Identifying Managerial Approaches In Implementing Controls Business Essay

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Most managers always encounter difficulties while applying management methods to control operations and govern their subordinates within their department. 'Many different schools of thought on management approaches, has their own proponents. Generally, an original proponent makes his or her name in that particular concept, and becomes an 'expert' of it. There is little incentive to integrate this one approach with others' (Arveson, 1998). Therefore, managers will usually tend to use their most familiar approach and a company's management culture tends to be dominated by one school of thought.

In today's context, managers are required to identify the possible causes to operational or subordinates' problems and handle it professionally. They can incorporate certain types of managerial control to minimize such disruptions in their work environment and to increase workplace productivity. 'The major approaches that managers use include bureaucratic control, clan (decentralized) control, market control, personal centralized control.' With these, a suitable control approach & system in placed, problems & conflicts will be minimised and will result in improvements that the workplace will become a more productive & fair environment to work in. In this paper, we seek to investigate the correlates and consequences of each style of control approach and to find out which of this/these plays the most positive effect.

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Problem Statement:

The effectiveness of management control exercised is inconsistent.

Research Objectives:

To identify the different managerial approaches of control.

To find out the pros and cons to control style adopted.

To understand the effectiveness of each control style.

To identify the human problems of controls

To conclude the control approach in service organizations and explore the possibility of a hybrid usage of the researched control approaches.

Introduction:

All organizations change over time. Some make these changes rapidly in revolutionary modes whereas others bring about change through evolutionary modes (Miller, 1992). These changes manifest in different organizational strategies, structures, or processes and have been referred to as transitions (Kimberly & Quinn, 1984).

Control is the task of ensuring that activities are providing the desired results. Management control is a systematic effort to set performance benchmarks with planning objectives, to design information feedback systems, to compare actual performance with these predetermined standards, to determine whether there are any deviations and to measure their significance, and to take any action required to assure that all corporate resources are being used in the most effective and efficient way possible in achieving corporate objectives. 'Management control involves setting a target, measuring performance, and taking corrective action, that lead to the attainment of organizational benefits.' (Arrow, 1974; Flamholtz et al, 1985) 'All control systems collect, store and transmit information on profits, sales or some other factor. And they are aimed at influencing employees' behaviour. A poor manager delegates nothing, and a mediocre manager delegates everything. Effective managers delegate all that they can to their subordinates, while at the same time establishing sufficient checkpoints so that they know how the work has been performed.' (Dessler, 1987).

Figure 1: Control as a Management Function (J Meredith, 2008)

The example of the process shown above has affirmed that Management Control in an organization plays an important role.

The Management Control function will be important in maintaining the business continuity, increase productivity in the production to achieve targeted profit set by organization, improve vision of the whole company to focus on coping with production innovation in inventory control to compete in the business world; to lead a productive team and improve effectiveness and efficiency; to drive the performance level to fulfill objectives of the organization. It also helps to reduce reluctance of managers to delegate authority and empower employees, thus protects the organisation and the physical workplace.

Management can implement controls before an activity commences, while the activity is going on, or after the activity has been completed. The three respective tools of control based on timing are feedforward, concurrent, and feedback.

Major control tool by timing

Feedforward control (preliminary or preventative control)

Regulation of inputs to ensure they meet standards, ex: McDonald in Russia: help farmers to grow high-quality potatoes and bakers to bake high quality bread.

Concurrent control

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Regulation of activities to ensure they conform to standards, ex: budgetary control, quality control

Feedback control (Ex: financial reports - financial control)

Regulation of completed product to ensure standards are met

Figure 2: Control types of timing: (J Meredith, 2008)

Literature Review:

Dr. Barnat, Ryszard (2005) suggests regardless of whether the organization focuses control on inputs, production, or outputs, another choice must be made between different approaches for control.

There are four control approaches that the mechanisms managers will use to implement controls: 'market control' (Robbins et al, 2003, p. 558), bureaucratic control, clan control and 'personal centralized control' (Mullins, 2002, p. 774).

Bureaucratic Control:

It is a managerial approach relying on regulation through rules, policies, supervision, budgets, schedules, reward systems and other administrative mechanisms aimed at ensuring employees exhibit appropriate behaviours and meet performance standards. It is 'do by the book' or process control (Barnat, 2005).

Pros: The nature of this control cause an organization's personnel to focus on those behaviors that management requires or desires. They provide employees with a set of day-to-day guidelines with which they can function. By observing the rules and procedures, people do what the system requires.

