control and change

8/9/2019 Control and Change

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Leading Change

Why Transformation Efforts Fail


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The research

More than 100 companies with differentcharacteristics have been studied.

TQM, Reengineering, Right Sizing,

Restructuring, Cultural Change, Turnaround


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The research

In almost every case the basic goal was:To make fundamental changes in how

business is conducted in order to help

cope with a new, more challenging market

environment


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Error#1: Not establishing a great

enough sense of urgency

How most successful changes begin.

Crises, potential crises or great opportunities. Over 50% have failed in phase 1, because of :

Underestimate motivating people.

Overestimate their success. Lack of patience.

A paralyzed senior management.


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Error#1: Not establishing a great

enough sense of urgency

The need for a leader, CEO or division

manager. Bad business results are both a blessing and

curse in first phase.

An almost universal tendency to shoot thebearer of bad news.


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Error#2: Not creating a powerful

enough guiding coalition

In most successful cases coalition is always pretty

powerful. Senior management always forms core of the group.

More than high sense of urgency is required.

Reasons for failing:

No history of teamwork at top.

Expecting the team to be led by a staff executive.


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Error#3: Lacking a vision

In very successful cases, coalition develops a

picture of future. A vision says something that helps clarify the

direction in which an organization needs to

move.

A list of confusing and incompatible projects.

A useful rule of thumb.


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Error#4: Under communicating

the vision

3 patterns with respect to communication: Holding single meeting or sending out a single

communication. Making speeches to group of employees.

Newsletters and speeches.

Particularly challenging in case of short term

sacrifices. Walk the talk, nothing undermines change

more than wrong behavior by importantindividuals.


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Error#5: Not removing obstacles to

the new vision

Obstacles for employees:

Narrow job definitions. Compensation and appraisal systems.

The action is essential both to empower

others and to maintain the credibility of

change effort.


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Error#6: Not systematically planning

for and creating short term wins

Most people go on a long march unless

In one or two years you should find: Quality beginning to go up. Decline in net income stopping.

Product introduction.

Upward shift in market share.

In successful cases manager actively plan toachieve objectives. They dont hope for.


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Error#7: Declaring victory too soon.

New approaches are fragile and subject to

regression. Ironically, it is often a combination of change

initiators and change resistors that creates the

premature victory.

What, instead of declaring premature victory.


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Error#8: Not anchoring changes in

the corporations culture.

In the final analysis changes sticks when it

becomes the way we do things around here Two factor in institutionalizing change:

To show people , the effects of new approaches.

Make sure that next generation of top management

will personify the new approach.


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Lessons to be learned

Change process goes through a series of

phases. Critical mistakes in any of the phases can

have devastating impacts.

A fewer errors can spell the differencebetween success and failure.


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Strategic Evaluation and Control


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Strategic Evaluation

Evaluate effectiveness of strategy in

achieving organizational objective

Taking corrective actions when required

Test the premises made during strategy

formulation

Ensures proper utilization of resources and

accomplishments of pre defined plans


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Participants in Strategic

Evaluation Shareholders

Lenders such as financial institutions and banks

Government

Board of Directors

Chief Executives

SBUs and Profit centers Head Financial Controls, CS, External and Internal

Auditors


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Barriers in Evaluations

Limits of controls

Difficulties in Measurements

Resistance to Evaluation

Short termism

Reliance on Efficiency vs. Effectiveness


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Requirements for effective

evaluation Involve minimum amount of information

Monitor only managerial activities and results

Timely

Use long term and short term control

Aim at pinpointing exceptions

Emphasize rewards / penalties for meeting andexceeding standards / failing to meet standards

well in advance


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Premise

Control

Special Alert

Control

Strategic

Surveillance

ImplementationControl

Strategic

Control


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Premise Control

Identify key assumptions, keep track of any

change in them and assesses its impact on

strategy and its implementations

Continuously test the assumptions to check

its validity

Enables to take corrective actions at theright time

Back


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Implementation Control

Aimed at evaluating whether the plans

programs or projects actually guiding the

organizations towards the pre determined

objectives. If not the commitment of

resources to these are revised.

Leads to strategic re-thinking

Back


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Strategic Surveillance

Designed to monitor broad range of events

inside and outside the company likely to

threaten firms strategy

Back


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Special Alert Control

Bases trigger mechanism for rapid response

and immediate reassessment of strategy in

light of sudden and unexpected events

Can be exercised through formulation of

contingency strategies and assigning

responsibility to crisis management teams


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Operational Control

Aimed at allocation and use of organizational

resources through an evaluation and

performance of organizational units, toassess their contribution to the

achievements of organizational objectives


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Evaluation Process for

Operational Control

Strategy/

Plan/ Obj

Analyzing

Variance

Setting

Std of Perf.

Measurement

Of Perf.

Actual

Perf.

