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An investigation into organizational commitment in the investment decision-making process: escalation, de-escalation and strategic control This item was submitted to Loughborough University's Institutional Repository by the/an author.

Additional Information:

•

A Doctoral Thesis.

Submitted in partial fulfillment of the requirements

for the award of Doctor of Philosophy of Loughborough University.

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14-30

On Strategic Control Of Investment

Chapter 14

influence in likely future to their assess order evaluated on outcomes, and regularly gathered and (d) feedforward control demands that control actions focus on preventing up-to-come errors rather than correcting past errors. In comparison, however, although feedback control (Figure 14-5) has been believed (e.g. Ashby, 1956) to be much less advantageous than the feedforward control (Figure 14-6), the best both feedback feedforward is to to use and control perhaps control as cybernetic approach few in because both their organizations can achieve control situation any purposes complements for any length of time if only one type of control is in use.'a

effectively and efficiently

to control Thesystematicapproaches 14.3.5.2 Systematic theories of control pinpoint the view that human and machine behaviour can be interrelationship by the of parts rather than the nature of the parts better explained studying importance the thus of emergent properties which are characteristic of stresses themselves, and have being which may not significant or non-forgettable studied and the level of complexity Seemingly, there two types levels the lower are of systematic control: analysis. of meaning at involves decision hard relatively clear objectives and to which processes first refers systems involves the to second refers soft systems of performance; which with quantitative measures irrational ill-defined decision best or processes and with at objectives vague and ambiguous 35 1981). (Checkland, qualitative measures of performance (e. 1972; Buckley, 1968; Boulding, Beer, 1956) derived theories g. are at a Most control systems 36 in be hierarchy, the attempts are level low a may arranged and which analyses of relatively higher level of analyses with probable adverse to them a much transfer of to each then made in terms of applicability. For example, Beer (1972) proposes that the human brain consequences for identifies five levels organizational control, a model and as serve of can system and nervous from the transformation processes required by the 14-7, in Figure depicted ranging control as internal dynamic to the the stability, of maintenance maintenance of whole system and development the to self-conscious the and of world, goals. external with equilibrium in hierarchies to Systematic organizations: 14-7: control approach of systematic controls Figure (Source: Adapted from Beer, 1972) Level five: organizationwide self-consciousdeterminationof goals via foresights Level four: organizationwide maintenanceof damic

equilibrium with the externalworld

Level three: autonomicmaintenanceof the stability of the internal environment of the organization ILevel

demanded divisions by between to the system whole prevent uncontrolled oscillation processes transformation two:

(e. divisional management g. monitoring achievement,endorsing routine, and determining actions)" of Lever one: organization

by to control provides a which real-world control means approaches In general, systems it does but basis for the study of control dealt theoretical be provide not any with; can problems that It the thinking evident to application the of systems seems study of control in organizations. 14-31

On Strategic Control Of Investment

Chapter 14

in organizations raises more questions than it answers; but it can provide a useful countervailing force in developing more comprehensive theories of control. Figure 14-8 is depicted to describe systematic control, the process of which can be regarded as i. development insightful the of rich and ways of viewing real-world e. one of appreciation involves deliberate (perhaps It 1965). (Vickers, conducting a non-systematic) analysis situations it definition (i. then the the complexity of systems; aims at to a rich root e. a uncover aiming fundamental statement of the purpose from first principles) of the basic nature of the system finally it to the be and constructs a conceptual model of to problem situation; thought relevant help the can achieve the root definition. minimum necessary system which the system using

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increasing influence found disciplines have ideas their to the on other related Moreover, systems ideological, in technical as social, such political, economic, and organizations study of control have development in theory thus to the and contributed much organization systems movement (old like and new) social concepts control, such self control, of political / the refinement and or and economic control. control, insidious emergent control, control,

to control Organizational approaches 14.3.5.3 focus behavioural by locating the to on side of control control control Organizational approaches 1995), behavioural information (Berry the et'al, and emphasize in the context of social systems be that the through control can accomplished premise performance under control of aspects in being Control, 1971). the social perspectives and patterns of as reflected (Dalton, evaluation 1974; is Merchant, 1985), (Hopwood, thus a property of the relationship interactions social 37 Organizational the to controlled. approaches potentially control stress and between controllers divergence behavioural the the of preferences among members of an minimizing the role of in that the achievement of the organizational members cooperate assumption under organization internalize (e. in the that members and understand organizational g. goals goals organizational

14-32

Chapter 14

On Strategic Control Of Investment

Ouchi, 1979; Hopwood, 1974). It has been argued among organization theorists (e.g. Hopwood, 1974; Thompson, 1967) that there exists classifiable controls of fundamental importance to any organizational context, and they can be generally classified into three types (Hopwood, 1974): administrative controls, social controls, and self controls (Figure 14-9). '$ Figure 14-9: Organizational

approaches to control: an exemplary interaction

between controls

(Source: Adapted from Hopwood, 1974)

control

Behaviours Controls in , organization Social

s,

s-''

controls

-Administrativ controls

Apparently, as can be seen in Figure 14-9, the interaction between administrative controls, has bearing in the self-controls a and significant on control situation controls, an social become in bear the that controls socially they constructed administrative sense organization: beliefs into design their and values encoded and mode of operation; the various assumptions, impact of administrative controls upon the members - in relation to whose behaviour they are becomes further individuals' behaviour be to affected since control may greatly supposed influenced by the various social pressures which occur in the organization; administrative and implemented through the ultimately agency of self-controlled get controls social (Johnson and Gill, 1993). The role of administrative