Cons: It will also result in rigid and inflexible behavior. Employees become accustomed to obeying the rules and doing nothing more. They often make the organization lethargic and stifle creativity and innovation.

Clan Control:

Clan control represents cultural values almost the opposite of bureaucratic control. Clan Control replies on values, beliefs, traditions, corporate culture, shared norms and informal relationships to regulate employee behaviours and facilitate reaching of organisational goals.

Pros: Organizations that use clan control require trust among their employees. Given minimal direction and standards, employees are assumed to perform well - indeed, they participate in setting standards and designing the control systems (Barnat, 2005).

Cons: The threat to clan control is change. This is often associated with geographical mobility, urbanization, growth, turnover, or specialization that undermines goal compatibility on which communal trust is founded. The instability of employment, which upsets the long socialization period, is a major enemy of clan control. Any tendency toward opportunism in the clan is destructive. (Moores, Mula, 2000)

Market Control

Market control uses external market mechanisms to establish standards in the system. It involves the use of price competition to evaluate output.

Pros: Managers compare profits and prices to determine the efficiency of their organization. In order to use market control, there must be a reasonable level of competition in the goods or service area and it must be possible to specify requirements clearly. (Barnat, 2005)

Cons: Market control is non appropriate in controlling functional departments, unless the price for services is set through competition and its representative of the true value of provided services.

Personal Centralised Control

This approach is usually practiced in small owner-managed organizations where decision-making and taking initiatives are centralized around a leadership figure. Centralized decisions will be made and executed. It emphasis direct supervision and personal leadership founded upon ownership, charisma, or technical expertise. It uses reward and punishment to reinforce conformity to personal authority (Mullins, 2002, p. 774).

The pros and cons deeply rely on the "super star" or leadership figure, whether this person is a good or bad influence.

Table 1: Social and Informational Prerequisites of Control (Moores, Mula, 2000)

Type of Control

Social Requirements

Informational

Requirements

Market

Norm of reciprocity

Prices

Bureaucracy

Norm of reciprocity

Rules

Legitimate authority

Clan

Norm of reciprocity

Traditions

Legitimate authority

Shared values, beliefs

Are there control combinations that best fit particular types of organizations/industries?

Long, (2003) suggests that the three controls are better than one. This notion of formal and informal

controls being combined echoes the early advice of Anthony (1952, p. 47), who suggested that

"management control is most effective when the formal and informal techniques are skillfully blended."

Ouchi (1979) is one subsequent researcher who reiterates this call for balance. He notes that the "problem of organization design is to discover that balance of socialization and measurement which most effectively permits a particular organization to achieve cooperation among its members" (Ouchi, 1979, p. 846). Ouchi (1979) developed a framework for organizational control based on market, bureaucratic, and clan controls. He contends that market relations are efficient when there is little ambiguity over performance, so the parties can tolerate relatively high levels of goal incongruence (Ouchi, 1980). Bureaucratic relations are efficient when both performance ambiguity and goal incongruence are moderately high. Ouchi (1979) introduces the concept of the clan as a means of exercising social control, where market and bureaucratic controls may not work or may be inappropriate. Table 1 outlines the informational requirements and social underpinnings necessary to operate each control type. Ouchi (1979) recognizes that pure forms of controls through markets, bureaucracies, or clans do not really exist. Organizations contain some features of each, and the control design problem requires an assessment of the social and informational characteristics of the organization or task to determine which of the forms of control ought to be emphasized.

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Research Framework:

Budgets put Supervisors under Pressure

Different Managerial Approaches for Control

Bureaucratic

Clan

Market

Personal Centralised

Hybrid

Controls Result in Narrow Viewpoints

Most Effective Managerial Approach of Control for Organisation

Short-Run Factors are Overemphasized

Easily Measure Factors are Overemphasized

Some Controls Results in Politicking

Specific human problems caused by control from 5 potential sources.

Methods and Research Design:

Conduct a literature review on employees' different types of perceptions and approaches on managing, handling and ultimately solving issues in the workplace environment.

Control is being exercised in workplace environment because supervisors, managers etc, will frequently expect their subordinates to exhibit some hostile or aggressive behavior when participating discussions or involved in work issues. Different types of managerial control styles are applied for things to work out on common ground. If the wrong control system is adopted, it will negatively influence the workplace behavior which will evolve into an uncooperative and non assertive environment. Employees will avoid in collaborating with the management. Employees may eventually lose their work commitments for the organisation when they lose confidence in their management's styles and decisions in handling workplace processes.

