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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