Lecture 01.12.12

7/30/2019 Lecture 01.12.12

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Lecture – 6, 7 (10.11.12, 01.12.2012)

Open System and Contingency Management Theories,

Discussion on Planning & Organizing

Chandrasen KumarM.Sc. (DU), MPA (LKYSPP, Singapore)

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Today’s overview

1) Minor Exams: Discussion on nature of paper

2) More about Open System Theory of Management

3) More about Contingency Theory of Management

4) Planning and Organising: Basic discussion today

and details shall continue

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Open System Theory

This theory is different from the rest we havediscussed earlier

It says – there is no ‗one best way‘ to run the

organization or limited number of immutable

principles uniformly applicable in all situations Emphasizes situational analysis:

Identification and

Analysis

of multiple variables affecting and determiningorganizational behaviour and effectiveness

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Open System Theory

A system is a set of interrelated units The whole is greater than the sum of all units –

example?

Traditional theories viewed organizations as closed

systems:It regarded ―the enterprise as sufficiently independent to allow

most of its problems to be analyzed with reference to its internal

structure and without reference to its external environment‖

Whereas OST views organisations as: Entities existing in dynamic and interdependent

relationship with environment receiving resources and

transforming into outputs and transmitting them to

environment, reactions are then fed-back to the system

as input, and cycle is maintained

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Open System Theory

Survival is the primary goal and in order to do that Organizations must acquire and develop –Ve entropy

because closed systems experience chaos, eg. Wearingout of parts, breakdown etc.

Open systems have differentiation and elaboration of

roles through specialization and equifianlity Open systems amy achieve purposes/goals through

diverse sets of inputs and different configuration of system componenets

Environment emerges as crucial variable Managing requires constant monitoring of

environment to overcome complacency andobsoletness

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Open System Theory

Thus OST: Provides a framework analyzing and understanding an

organization and required management system/practices

Does not negate other theories we have studied

Merely encourages to recognize ―all organizations aresame but they are all different‖

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Contingency Theory

This theory is also different from the rest we havediscussed earlier and

Provides another framework analyzing and understanding

an organization and required management

system/practices

Does not negate other theories we have studied

Emphasizes the differences among organizations and

seeks to identify variables – contingencies affecting

Organizational structure

Performance and

Effectiveness

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Contingency Theory

Environment affects organizational behavior – JamesThomson identified stability and homogeneity are

crucial contingencies for structure

Organizations adapt to unstable heterogeneous

environment through Decentralization

Increase in monitoring units and

Complex divisional structure

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Contingency Theory

Different contingencies have different impact Laurence and Lorsch – Stability impacts differentiation,

formalization and centralization

Organizational technology – Basic work flow, process and

methods

Fred Fiedler – Leadership styles: Different situations with

different leders would give different outputs

Thus Contingency Theory

―Substituted ―it all depends for ―One best way‖

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Planning – Learning overview

How do managers plan?

What types of plans do managers use?

What are the useful planning tools and techniques?

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1. How do managers plan?

Planning The process of setting objectives and determining how

to best accomplish them.

Objectives

Identify the specific results or desired outcomes thatone intends to achieve.

Plan

A statement of action steps to be taken in order to

accomplish the objectives.

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Steps in the planning process: Define your objectives.

Determine where you stand vis-à-vis objectives.

Develop premises regarding future conditions. Analyze and choose among action alternatives.

Implement the plan and evaluate results.

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The roles of planning and controlling in the

management process.

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Benefits of planning: Improves focus and flexibility.

Improves action orientation.

Improves coordination. Improves time management.

Improves control.

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A sample means-ends chain for total quality

management.

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2. Types of plans do managers use

Short-range and long-range plans Short-range plans = 1 year or less

Intermediate-range plans = 1 to 2 years

Long-range plans = 3 or more years

People vary in their capability to deal effectively withdifferent time horizons.

Higher management levels focus on longer timehorizons.

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Strategic and operational plans Strategic plans — set broad, comprehensive, and

longer-term action directions for the entireorganization.

Operational plans — define what needs to be donein specific areas to implement strategic plans. Production plans

Financial plans

Facilities plans Marketing plans

Human resource plans

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Policies and procedures Standing plans

Policies and procedures that are designed for repeated use.

Policy

Broad guidelines for making decisions and taking action in

specific circumstances. Rules or procedures

Plans that describe exactly what actions are to be taken inspecific situations.

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Budgets and project schedules Single-use plans

Only used once to meet the needs and objectives of a well-defined situation in a timely manner.

Budgets

Single-use plans that commit resources to activities, projects, or programs.

Fixed, flexible, and zero-based budgets.

Projects

One-time activities that have clear beginning and end points.

Project management and project schedules.

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3. What are the useful planning tools and

techniques?

Forecasting Making assumptions about what will happen in the

future.

Qualitative forecasting uses expert opinions.

Quantitative forecasting uses mathematical and

statistical analysis.

All forecasts rely on human judgment.

Planning involves deciding on how to deal with the

implications of a forecast.

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techniques?

Contingency planning

Identifying alternative courses of action that can be

implemented to meet the needs of changingcircumstances.

Contingency plans anticipate changing conditions.

Contingency plans contain trigger points.

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techniques?

Scenario planning A long-term version of contingency planning.

Identifying alternative future scenarios.

Plans made for each future scenario. Increases organization‘s flexibility and preparation for

future shocks.

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techniques?

Benchmarking Use of external comparisons to better evaluate current

performance and identify possible actions for the future.

Adopting best practices of other organizations thatachieve superior performance.

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techniques?

Use of staff planners

Coordinating the planning function for the total

organization or one of its major components.

