsy move on the part of the
plant manager. The results that follo occurred during the first $> months of the experiment.
To begin ith, Edison, 7e Aersey, is not li&e an industrial psychology lab. 8eople did push
their buttons at Edison. To be precise, they shut the facility don '> times the first day and
about $> times a day thereafter. The good nes is that after the first day the average shutdon
lasted only about $> seconds;6ust time enough to ma&e a 4uality ad6ustment, a tea&, a
tist, a turn, to tighten up a nut or bolt.
8roductivity in the plant did not change. Three other indicators, hoever, are orthy of note.
The number of defects per car produced dropped during the first months of the experiment
from $@.$ per car to >.E per car. The number of cars re4uiring reor& after they had come off
the line fell by ?@ percent. 2nd the bac&log of union grievances plummeted. ,oreover, the
change in attitude as as extreme as the numbers. #ne old pro on the line commented, GIt+s
li&e someone opened the indo and e can breatheI.
MANAGEMENT IN ACTION
Note$ for Topc$ for 0$c*$$on an% Acton
Jones and George, Essentials of Contemporary Management, Third Edition 8-14
CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
0$c*$$on
$. =hat is the relationship ,et:een organi5ing and controlling> ("#$)
The text defines controlling as the process hereby managers monitor and regulate ho
efficiently and effectively and organization and its members are performing the activities
necessary to achieve organizational goals.
In previous chapters the text defines planning and organizing as the process hereby mangers
develop the organizational strategy and structure that they hope ill allo the organization to
use resource most effectively to create value for customers.
In order to control the organization, managers must monitor and evaluate hether their
organization+s strategy and structure (hich as developed during the organizing function)
are or&ing as they intended, ho they could be improved, and ho they might be changed if
they are not or&ing.
%. 9o: do output control and ,ehavior control differ> ("#$)
In an output control system managers must first choose the set of goals or output performance
standards or targets that they thin& ill best measure efficiency, 4uality, innovation, and
responsiveness to customers for their organization. Then they measure hether or not the
performance goals and standards are being achieved at the four main levels in an organization
(corporate, divisional, functional, and individual levels.)
2s its name insinuates, ,ehavior control systems involve providing mechanisms to ensure that
or&ers ,ehave in ays that ma&e the structure or&. It concentrates on controlling the
behavior of the or&ers opposed to their output or results. The three &inds of behavior control
systems are direct supervision, monitoring progress toard goals, and bureaucratic control.
'. =hy is it important for managers to involve su,ordinates in the control process> ("#$)
It is very important to involve subordinates in the control process in order to achieve success
in any organization. If subordinates are involved in setting the goals and standards, they ill
feel a sense of onership toard them, hich ill motivate them to or& to achieve those
goals. They ill be more committed to goals that they helped to design. It ill also help to
ensure that unrealistic goals are not created.
Jones and George, Essentials of Contemporary Management, Third Edition 8-6
CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
). =hat is organi5ational culture and ho: does it affect the :ay employees ,ehave> ("#%)
The text defines organizational culture as a specific collection of values, norms, and standards
of behavior shared by people and groups in an organization hich controls the ay
employees interact ith each other and or& toard organizational goals. If organizational
culture is in place then employees are not controlled by some external system of constraints,
but rather, employees ma&e organizational values and norms their on, and then they ma&e
decisions and act in accordance ith these values and norms. Employees also become focused
on thin&ing about hat is best for the organization in the long run, ta&ing actions and ma&ing
decisions that are oriented toard helping the organization to perform ell.
=. =hat +ind of controls :ould you e0pect to find most used in %a( a hospital, %,( the @avy,
%c( a city police force. =hy> ("#$)
2 hospital ould most li&ely use output and behavior control systems. -atios such as the
number of days outstanding for receivables are used to determine the economic health of the
hospital. #perating budgets are used for each department as ell as each function (i.e.,
mar&eting and advertising) of the hospital. #rganizational goals, such as the desire to achieve
the best reputation in the treatment of heart disease, are usually established.