Conduct primary research in 4 education service-oriented organisations in order to gain understanding of the employees' viewpoint from the middle management to the senior management staffs, on how their workplace environment and policies. The service industry is chosen for this research as this is where companies are always on the front line and lots of management control need to be executed due to the direct peer competition and handling clients.

In these organisations, different conflicts arise due to different control styles. As a result, there are many factors that allow employees to build up and intensify situations that lead to impairment and dysfunctional of the workplace. When action is undertaken to control the situation or process, the impact on these organisation can be seen in a negative or positive manner. This is either affecting a higher staff turnover rate in the organisation or leading to an organisation where the employees develop effective communication and solve differences in the common working ground. Problems run daily in workplace and the effectiveness of management control used are important. This will impact either positively or negatively to the standards of professional service rendered to customers.

An online open-ended questionnaire will be designed with questions which list out the various factors that lead to conflict issues and the ideal strategy to resolve conflict. The questionnaire will be distributed to the proposed sample size of employees from the different hierarchical levels across all 4 service organisation population.

An interview questionnaire was developed to find out on the types of controls the management of the company administered during different scenarios and the results obtained. I had made an attempt to contact each company's CEO or business manager by phone to secure his or her cooperation in accepting my interview. Response rates are significantly better when verbal commitment is obtained prior to sending a interview instrument. (O'Keefe & Homer, 1987). One-to-one interviews are carried out on the middle and senior management. Questions are focused on the various control styles they applied in handling their subordinates and the processes in the work environment, the observations from each control style, the impact on the organisation, as well as how it affects the workplace environment. Each type of control handling styles will lead to a hypothesis or a proposed explanation for an observable phenomenon. For example, managers established strict ground rules for employees to abide, or when one company inculcate strong beliefs and visions, together all staff behave like a big family, and the organisation will not suffer a high staff turnover rate because of workplace control approaches.

Figure 3: Schedule (Gantt chart): (Saunders et al, 2009, p45)

Sampling:

From the definition of population of the 4 education service organisation, a census is not feasible for this study. A sample from the targeted population is needed to define. Probability sampling is used as the questionnaire is adopted to generate vital information where the population group is more than 50 (Saunders et al, 2009, p.212).

Four stages of probability sampling:

Identify sampling frame based on research objectives.

Decide on suitable sample size.

Select sampling technique and sample.

Ensure sample is able to represent the population.

(Saunders et al, 2009, p.214)

In this study, an online questionnaire is to be disseminated to 4 local service companies. The employees are selected based on:

Middle management (Examples: Operational Managers, Human Resource Managers etc.)

Senior management (Examples: Managing Directors, Executive Directors etc.)

With the considerations on the minimum sample size and estimated response rate, an actual sample size of 667 employees is decided. This figure is derived from the calculation as below (Saunders et al, 2009, p.221).

na = n x 100 / re%

= 200 x 100 / 30

= 20000 / 30

= 667

Explanation for the above formula:

na = the actual sample size required.

n = the minimum sample size.

re = the estimated response rate expressed as a percentage.

200= adjusted minimum sample size.

This study will adopt stratified random sampling method. The population will be divided into subgroups and random samples were then drawn from these individual subgroups. For this, the sampling frame will be divided into the subgroups. The stratification variables used for the population division into the subgroups are to associate with particular characteristic (Lind et al, 2009, p.262). Therefore, with this division of population into series of relevant subgroups (strata), the sample will be more representative (Saunders et al, 2009, p.228).

Analysis Methods:

Open-ended online questionnaire and one-to-one interview used in this study are the few examples of qualitative data. Qualitative data provide rich descriptions and explanations (Miles & Huberman, 1994) to uncover and describe the reality of the individual operators. Such data are not standardised and complex. Therefore, the data are needed to be summarized, categorized and restructured as a narrative for a reliable interpretation. Qualitative data analysis aids to develop theory from the data collected. The analysis will be done in an inductive approach (Saunders et al, 2009, p480-p482).

Figure 4 below shows 'The process of induction' (Mcmurray et al, 2004, p.70).

The ethnographic approach enables informants to share how their situations are structured and the motivations and interests through which the informants interpret their situations (Burns, 1997).

