mcs2 result control
TRANSCRIPT
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RESULT CONTROL
SESSION 2
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Results controlsIt involves rewarding individuals for generatinggood results, or punishing them for poor results.
Results accountability
It influences actions because it causesemployees to be concerned about theconsequences of the actions they take.
However, the employees’ actions are not constrained ;On the contrary, employees are empowered totake whatever actions they believe will bestproduce the desired results.
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Result Control
Pay-for-performance (not pay for position)Rewarding employees for generating goodresult
MeritocraciesRewards are given to the most talented andhardest working employees rather than those
with the longest tenure or the right socialconnection
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Who is a professional?
“A professional is someone who isresponsible for achieving a result ratherthan [for] performing a task” [ Michael Hammer, Re-engineering guru]
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Management by Objective (MBO)
Result control are often implemented under theframework of MBO
A process whereby the superior and subordinatemanagers of an organization jointly identify common
goals, define each employee’s major areas ofresponsibilities in terms of the results expected of them,and use these measures as guides for operating the unitand assessing the contribution of each of its membersSuatu proses dimana atasan dan bawahannya padasuatu organisasi bersama-sama mengidentifikasi tujuanbersama, kemudian tanggungjawab dan hasil yang ingindicapai dirinci untuk setiap karyawan, kemudianmenggunakan ukuran tersebut sebagai dasar untukmenjalankan unit organisasi dan untuk mengukurkontribusi tiap-tiap anggota organisasi.
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Elements of Result Controls
Defining the performance dimensions Example: profitability, customer satisfaction, productdefect
What you measure is what you get ; hence,If not congruent with the organization’s objectives, thecontrols will actually encourage employees to do thewrong things!
Measuring performance on these dimensions Objective > financial > market-based: e.g., stock price; > accounting-based: e.g., return on assets; > non-financial: e.g., market share, cycle-time, waste;Subjective: e.g., managerial characteristics (“being ateam player”).
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Elements of Result ControlsSetting performance targets
Motivational effects [stimulate action andimprove motivation]
Specific target, not vague statement like“do the best you can” or “work at areasonable pace”
Performance targets allow to interpret(own) performance.
Providing rewards or punishments Salary increases, bonuses, promotions, jobsecurity, recognition, training opportunities,freedom, power, etc.
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Expectancy theory
Individuals’ motivational force, or effort, isa function of:(1). Their expectancies: their belief that certain
outcomes will result from their behavior(example: bonus for increased effort)
(2). The valences of (the strength of their
preference for) those outcome
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Conditions determining theeffectiveness of result control
Results controls work best only when all ofthe following three conditions are present:
Superiors / managers mustknow
what results aredesired in the areas being controlled;
The individuals whose behaviors are being controlledmust have significant influence on the results in thedesired performance dimensions;
Superiors / managers must be able to measure theresults effectively.
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Knowledge of desired result
For result control to work managers mustknow what results are desired in the areasthey wish to controlThey must communicate those desireseffectively to the employees working inthose areas.Ex: Purchasing managers???Result areas quality, cost, schedule
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Ability to measure resultseffectively
The “effectiveness” of results measures must be judged by their ...
Ability to evoke the desired behaviors
Results measures should be:
Precise;Objective;Timely;Understandable.
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Precision
Measurement precision refers to theamount of randomness in the measure.Precision is an important quality becausewithout it the measure loses much of itsinformation value.Ex. 120,3 = between 100-130
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Objectivity
Freedom from biasMeasurement of quality
Managers have two main alternatives forincreasing measurement objectivity1. The actual measuring done by
independent of the process. Ex. IC2. Independent person. Ex. Auditor
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Timelines
The lag between the employee’sperformance and the measurement ofresults.Employee need consistent
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Understandability
The employees whose behaviors arebeing controlled must understand what arebeing held accountable for.The employees involved must understandwhat they must do to influence themeasure.
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Pros and cons of results controls
Behavior can be influenced whileallowing significant autonomy.
They yield greater employeecommitment and motivation .
They are often inexpensive.
e.g. performance measuresare often collected forreasons not directlyrelated to managementcontrol.
Often less than perfect indicators ofwhether good actions have been taken.
They shift risk to employees (becauseof uncontrollable factors). Hence, they oftenrequire a risk premium for risk averse employees.
Sometimes conflicting functions:Motivation to achieve
targets should be “challenging” Communication among entities
targets should be slightlyconservative
PRO CON
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Exercise
Result control;1.Defining performance dimensions
2.Measuring performance3.Setting performance targets4.Providing rewards and punishment
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New Open Customer/outletDaily sales
Item productGrowth productPareto
ReturnDiscount rate
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Tele selling