5ehavior controls, such as direct supervision and bureaucratic control, are also very common.
Interns and residents of the hospital are regularly monitored to ensure that they are ma&ing the
correct diagnosis for patients. 5ureaucratic controls are evident in the abundance of rules,
policies and procedures that are established and must be obeyed. This is done to ensure safety,
health and ell being of the employees and patients of the hospital.
The 7avy primarily uses behavior and culture control systems. The behavior of enlisted
personnel is constantly monitored and they are expected to follo a plethora of rules,
including the ay that they should al&, tal&, and respond to superiors. There is a deep
culture entrenched in the military. 0ince members of the 7avy are representing their country
and their arm of the military at all times, there is a high level of behavior that is expected of
them, especially hen they are in uniform.
Jones and George, Essentials of Contemporary Management, Third Edition 8-1
CHAPTER EIGHT
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2 city police force uses output, behavior, and clan control systems. 0ince the city established
a budget for the police force, they are under the control of their output. They are expected to
&eep the crime level belo certain levels or&ing ithin their budget. 5ehavior controls are
used hen policemen are expected to follo established procedures in many of their duties. 2
culture is created ithin the police force in regards to the ay that they fulfill their duties.
5ecause their purpose to protect the people, they should deal ith the community in a
professional manner and develop a trusting relationship ith its members.
Acton
J. 7s+ a manager to list the main performance measures that he or she uses to evaluate ho:
:ell the organi5ation is achieving its goals. ("#$)
(7ote to Instructors: The folloing are some examples of performance measures.)
,anagers can use financial measures to determine the performance of the company. These
include financial ratios such as profit ratios, leverage ratios and activity rations (mentioned in
the text.) If organizational goals are used such as: the company must be first or second in its
industry in terms of level of profit9 increase the level of sales9 increase the 4uality of inputs or
loer their costs9 develop a number of ne products or patents, a manager ould need to
measure the respective activities and compare them against the goals to evaluate performance.
If operating budgets are used to measure performance, then budget are set for functions,
divisions, or products and then actual figures are measured against budgeted figures at
different time intervals throughout the budgeted period.
Jones and George, Essentials of Contemporary Management, Third Edition 8-
CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
@. 7s+ the same manager or a different manager to list the main forms of output control and
,ehavior control that he or she uses to monitor and evaluate employee ,ehavior. ("#$)
Examples of output control systems include: financial controls, organizational goals and
operating budgets. Examples of behavior control systems include: direct supervision
monitoring progress toard goals and bureaucratic control.
E. 'ntervie: some employees of an organi5ation and as+ them a,out the organi5ationAs
values, norms, sociali5ation practices, ceremonies and rites, and special language and
stories. $eferring to this information, descri,e the organi5ationAs culture. ("#')
5loomberg :inancial ,ar&ets in 8rinceton 7e Aersey has a very uni4ue culture. There are
no offices or internal alls so that everyone is able to see everyone else at all times. !ress is
very casual as is conversation. The company provides lunch to all employees as ell as
snac&s and soft drin&s throughout the day. This encourages employees to not ta&e a very long
time for lunch ith some employees even eating at their des&s. 5esides fresh air there is no
reason for employees to leave the building. 5y =:'> most of the employees are gone and not
many or& more than )> hours a ee&. Employees are encouraged to spend time
familiarizing themselves ith the many features of the 5loomberg terminal, hich provides
an abundance of financial information on stoc&s, bonds and mutual funds. This affords the
employees leisurely time to explore a ide array of information offered on the 5loomberg.
0ince employees are free to roam throughout the building, a very social atmosphere exists.
,any of the younger employees socialize outside of or&, playing together on softball teams
and ta&ing s&i vacations.
4. 'ntervie: an entrepreneur to learn ho: he or she organi5ed a ne: venture. ("#))
2nsers to this 4uestion ill vary, depending upon the entrepreneur intervieed, the size of
his or her business, and the industry in hich it competes. In general, hoever, organization
ithin the entrepreneurial venture must be addressed at both the macro and a micro level.