Grounded theory analytical procedure which states the 3 coding methods is selected for the analysis of this study.

Opening coding

Axial coding

Selective coding

The aim of open coding is to develop categories from the data collected. Opening coding is a process of breaking down, examination, comparing, conceptualising and categorising data. Axial coding is the process of establishing relationships between categories as well as to the subsequent sub-categories. This approach aids in the phenomenon definition. A hypothesis test will be used to test on the relationships with the data collected. Lastly, selective coding involves core category selection among the principal categories which will relate to other categories. In this process, it will validate the relationships of the principal categories from the grounded approach to develop an explanatory theory (Saunders et al, 2009, p509-p511). Microsoft Office Excel software is used in collating the results.

Results of Analysis

The results of the analysis may be summarized as follows.

Managers within market control systems rely less on formal and informal organizational controls and more on performance-based contracts to ensure that the work of employees aligns with organizational goals. Managers within bureaucratic control systems apply primarily formal control mechanisms such as

rules and regulations through task specialization and hierarchies. Managers within clan control systems direct workers using informal control mechanisms such as common values, traditions, and beliefs or religion. A manager, who only has experience in one approach, will definitely encounter difficulties as there are too many deviations within organizations. For example, if a manager only exercises bureaucratic control, may have issues "controlling" his subordinates in the long run.

Exercising a combination of control systems is possible and has been known during the interviews with the education service organizations. Unfortunately, there are no actual formulas of managerial control for specific organizations or tasks. It is usually customized according to their company's direction or employees' attitude, abilities and/or job nature.

Conclusion:

The focus of this paper is to determine which managerial approaches best implement controls within education service organisations. Results from the data collected have shown support for the general proposition of the dominance of a particular control strategy or a combination. There is also some evidence to suggest that the relative importance of market, bureaucratic, and clan controls are ranked in accordance with propositions made. Existing control systems and new control systems should be assessed to ensure that they have the right qualities. They also need to consider how the control systems could be misused, manipulated or be negatively viewed. A manager can be much more effective if he or she is able to select a management approach that is most appropriate to the desired need or goal. This adaptability may prove very useful in the changing government management environment. There is no good reason why managers must follow the latest school of management thought. On the other hand, just because an idea is new does not mean that it should be dismissed. There are reasons why one particular approach is better than another depending on the strategic goal or need.

I have come across some interesting information such as the Balanced Scorecard while searching for research materials and reference. Unfortunately, I do not have the enough time to further explore and to research on it. It appears to be a very appropriate technique for meeting the urgent management needs of many Government agencies, such as their need to comply with the requirements. This concept was developed by Kaplan and Norton (1992) at Harvard Business School. It is a framework that translates an organisation's strategy into a coherent set of initiatives and performance measures.

Figure 5: Adapted from The Balanced Scorecardby Kaplan &Norton

Figure 6: A Balanced Scorecard Example(J Meredith, 2008)

However, this need should not blind managers to other, perhaps even more pressing goals of their organization that may require a different approach.

Limitations of Study

Time is a deciding factor. As this study involves in a lot of human relationships, work relationships, certain research need time to generate better concrete results. A major limitation of this analysis is the reliability and validity of the operational measures used for the control constructs. Some individual measures did not produce results that are consistent with my propositions. Additionally, I did not manage to confirm that the groups of measures that used coalesce as factors that represent composite dimensions of the four forms of control. Reliance was placed on face validity; further validity tests are necessary to test the construct and content validity of the measures.

Directions for Future Research

Future research on managers' attempts to balance control in organizations will revolve around three general issues. First, researchers should examine the composition of various combinations of trust-building and task control activities. Second, researchers need to develop a much clearer understanding of what leads managers to promote various forms of control approach both jointly and independently. Third, researchers need to focus more effort on understanding the relationships between various types of task controls activities. Future research should begin by examining how managers conceptualize task controls.

Future investigations are needed on how managers use combinations of these activities to accomplish various types of goals and respond to a range of contextual factors. To date, our analysis leaves unanswered the question asked earlier: Are there control combinations that best fit particular types of transitions? Answering this question requires further research on the combinations of management controls that other businesses or industries adopt to achieve successful transitions. Researchers would require to follow up on the research and testing of the balance scorecard for organizations over a period of time to justify its validity.

Through this study, I will broaden my understanding regarding the independent roles of control in the workplace as well as the effects produced when they combined and integrated by managers.