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A Conceptual Framework for the Design of Organizational Control Mechanism

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A Conceptual Framework for the Design of Organizational Control Mechanism William G. Ouchi Management Science, 1979, 25 (9): 833-847 BA 545 Foundations of Strategy ... – PowerPoint PPT presentation

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Title: A Conceptual Framework for the Design of Organizational Control Mechanism


1
A Conceptual Framework for the Design of
Organizational Control Mechanism
  • William G. Ouchi
  • Management Science, 1979, 25 (9) 833-847

BA 545 Foundations of Strategy Research College
of Business University of Illinois at
Urbana-Champaign Marleen Rust
2
Overview
  • Objective describe three mechanisms through
    which organizations seek to cope with the problem
    of evaluation and control
  • Markets
  • Bureaucracies
  • Clans

Examine each of these mechanisms by looking at
the parts distribution division of a major company
3
Organizational Control
  • Simple-minded view of organizational control
    stated in the following two questions
  • 1. What are the mechanisms through which an
    organization can be managed so that it moves
    towards its objectives?
  • 2. How can the design of these mechanisms be
    improved, and what are the limits of each basic
    design?

4
Three modes of organizational control
  • Precisely evaluate and reward each persons
    contributions with all of the information
    necessary for efficient decision-making
  • Provide a price mechanism for solving the problem
    of goal incongruity
  • Permit each individual to pursue
    non-organizational goals, but at personal loss of
    reward

Markets
Markets
  • Working within a well-defined set of rules and
    formal authority for monitoring, evaluating, and
    directing
  • Partial information rather than complete
    information (Rule vs. Price)

Bureaucracies
  • High internal commitment to the firms objective
    by Informal social system such as socializing
    process
  • Eliminate many costly forms of auditing and
    monitoring

Clans

5
The Control Mechanisms
  • Markets prices convey all the information
    necessary for efficient decision making
  • Bureaucracies close personal surveillance and
    direction of subordinates by superiors
  • Info for task completion is contained in rules
  • Differ from price because partial information
  • Clans informal social system where manager
    knows that all are trying for same right
    objective and can eliminate audit/surveillance

Markets
Bureaucracies
Clans
6
(No Transcript)
7
Designing Control Mechanisms Costs and Benefits
  • Two ways an organization can achieve effective
    people control
  • Go to the expense of searching for and selecting
    people who fit its needs exactly or
  • Can take people who do not exactly fit its needs
    and go to the expense of putting in place a
    managerial system to instruct, monitor and
    evaluate them
  • Which of these approaches is best depends on the
    cost to the organization of each

8
(No Transcript)
9
Loose Coupling and the Clan
  • Present (1979) literature has taken on a new view
    of organizational rationality or loose
    coupling the bureaucratic forms of control are
    unsuitable for many contemporary organizations
  • Assumption with bureaucratic or market forms of
    control is we can measure the performance desired
  • To set a production standard with effective
    controls, we must be able to measure desired
    output
  • To control through rules, the rules that achieve
    the desired performance must be known
  • To measure either output or behavior relevant to
    desired performance is critical to the "rational
    application of market/bureaucratic forms of
    control

10
Table 3 the contingencies which determine
whether or not measurement is possible
Recent (1979) organization theorist have argued
that few organizations process underlying
rationality for market and bureaucratic forms of
control therefore the forms of control of today
may be inappropriate for the future
11
Closing Remarks
  • The design of organizational control mechanisms
    control must focus on the problem of achieving
    cooperation from people with partially divergent
    objectives
  • Market precisely evaluates persons contributes
    permits each to pursue non-organizational goals,
    but at a personal loss of reward
  • Clan Select and socializing people to have
    overlapping objectives
  • Bureaucratic does little of each of above but
    evaluates performance to encourage commitment

12
More Closing Remarks
  • Two underlying issues that are central to
    importance in determining control
  • Clarity with which performance can be assessed
  • Degree of goal incongruence
  • Immediate goal Balance of socialization and
    measurement which most efficiently permits a
    particular organization to achieve cooperation
    among its members
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