The macro*level involves the structuring of the business itself, hile the micro*level is
concerned ith day*to*day operational issues.
Jones and George, Essentials of Contemporary Management, Third Edition 8-!
CHAPTER EIGHT
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2t the macro level, the tas& of organizing begins ith the development of a business plan. 2
business plan is a ell researched, ritten document that outlines the ob6ectives of the
business and strategies to be used to achieve ob6ectives. It serves not only as a strategic
planning document, but also as a road map to guide daily operations, and a sales tool hen
attempting to attract financial investors. 2 ell ritten business plan is typically organized by
functional area * it ill include a mar&eting plan, human resources plan, operations plan, and
a financial plan. The human resources section of the business plan ill contain an
organizational chart outlining the chain of command. In this section the entrepreneur
addresses other organizational structure issues, such as decentralization, line vs. staff
positions, duties of &ey personnel, delegation of authority, etc.
2t the micro level, an organized approach to resource deployment of resources is critical since
the most immediate goal of start*ups is to achieve brea&*even status and from there, begin
generating profits. Effective organization of time is critical, since entrepreneurs alays have
too much to do and priorities often shift. 2lso, effective organization of both human and
financial resources presents an ongoing challenge since both are sorely needed to fuel groth,
but at the same time, must be tightly controlled to avoid cash flo problems. Inefficiency or
aste ithin an entrepreneurial venture can lead to financial disaster.
AACSB standards 1, 3, 10
Note$ for +*"%ng )anagement S5""$
U!der%"a!d&!* Co!"ro##&!* (LO17 3)
$. 7t :hat levels does control ta+es place in this organi5ation>
.ontrol can ta&e place at the corporate, divisional, functional, and individual levels.
%. =hich output performance standards %such as financial measures and organi5ational
goals( do managers use most often to evaluate performance at each level>
8erformance standards include financial measures (such as ratios), organizational goals, and
operating budgets. -efer to the anser to 4uestion K' in ,anagement in 2ction for examples
of these standards.
'. -oes the organi5ation have a management ,y o,2ectives system in place> 'f it does,
descri,e it. 'f it does not, speculate a,out :hy not.
Jones and George, Essentials of Contemporary Management, Third Edition 8-"
CHAPTER EIGHT
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,anagement by ob6ectives (,5#) is a system of evaluating subordinates by their ability to
achieve specific organizational goals or performance standards and to meet operating budgets.
3ithout measuring hether goals or standards are met, it is pointless to establish them
because one ould never no if they ere achieved. 2 management by ob6ectives system
involves the folloing steps:
0pecific goals and ob6ectives are established at each level of the organization.
2ll levels of employees participate in the goal setting is a process.
8eriodic revies are made of progress toard meeting goals.
). 9o: important is ,ehavior control in this organi5ation> Bor e0ample, ho: much of
managersA time is spent directly supervising employees> 9o: formali5ed is the organi5ation>
-o employees receive a ,oo+ of rules to instruct them a,out ho: to perform their 2o,s>
5ehavior control systems are use to enable managers to &eep their subordinates on trac& and
ma&e their organizational structures or& as they are designed to. !irect supervision is used
hen managers actively monitor and observe the behavior of their subordinates, teach
subordinates the &inds of behaviors that are appropriate and inappropriate, and intervene to
ta&e corrective action as needed. It is a very effective ay of motivating employees but there
are certain problems associated ith direct supervision. :irst, it is very expensive because
each manager can only personally manage a small number of subordinates effectively.
0econd, it can demotivate subordinates if they feel that they are under close scrutiny or are not
free to ma&e their on decisions. Third, for many 6obs direct supervision is not feasible or
possible, such as complex 6obs and responsibilities that can only be measured over long
periods of time.
In some industries it is imperative that a set or boo& of rules exists. #ther industries, hoever,
rely on employees+ creativity in devising more effective and efficient ays to accomplish
tas&s and design products. In this case a very formalized environment ith a rule boo& to
follo ould not be beneficial for success.
