Advance Topics in Change Management

Lecture 21: Information, Knowledge and Control in Organizations

Objectives

• To explore different aspects of knowledge and what they might mean for companies.

• To explore the ways in which information and knowledge are used in organizations to control (co-ordinate) the different activities that are carried out within them.

DEVELOPING ORGANISATIONAL KNOWLEDGE

An Example of Tacit Knowledge• Wind of change revives Harland and Wolff (a ship

builder)• David McVeigh, the sales manager, and Robert Cooper,

the chief executive, are credited with turning things round [at the firm since the 1990s].

• Many of the core competencies needed for shipbuilding are equally applicable to making infrastructure for wind farms and tidal and wave generators, Mr McVeigh says. But he also recognises that, with the age profile of the current workforce, the company faces the loss of key process skills as men retire.

• “There are a number of people who will be extremely difficult to replace – the stern engineers, for example. This is an expertise that has been perfected over decades,” he says.

• http://www.ft.com/cms/s/36b3b4c4-f5a7-11df-99d6-00144feab49a,dwp_uuid=fe95602e-e821-11db-b2c3-000b5df10621,print=yes.html

Questions

• Could the skills of the stern engineers be codified?

• How should the company ensure that the skills of those engineers are passed on if they cannot be codified?

MANAGERIAL NEEDS AND INFORMATION MEDIA

An Example of the Need for Rules and Regulations? – BP

• The important lesson [after the recent explsion on one of its rigs in the Gulf of Mexico] for the company is not that a few individuals made an error of judgment but that BP did not have the systems in place to prevent it. The inquiry reveals that it had no standard procedures for how a negative-pressure test should be conducted, how the results should be interpreted, or what should be done if the test was a failure.

• Without such guidelines, staff were left to make critical decisions on their own. With the well running 43 days behind schedule, and Transocean charging $533,000 a day for the rig, everyone involved would have been conscious of the rising cost. BP could have run another test to see if the well was secure but opted not to, saving in the short term about $118,000.

• http://www.ft.com/cms/s/0/5616a662-d191-11df-b3e1-00144feabdc0.html

Questions

• Does this proposal – i.e. that BP should have had more routines in place in the form of regulations – overlook the uncertainty associated with drilling for oil in such deep waters?

• If so, should different proposals be made?

Unilever’s CEO Responsibilities

• Strategy and Managing the Corporate Portfolio• Proposing, following consultation with the

Chairman, the Corporate Strategy for the shaping of the portfolio and strategy for the Group and priorities in corporate resource allocation.

• Proposing the Corporate Financial Plan.• Implementing and monitoring strategies and

Annual Plans, agreeing geographical and product markets for Category activities and places of operation and ensuring that business plans and strategies are aligned with corporate objectives and priorities agreed with the Board.

• http://www.unilever.com/images/ir20100428TheGovernanceofUnilever200510tcm13216301.pdf

Information to Control and Co-ordinate Activities within Firms

Formal Management Control Systems

System Content

Budget Financial data

Statistical Reports Non-financial data

Performance appraisal Evaluation on basis of goals

Standard operating procedures

Rules, regulations and policies

Organisational Control Strategies

Type of Control

Output/ Market-based Bureaucratic Normative Personal and Direct

Characteristics of the Control System

Behaviour Control Low High Unclear High

Formalisation High High Low Low

Subordinate Involvement Limited Low High Low

Scope and variety of Information

Low Medium High High

Requirements (Features of the Organization/Task)

Standard outputs Yes No No No

External benchmark of performance (e.g. price)

Yes No No No

Process knowledge No Yes No Yes

Employee commitment No No Yes No

Stable environment No Yes No No

What Ernst and Young Looks for in Its Employees• What we’re looking for• People who excel

We look for high performers, who consistently deliver quality work while continually looking for ways to improve.

• People with integrityWe look for people with a clear sense of personal and professional accountability, who build relationships based on doing the right thing.

• People who are good at working in teamsWe seek individuals who are good at listening, learning, sharing, developing and collaborating — helping people from different backgrounds, perspectives and experiences to perform at their best.

• People with the courage to leadWe want people who inspire and motivate others, and provide clear direction and encouragement in times of both prosperity and challenge.

• People with energy, enthusiasm and strength of characterWe look for people who demonstrate drive, vision and determination and are passionate about helping our clients achieve their potential.

• People with the right experienceWe want people who understand the challenges of working in a professional services environment and are focused on achieving and delivering the best for our clients.

Tesco - Corporate Purchasing I

• Gas. Tills. Lorries. Carrier Bags. If we need to buy goods and services which we don't re-sell to customers, Corporate Purchasing is where it happens. And for a business our size - that's quite some shopping list.

• Even this part of our business is focussed purely on customers. That's because we use a system to track down every penny we've saved, allowing us to re-invest this money back into product quality and price cuts.

• Or to put it another way, our role is to help Tesco get cheaper - by spending around £2.8 billion every year.

Tesco - Corporate Purchasing II• Who we look for• As a buyer, you'll help to develop and manage the supply of

whatever area of our business you'll be working in. More than that, you'll make sure we deliver excellent customer service by building relationships at all levels.

• That means working closely with other departments, developing product ranges and maintain a sustainable supply base - It's obviously important we meet financial targets as well as our customers' expectations.

• You'll also develop supplier strategies and objectives, setting specific targets and boosting our performance through the buying plan.

• What you'll need• You'll need to be a good negotiator, customer focussed and

possess strong communication skills. On top of all that, you'll need to be adept at supplier management, with a solid grasp of how to analyse management information.

• Of course, purchasing experience would be great, but we're more interested in your influencing and business skills as well as your desire to succeed in a business that's constantly moving forwards.

Mortgage Advisor• Salary: • Basic to £20k, OTE (‘on-target earnings’ – ie what you might expect to get if you

are very good!) £30-£35k

• A major mortgage brokerage dealing with the new build sector currently seeks an experienced Mortgage Advisor to provide mortgage advice to their clients. 

• Role Profile• Develop and build relationships with new and existing clients• Field based role.• Working to set targets

• Skills Required• 2 years estate agency based or new homes • Confident, assertive with strong client management skills

• An excellent package is on offer including:• Basic to £20k (depending on experience)• OTE £40k (uncapped)

Questions

• What forms of control are Ernst and Young likely to use?

• What forms of control are likely to be used in the Corporate Purchasing division of Tesco.

• What forms of control are likely to be used by the mortgage company?

• Why might these forms of control be appropriate in these cases?

Organisational Control Strategies

Type of Control

Output/ Market-based Bureaucratic Normative Personal and Direct

Characteristics of the Control System

Behaviour Control Low High Unclear High

Formalisation High High Low Low

Subordinate Involvement Limited Low High Low

Scope and variety of Information

Low Medium High High

Requirements (Features of the Organization/Task)

Standard outputs Yes No No No

External benchmark of performance (e.g. price)

Yes No No No

Process knowledge No Yes No Yes

Employee commitment No No Yes No

Stable environment No Yes No No

Conclusions

• The different forms that knowledge can take pose different challenges for managers within organizations.

• Work activities can be controlled (co-ordinated) in different ways. The most appropriate way or ways of controlling those activities will depend upon the organization’s objectives.