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Dr. R. UmaLakshmi College of EducationGandhigram

Harward Business ReviewHarward Business Review

CONTROL IN AN AGE CONTROL IN AN AGE OFOF

EMPOWERMENTEMPOWERMENTbyby

Robert SimonsRobert Simons

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The Employer & The EmployeeThe Employer & The Employee

• Employee – innovative & creativeEmployee – innovative & creative Employer - PraiseEmployer - Praise Productive/Destructive Productive/Destructive Fails to notice innovation---Fails to notice innovation--- Stagnation Stagnation

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The Empowered Employee The Empowered Employee

• Should have high initiative to seek out Should have high initiative to seek out opportunities opportunities

• High zeal of the employee may sometimes High zeal of the employee may sometimes expose business to risk -expose business to risk - business losses, civil business losses, civil

& criminal penalties & loss of reputation of the & criminal penalties & loss of reputation of the organizationorganization

• Need to encourage innovation while ensuring Need to encourage innovation while ensuring adequate adequate controlcontrol by using powerful by using powerful management systems or LEVERSmanagement systems or LEVERS

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WHAT IS CONTROL?WHAT IS CONTROL?

• Measuring process against plans to guarantee the Measuring process against plans to guarantee the predictable achievement of goalspredictable achievement of goals

• Controls ---Controls --- Process - Process - Plans -- Plans -- Goals Goals

• Types of ControlsTypes of Controls

1. Diagnostic control systems1. Diagnostic control systems 2. Beliefs systems2. Beliefs systems 3. Boundary systems3. Boundary systems 4. Interactive Control systems4. Interactive Control systems

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The Problem of ManagersThe Problem of Managers

• How to exercise adequate control in an organization that How to exercise adequate control in an organization that demanddemand

- Flexibility- Flexibility - Innovation &- Innovation & - Creativity- Creativity

• Customers are more demanding and more informedCustomers are more demanding and more informed

• Competitive businesses rely on employee initiative to Competitive businesses rely on employee initiative to seek out opportunities to satisfy customer needsseek out opportunities to satisfy customer needs

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Control failureControl failure

• By using some opportunities if business face By using some opportunities if business face excessive risk or cause damage to company’s excessive risk or cause damage to company’s integrity integrity Control failure Control failure

• 1950s & 1960s Control – by telling people how 1950s & 1960s Control – by telling people how to do their jobs, monitoring them with constant to do their jobs, monitoring them with constant surveillancesurveillance

• It is still effective where standardization is critical It is still effective where standardization is critical for efficiency and yield for efficiency and yield

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1. Diagnostic Control Systems1. Diagnostic Control Systems

• Work like the dials on the control panel of an airplane Work like the dials on the control panel of an airplane cockpitcockpit

• Scanning for signs of abnormal functioningScanning for signs of abnormal functioning• Keeping critical performance variables within preset Keeping critical performance variables within preset

limits (costs & revenues)limits (costs & revenues)• Measuring outputs and comparing them with preset Measuring outputs and comparing them with preset

standards of performancestandards of performance• Holding employees are accountable for performanceHolding employees are accountable for performance

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DemeritsDemerits

• Leads to problems by the employeesLeads to problems by the employees• Can go with other monitoring systemsCan go with other monitoring systemsExample: Nordstorm used DCS to track the Example: Nordstorm used DCS to track the

performance of its sales forceperformance of its sales force Employees filed lawsuit – Supervisors’ Employees filed lawsuit – Supervisors’

pressure to under-report their job hourspressure to under-report their job hours Settling the claim cost Nordstorm 15 million Settling the claim cost Nordstorm 15 million

dollarsdollars

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2. Beliefs Systems2. Beliefs Systems

• Encompasses organization’s values, Encompasses organization’s values, mission and other statements of mission and other statements of philosophyphilosophy

• Managers must ‘walk the talk’ Managers must ‘walk the talk’ exemplifying appropriate behavior for the exemplifying appropriate behavior for the employees to watch & followemployees to watch & follow

• Must use their mission as living Must use their mission as living documentsdocuments

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• BS can motivate individuals to search for new ways of creating value

• Every individual has a deep seated need to contribute his time and energy to worthwhile endeavors

• Often organization fails to make the employees understand how they can add value that can make a difference

• Managers must unleash the employees’ potential and inspire them by actively communicating core values and missions

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3. Boundary Systems (BOS)3. Boundary Systems (BOS)

• Based on the power of ‘Negative thinking’Based on the power of ‘Negative thinking’• To make employees creative – do not tell To make employees creative – do not tell

them what to do - tell them what them what to do - tell them what notnot to do to do• Standard operating procedures and rule Standard operating procedures and rule

book discourages initiative and creativity book discourages initiative and creativity of an empowered employeeof an empowered employee

• BOS are an organizational brakesBOS are an organizational brakes

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Creativity & HurdlesCreativity & Hurdles

“Freedom is the greatest when the ground rules are clear. Chalk out the playing field and say, Within those lines, make any decision you need.” - Dick Brown, chairman CEO of EDS

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4. Interactive control systems(ICS)4. Interactive control systems(ICS)

• Especially important when organizations Especially important when organizations grow larger and senior managers have grow larger and senior managers have less personal contact with people less personal contact with people throughout the organizationthroughout the organization

• Formal Information systems managers Formal Information systems managers use to involve themselves regularly& use to involve themselves regularly& personally in the decisions of subordinatespersonally in the decisions of subordinates

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• ICS track the strategic uncertainties that keep ICS track the strategic uncertainties that keep the senior mangers awakethe senior mangers awake

• Uncertainties may be changes in technology, Uncertainties may be changes in technology, customers’ tastes, government regulation, customers’ tastes, government regulation, industry competitionindustry competition

• ICS are designed to gather information that ICS are designed to gather information that might challenge the vision of the futuremight challenge the vision of the future

• The information gathered are discussed &, The information gathered are discussed &,

debated leading to the emergence of new debated leading to the emergence of new strategies. strategies.

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Renew strategy with four levers of controlRenew strategy with four levers of control

Business strategy

Risks to be avoided

Critical performance variables

Core values

Strategic uncertainties

Belief systems Boundary systems

Interactive control systems

Diagnostic control systems

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Points for DiscussionPoints for Discussion

• Do all our control systems function Do all our control systems function effectively? effectively?

If yes, explain. If no, give reasons.If yes, explain. If no, give reasons.• Which control(s) we need to improve?Which control(s) we need to improve?• Give your own unit’s experience in using Give your own unit’s experience in using

these four controls.these four controls.

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THANK THANK

YOUYOU