=. =hat +ind of culture does the organi5ation have> =hat are the values and norms> -o
employees tell any particular stories that reveal the organi5ationAs norms and values> =hat
effect does the organi5ational culture have on the :ay employees ,ehave or treat customers>
There are many different types of organizational culture. #ne example ould be a very
conservative culture that is filled ith many Gunritten rulesI that are folloed by the
employees. This might include a dress code, here men and omen here dar&, conservative
suits ith hite shirts, and men ear ing*tipped shoes and do not ear flashy ties. In this
organization one must or& upards of @> hours a ee& including 0aturdays in order to
succeed.
Jones and George, Essentials of Contemporary Management, Third Edition 8-.
CHAPTER EIGHT
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In the organization, the values and norms inform employees about hat goals they should
pursue and ho they should behave to reach those goals. 2n example is an organization
here values create an environment here creativity and innovation are encouraged. 7orms
are in place that allo employees to experiment ith ne ideas in an attempt to create ne
ays of doing things or creating ne products.
The culture can have a significant impact on ho employees treat customers. :or example, in
a retail store, employees might be encouraged or re4uired to approach customers in a friendly
manner and offer assistance before the customer is able to pose a 4uestion. 2lso, some
cultures practice the rule that the customer is alays right so that even if the employee
disagrees ith the customer, they must behave in a manner that indicates that the customer is
right in their conviction.
J. <ased on this analysis, do you thin+ there is a fit ,et:een the organi5ationAs control
systems and its culture> =hat is the nature of this fit> 9o: could it ,e improved>
If there is not a good fit beteen the organization+s control system and culture, it should be
very apparent. There ill most li&ely be a brea& don somehere in the system here
employees are not reaching the standards or are very unhappy in their positions.
AACSB standards 1, 3, 10
)anagng .thca""# (LO1)
$. Either ,y yourself or in a group, thin+ a,out the ethical implications of organi5ations
monitoring and collecting information a,out their su,ordinates. =hat +ind of
information is it ethical to collect or not to collect> =hy> ?hould managers and
organi5ations inform su,ordinates they are collecting such information>
7early three*4uarters of all large companies that responded to a survey conducted by the
2merican ,anagement 2ssociation said that they actively record and revie at least one of
the folloing: employees+ phone calls, e*mail, Internet connections, or computer files.
-easons given by companies for engaging in these practices include prevention of personal
use or abuse of company resources, prevention or investigation of corporate espionage or
theft, cooperation ith la enforcement officials in investigations, and resolution of technical
problems, or other special circumstances.
Jones and George, Essentials of Contemporary Management, Third Edition 8-/
CHAPTER EIGHT
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5ecause their ob6ective is to protect the company+s best interests, employers feel that their
behavior is both legal and ethical. Ideally, companies should only collect information that is
6ob specific. :rom a pragmatic viepoint, hoever, hen scanning messages that move
through a company+s server, it may be difficult to distinguish in advance an employee+s
professional from personal correspondence.
#ften employees are unaare that their telephone andLor computer communications are not
confidential. Therefore, if an organization regards all communications sent or received during
or& hours and using company e4uipment as corporate property, this should be formally
stated as a policy. 2gain, the most ethical approach is to use monitoring only hen the
organization has good grounds for suspecting that there is abuse.
%. ?imilarly, some organi5ational cultures li+e those of 7rthur 7ndersen, the accounting
firm, and Enron seem to have developed norms and values that caused their mem,ers
to ,ehave in unethical :ays. =hen and :hy does a strong norm that encourages high
performance ,ecome one that can cause people to act unethically> 9o: can
organi5ations prevent their values and norms from ,ecoming too strong>
Enron+s corporate culture seemed to exemplify ris& ta&ing, aggressive groth and
entrepreneurial creativity, hich are all positive values. /oever, these values ere not
balanced by a genuine concern for corporate integrity, customer needs, and shareholder value.
