Managing the Internal Organization

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Managing the Internal Organization
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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

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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

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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 organizations
  resources and expectations
• Enable the organization to evaluate the
  performance of managers and organizational units

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Linking Budgets to Strategy
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Linking Budgets to Strategy
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Linking Budgets to Strategy
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Linking Budgets to Strategy

• 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

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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

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Policies and Procedures
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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

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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

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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

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Total Quality Management

• Dimensions of Quality
• 1. Performance- A products primary operating
  characteristic. Examples are automobile
  acceleration and a televisions picture clarity
• 2. Features- Supplements to a products 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 products
  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

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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

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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

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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

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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

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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

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Information Systems
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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

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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

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Information Systems

• More Flexible Work Sites
• Networks allow workers to be located in places
  other that the traditional office and still
  participate in the firms 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

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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

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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

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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

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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

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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

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Motivation and Compensation

• Effects of Organizational Rewards (contd)
• 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

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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

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Motivation and Compensation

• Performance target outcomes must be within the
  individuals control
• Strive for immediate reinforcement
• Employ non-monetary incentives liberally
• Do not reward non-performance