Feedback

Check

Performance

Check

StandardsReformulate


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Setting Of Standards

Key managerial tasks derives through strategicrequirements can be analyzed for finding keyperformance areas, standards can then be set in

each of these KRAs Special requirements for the performance of key

tasks can help determine type of standards to set

Performance indicators that best express special

requirements could then be decided to be used forevaluation

Can be effectively exercised through quantitativeand qualitative criteria

Back


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Measurements Of Performance

Operationally measurements is done

through accounting, reporting and

communication systems effective MIS

Difficulties in measurement

Timing of measurement

Periodicity in measurement

Back


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Analyzing Variances Measurement of actual performance and its

comparison with standard performance leads to

analysis of variances Three situations may arise

Actual performance = standard performance

Actual performance > standard performance

Actual performance < standard performance

Requires analysis of the causes of deviation basedon which corrective actions is taken


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Taking Corrective Actions Three Courses of corrective actions

Checking of performance

Checking of standards

Re-formulating strategies, plans and objectives


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Evaluation Techniques for

Strategic ControlStrategic Momentum

Control

Stable environment

Responsibility

control centers

Underlying success

factors

Generic strategies

Strategic Leap Control

Dynamic environment

Strategic issuemanagement

Strategic field analysis

System modeling

Scenarios


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Evaluation techniques for

operational control

Internal Analysis

Value chain analysis

Quantitative analysis

Qualitative analysis

ComprehensiveAnalysis

Balance Scorecardmethod

Key factor Rating

Comparative AnalysisHistorical analysis

Industry norms

benchmarking


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CONTROL IN AN AGE OF

EMPOWERMENT

How can managers promote innovation while avoiding

unwelcome surprises?


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Examples of Management Control Failures

1. Kidder, Peabody & Company lost $350 million when atrader allegedly booked fictitious profits.

2. Sears, Roebuck and Company took a $60 million chargeagainst earnings after admitting that it recommendedunnecessary repairs to customers in its automobileservice business.

3. Standard Chartered Bank was banned from trading onthe Hong Kong stock markets after being implicated inan improper share support system.


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What is common in these Examples?

1. In each case, employees broke through existingcontrol mechanisms and jeopardized the

franchise of the business.2. The cost to the company was enormous, interms of:

i. Damaged Reputation

ii. Fines

iii. Business Lossesiv. Missed opportunities and

v. Diversion of management attention to deal with crises.


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This leads us to the Following Questions?

1. How to exercise adequate control inorganizations that demand flexibility, innovation

and creativity?2. How do senior managers protect their companiesfrom control failures when empoweredemployees redefine the way they go about doingthe job?

3. How do managers ensure that subordinates withan entrepreneurial flair do not put the well beingof the business at risk?


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CONSTRAINTS. Managers cannot spend all their time and effort

making sure that everyone is doing what is

expected- This is certainly NOT their job Managers cannot achieve control by simply hiring

good people, aligning incentives, and hoping for

the best- They need proper mechanism to do that.

Managers tend to define CONTROL narrowly.


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FOUR LEVELS OF CONTROL

Business

Strategy

Core Values

Strategic

uncertanities

Risks to be

Avoided

Critical

Performance

Variables

Beliefs Systems Boundary Systems

Diagnostic Control SystemInteractive Control Systems


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Diagnostic Control System Allows managers to ensure that important goals are being

achieved efficiently and effectively.

It help managers track the progress of individuals,departments, or production facilities towards strategically

important goals.

Manager use this system to monitor goals and profitability,

and to measure progress toward targets such as revenue

growth & market share. Feedback allows management to adjust and fine tune

inputs and processes.


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Continued The main purpose of this system is to eliminate

the managers burden of constant monitoring.

Once goals are established and people haveperformance targets on which their rewards will

be based, many managers believe they can move

on to other issues, knowing that employees will be

working diligently to meet the agreed goals.


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Problems. Not adequate to ensure effective control.

They create pressures that can lead to

control failures even crises. There are built-in dangers when empowered

employees are held accountable forperformance goals and then are left totheir own devices to achieve them.

Example: Nordstrom.


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Beliefs Systems They communicate core values and inspire all participants

to commit to the organizations purpose.

They draw employees attention to key tenets of the

business: How the organisation creates value

The level of performance the organisation strives for

How individuals are expected to manage both internal

and external relationship. Beliefs systems can also inspire employees to create

new opportunities and new ways of creating value.


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Continued Belief systems are broad enough so as to cater to

different groups within the organisation:

Salespeople Managers

Production workers

Clerical personnel


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Boundary Systems They establish the rules of the game and identify

actions and pitfalls that employees must avoid.

Based on the power of negative thinking, i.e.telling employees what not to do.

This system allows innovation within clearlydefined limits.

This system is especially critical in thosebusinesses where a reputation built on trust is akey competitive asset.


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Continued

Boundary systems are an

organizations brakes. And, likeracing cars, the fastest

companies need the best brakes.


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Interactive Control Systems

They enable the top level managers

to focus on strategic uncertainties,to learn about threats and

opportunities as competitive

conditions change, and to respondproactively.


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Continued Interactive control system are the formal

information that managers use to involve

themselves regularly and personally in thedecisions of subordinates.

They track the strategic uncertainties that keep

senior managers awake at night the shocks to the

business that could undermine their assumptionsabout the future and the way they have chosen to

compete.


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ContinuedInteractive control system have four characteristics that set them

apart from diagnostic control systems.

They focus on constantly changing information that top levelmanagers consider potentially strategic.

The information is significant enough to demand frequent & regular

attention from operating managers at all levels in the organization.

The data generated by the interactive system are best interpreted and

discussed in face-to-face meetings of superiors, subordinates and

peers.

This system is a catalyst for an ongoing debate about underlying

data, assumptions, and action plans.


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Balancing empowerment and control Effective managers empower their organizations

because they believe in the innate potential of people to

innovate and add value.

To unleash this type of potential:

1. Senior managers must give up control over many

kinds of decisions

In small organisations, managers do this informally.

2. Allow employees at lower levels of the organisationto act independently

control and change

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