,any believe that this lac& of balance, combined ith Enron+s creation of a GyesI culture that
s4uelched any internal complaints or negative feedbac&, resulted in norms that encouraged
overhelming pressure to conform and an abuse of poer.
/ard*charging, aggressive cultural norms must alays be tempered ith a sense of morality
and integrity. .areful monitoring and preservation of this delicate balance ill help a
company avoid ethical breaches.
AACSB standards 1, 2, 3, 6, 7
Note$ for Sma"" Gro*p +rea5o*t .;erc$e
Ho- +e$t to Contro" the Sa"e$ (orce? (LO 17 3)
$. -esign the control system that you thin+ :ill ,est motivate salespeople to achieve
these goals.
Jones and George, Essentials of Contemporary Management, Third Edition 8-1
CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
2 control system that ould motivate salespeople to achieve set goals may include:
,eeting ith their supervisor regularly to set and agree upon the level of sales they
should strive to achieve each month, 4uarter, and year.
!etermining ho many cold calls they should conduct or the number of ne
customers they should contact during a specific period.
,aintaining records for all clients and potential clients that they have visited or made
contact ith.
8reparing brief summaries of the results of these contacts to be submitted regularly to
their supervisor.
/olding meetings beteen salespeople and supervisors on a regular basis to determine
if the salesperson is achieving their goals and if they are having any problems.
%. =hat relative importance do you put on %1( output control, %( ,ehavior control, and
%!( organi5ational culture in this design>
2ll three types of control systems are important in this design. 2n examples of output control
is the establishment of sales goals to be reached during a specific period. 5ehavior controls
are found in the system by the presence of prescribed behaviors that should be performed by
the salespeople. These include: the amount of time that they should spend see&ing ne
business and the re4uired submission of client logs. #rganization culture is underlying in this
design since the setting of goals by both the supervisor and salesperson shos that
management values the opinions and the abilities of their employees. The dictation of goals to
the salesperson ould signal to them that their input is not valued in this organization.
AACSB standards 1, 3, 10
+e the )anager (LO17 3)
$. =hat +ind of outputs controls :ill ,est facilitate positive interactions ,oth :ithin the teams
and ,et:een the teams>
,anagers and each team should be given organizational goals that are challenging and re4uire
them to GstretchI.
%. =hat +ind of ,ehavior controls :ill ,est facilitate positive interactions ,oth :ithin the
teams and ,et:een the teams>
3ith the ,5# approach, everyone has &noledge of hat is going on, hat is expected of
the teams and of individuals, and managers and employees buy into their goals because they
are part of the decision process.
Jones and George, Essentials of Contemporary Management, Third Edition 8-8
CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
'. 9o: :ould you go a,out helping managers develop a culture to promote high team
performance>
2 brainstorming session (including employees) could be used to generate ideas for ays to
develop a culture that is conducive to achieving goals. .orporate values and norms should be
clearly articulated by the leadership, and various methods of fostering the internalization of
those values and norms by employees should be developed.
AACSB standards 1, 2, 3, 6, 7
BUSINESS WEE. CASES IN THE NEWS
Ca%e S-!o/%&%: Crac5ng the Whp at W#eth
3hen -obert -uffolo as appointed executive Cice 8resident for -H! at 3yeth, he as
given the mandate of sha&ing up the drug ma&er+s mediocre performance in that division. /is
controversial changes included establishing 4uotas for ho many compounds must be
churned out by company scientists. 5onuses ere held hostage to managers+ meeting of their
4uota. 3yeth+s problems are reflective of those plaguing its industry. 7e drug development
is don )@F from its pea& during the late $??>+s. -uffolo ants to bring greater efficiency to
the innovation process by instilling tougher discipline as a means of increasing productivity.
2lthough his approach has critics, analysts say that 3yeth+s pipeline has shon ma6or
improvement.
0'e%"&o!%:
1. =hat +inds of control systems tend to ,e used to measure the performance of $C-
scientists>
It seems that in the past, behavior controls ere used to measure their performance. 2 scientist
as considered a good performer as long as he or she engaged in appropriate scientific
in4uiry. Engagement in such activities as more important than 4uantity of output from it.