Possible communication gaps between staff planners and

line management.

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techniques?

Participation and involvement

Participatory planning requires that the planning

process include people who will be affected by theplans and/or will help implement them.

Benefits of participation and involvement:

Promotes creativity in planning.

Increases available information.

Fosters understanding, acceptance, and commitment to the

final plan.

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How participation and involvement help

build commitments to plans.

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4. What is the control process?

Controlling The process of measuring performance and taking

action to ensure desired results.

Has a positive and necessary role in the management

process.

Ensures that the right things happen, in the right way,

at the right time.

Organizational learning and after-action review.

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Steps in the control process: Step 1 — establish objectives and standards.

Step 2 — measure actual performance.

Step 3 — compare results with objectives and standards.

Step 4 — take corrective action as needed.

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Four steps in the control process.

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Step 1 — establishing objectives and standards Output standards

Measure performance results in terms of quantity, quality, cost,

or time.

Input standards Measure effort in terms of amount of work expended in task

performance.

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Step 2 — measuring actual performance

Goal is accurate measurement of actual performance

results and/or performance efforts.

Must identify significant differences between actual

results and original plan.

Effective control requires measurement.

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Step 3 — comparing results with objectives and

standards

Need for action reflects the difference between

desired performance and actual performance

Comparison methods:

Historical comparison

Relative comparison

Engineering comparison

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Step 4 — taking corrective action

Taking action when a discrepancy exists between desired

and actual performance.

Management by exception

Giving attention to situations showing the greatest need for

action.

Types of exceptions

Problem situation

Opportunity situation

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Feedforward controls …

Employed before a work activity begins.

Ensures that:

Objectives are clear.

Proper directions are established.

Right resources are available.

Focuses on quality of resources.

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Concurrent controls

…

Focus on what happens during work process.

Monitor ongoing operations to make sure they are being

done according to plan.

Can reduce waste in unacceptable finished products or

services.

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Feedback controls … Take place after work is completed.

Focus on quality of end results.

Provide useful information for improving future operations.

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The role of feed-forward, concurrent, and

feedback controls in organizations.

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Internal and external control Internal control

Allows motivated individuals and groups to exercise self-

discipline in fulfilling job expectations.

External control

Occurs through personal supervision and the use of formal

administrative systems.

5 Wh h i i l

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5. What are the common organizational

controls?

Management by Objectives (MBO) A structured process of regular communication.

Supervisor/team leader and workers jointly set

performance objectives.

Supervisor/team leader and workers jointly review results.

M b bj i i d

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Management by objectives as an integrated

planning and control framework.

h h l

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MBO involves a formal agreement specifying … Workers‘ performance objectives for a specific time

period.

Plans through which performance objectives will be

accomplished.

Standards for measuring accomplishment of

performance objectives .

Procedures for reviewing performance results.

5. What are the common organizationalcontrols?

5 Wh t th i ti l

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The MBO process: Supervisor and workers jointly set objectives, establish

standards, and choose actions.

Workers act individually to perform tasks; supervisors actindividually to provide necessary support.

Supervisor and workers jointly review results, discussimplications, and renew the MBO cycle.


controls?

5 Wh t th i ti l

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Types of MBO performance objectives

Improvement

Personal development

Maintenance

Criteria for effective performance objectives Specific

Time defined

Challenging

Measurable


controls?

5 Wh t th i ti l

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Pitfalls to avoid in using MBO Tying MBO to pay.

Focusing too much attention on easily quantifiable

objectives.

Requiring excessive paperwork.

Having managers tell workers their objectives.


controls?

5 Wh t th i ti l

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Advantages of MBO

Focuses workers on most important tasks and objectives.

Focuses supervisor‘s efforts on important areas of

support.

Contributes to relationship building.

Gives workers a structured opportunity to participate in

decision making.


controls?

5 Wh t th i ti l

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Employee discipline systems

Discipline is the act of influencing behavior through

reprimand.

Discipline that is applied fairly, consistently, and

systematically provides useful control.


controls?

5 Wh t th i ti l

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To be effective, reprimands should …

Be immediate.

Be directed toward actions, not personality.

Be consistently applied.

Be informative. Occur in a supportive setting.

Support realistic rules.


controls?

5 What are the common organizational

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Employee discipline systems Progressive discipline ties reprimands to the severity

and frequency of the employee‘s infractions.

Progressive discipline seeks to achieve compliance with

the least extreme reprimand possible.


controls?


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Important financial aspects of organizationalperformance … Liquidity

The ability to generate cash to pay bills.

Leverage The ability to earn more in returns than the cost of debt.

Asset management The ability to use resources efficiently and operate at minimum

cost.

Profitability The ability to earn revenues greater than costs.


controls?


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Break-even analysis …

Determination of the point at which sales revenues are

sufficient to cover costs.

Break-Even Point = Fixed Costs / (Price – Variable Costs)

Used in evaluating:

New products

New program initiatives


controls?

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Graphical approach to break-even analysis.


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Purchasing control … A productivity tool

Trends in purchasing control:

Leveraging buying power

Committing to a small number of suppliers

Working together in supplier-purchaser partnerships


controls?


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Inventory control

Goal is to ensure that inventory is just the right size to

meet performance needs, thus minimizing the cost.

Methods of inventory control:

Economic order quantity

Just-in-time scheduling


controls?


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Statistical quality control

Quality control involves checking processes, materials,

products, and services to ensure that they meet high

standards.

Statistical quality control involves: Taking samples of work.

Measuring quality in the samples.

Determining the acceptability of results.


controls?

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THANKS

Documents

Lecture 01.12.12