Jones and George, Essentials of Contemporary Management, Third Edition 8-4
CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
. =hat +ind of control system did $uffolo institute> =hat are the various parts or
measures of the control system he instituted>
The revie process he initiated is an example of concurrent control. (nder this revie
process, a value is determined for every pro6ect in the pipline, based on a host of factors.
!uring an annual revie, these ratings are used to decide hich pro6ects are given high
priority, lo priority, or are discontinued. Establishing a 4uota for number of ne compounds
developed is an example of output control.
!. =hat are the pros and cons of his system> -oes it seem to ,e :or+ing>
The criticisms of -uffolo+s use of output control are: $) increased anxiety level among
scientists, %) encouraging scientists to overloo& problems ith some compounds in order
to ma&e their numbers, and ') encouraging scientists to focus on those pro6ects that are the
safest gambles. /oever, it appears that the use of such controls has resulted is helping
the organization to achieve its ob6ectives. 3yeth+s pipeline has improved, ith a number
of potentially hot*selling products li&ely to hit the mar&et ithin the next fe years.
8rior to the introduction of -uffolo+s revie system, hich is an example of a concurrent
control system, drugs ith the least chance of paying often ended up ith the most
resources. The ne rigor imposed by this system forced scientists to terminate troubled
pro6ects earlier in the transformation process, thus saving time and money.

AACSB standards: 1, 3, 9, 12, 13
Chapter 9 /%eo Ca$e Teachng Note
Jo,!%o! 1 Jo,!%o!: Crea"&!* a G#o(a# Lear!&!* Or*a!&2a"&o!
Teachng O,2ect1e: #bserve ho a large, decentralized global company uses an innovative
solution to meet the challenge of providing training and employee development.
/%eo S*mmar#: This video illustrates ho AHA is able to control and enhance training and
development in its highly decentralized organization. 3ith Internet technology, the company
created an e*(niversity that provides learning across its %'> independent business units.
Employees of the various companies are able to tap into each other+s areas of expertise, share
ideas, and contribute to a diversity of thought hile the separate businesses retain the
autonomy typically associated ith decentralization.
Jones and George, Essentials of Contemporary Management, Third Edition 8-!6
CHAPTER EIGHT
CONTROL, CHANGE, AND ENTREPRENEURSHIP
<*e$ton$=
1. =hy is eDniversity a valua,le learning tool for the Johnson C Johnson organi5ation>
e(niversity created a ay for AHA to provide training and development opportunities for the
hundreds of thousands of employees of its %'> companies orldide. The 3eb*based system
provides programs from corporate head4uarters, various AHA companies, and outside vendors.
The system helps AHA retain and ta&e advantage of the independence of its separate units and
capture their diversity of thought. The cross*fertilization of &noledge gives employees not
only an opportunity to learn and plan personal and professional development but also a career
competitive advantage.
. 9o: does eDniversity manage to operate in a decentrali5ed environment>
AHA anted to support learning ithout losing the advantages of a decentralized company.
e(niversity accomplished this by consolidating disparate learning technologies into a single
learning system. The system uses Internet technology to leverage and integrate existing
functional, regional, and operating company*specific learning and development systems.
!. =hat are the ,enefits, ,oth e0pected and une0pected, of eDniversity>
AHA managers expected the platform to provide learning opportunities critical to employee
training and professional development, one of the values expressed in the AHA .redo. They
also expected that the employee training and development enhanced by e(niversity ould
help AHA sustain its competitive advantage. There ere also unexpected benefits.
,anagement didn+t anticipate ho much learning employees ould gain from peers in other
operating units. 2lso, smaller companies gained previously unavailable access to the best
learning experiences from other companies and from outside vendors. :inally, employee
interaction through e(niversity fostered a ne opportunity to discuss the AHA .redo.
Jones and George, Essentials of Contemporary Management, Third Edition 8-!1