individuals

controls

controls refer to mechanisms, techniques and processes which are consciously (presumably by particular coalitions of members such as powerful or designed and purposefully behaviours individuals, the to try to control of other interested parties) groups and organizations Administrative

has been (Mintzberg, It 1993). 1979) that administrative control can Gill, argued (Johnson and (Figure 14-10): (a) least three mechanisms major. involve at rules and procedures which are 1964), (Weber,, (b) (e. budgets, feedback, work processes output control to standardize g. aimed is MBO) aimed to standardize work output so as to ensure control while which feedforward, and judgment tasks to of accomplishment members' the and discretion (Ouchi, leaving everyday (Anthony, 1977) by internalized (c) / objectives means of pre-emptive 1979), and recruitment 1988) or restructuring of attitudes and beliefs (Wood, 1986) which are (Armstrong, selection internalize beliefs the that subordinates values, to the and ensure attitudes supportive of aimed by hierarchical superiors (Ouchi, 1979).39In general, pre-set and objectives goals organization's distinguish from themselves forms control in terms of the administrative of one another varying intend influence; members to in practice, however, organizational restrict which or task aspects 14-33

Chapter 14

On Strategic Control Of Investment

administrative attempts to control organizational members' behaviour at work may involve more than one type of administrative control. " Figure 14-10: Organizational approaches to control: forms of administrative controls CRul

s`& rocedures

Ädministrath', controls Internalized 'ý"öbjectives?

,., Output "ý° °"

control

The role of social controls Social controls essentially refer to the process through which compliance, obedience and behaviour to standards of are spontaneously rather than consciously predetermined conformity interpersonal (Huczynski through Buchanan, and group achieved processes and or purposively 1991). This suggests that - according to Mead's (1934) notion that humans experience indirectly, but directly, from the particular standpoints of other only not such, as themselves individual members of the same social group, or from the generalized standpoint of the social belong' in involve they informal to the the social which controls, main, whole a as group by induct each other into membership members of which an organization processes socialization the kinds through (or of reflections standpoints of particular cultures of people of particular important in the are, presumably, significant who or group) organizational members' reference 1974). 1976; Hopwood, Seemingly, Maanen, (van a reference group such as superiors in lives to feeling, thinking, a as source of or a role reference ways of plays perceiving, organizations help orientate others' conduct, although reference groups do can eventually and and evaluating transit those and which the norms values agree with of particular cultures necessarily not hierarchically superior coalitions of members (Turner, 1972). This implies that, by to adhered through establishing, valuing, and enjoying social relationships with other organizational " (hierarchical superiors or subordinates), peers, some members of an organization can members into accepting the particular norms and values dominant within that social become socialized

1980). (Ouchi, network `getting for job' the person right mean brief, controls or training and culture (Merchant, In social interactions from the 42 everyday mundane of organizational members; as a 1985); they emerge for they the beliefs backdrop are made up of shared action values, norms, and kind of which are by group members; they can not only affect the operation of any administrative to adhered direct influence by which administrative controls the but a exert they can on ways also controls In first however, in the place. practice, difficult social designed controls to can remain are from less forms obtrusive themselves of administrative controls in that social distinguish (i. insidious 4J administrative human controls e. controls), unobtrusive which affect and controls

14-34

Chapter 14

On Strategic Control Of Investment

behaviour and attitudes in ways (e.g. deceptive, elusive, and unresponsive) which do not involve the experience of being controlled or manipulated), can merge; besides, the motivations, expectations, and personal relationships of all the members of an organization can literally exert a significant effect on the outcome of the control processes. It has been argued (Pfeffer, 1997) that among those major mechanisms of social control are (Figure 14-11): (i) rewards, incentives, sanctions, and surveillance, (ii) commitment and leadership. (iv) Consider (iii) incentives, culture, and organizational rewards, socialization, sanction and surveillance, research evidence seems persuasive that rewards (e.g. pay) have important symbolic and legitimating aspects (Wood, 1996), although the efficacy of financial incentives still remains substantially more equivocal (Besser, 1995); that organizational face (punitive have to the the controlled regardless of symbolic, public a or nonsanctions 44 (Gavin 1995; O'Reilly Weitz, 1980); the strategies et al, control and and punitive) nature of that the rapid development of electronic monitoring capacity has undoubtedly enhanced the 45 (Aiello in behaviour Svec, 1993). and monitoring significance of surveillance Figure 14-11: Organizational

approaches to control: mechanisms of social control

As regards commitment and socialization, research evidence seems more persuasive that control in socialization and commitment processes remain quite effective: commitment premised (Bem, 1972) dissonance (Festinger, 1957) from and of self-perception under a process resulting 46 (Salancik, 1977), can function as a form the conditions of choice, publicness and explicitness does thus internal rely on continuing not really surveillance and which reward, control, of behaviour (Simmon, more effective means well as of coordinating as efficient more a remaining 1991) despite the worry that commitment may also be a means of resistance to change or an irrational perseverance in behaviour (Staw, 1976,1977; Brockner, 1992);47and institutionalized for organizations as well as individuals in that the has effects positive obvious commitment less higher tactics suitable can with produce stress and coupled role socialization process when 48 Saks, 1996; Ashforth Maanen Schein, 1979). 1985; (Pascale, and job satisfaction van and "' Organizational cultures, though closely related to the idea of control through commitment and " also, exhibit distinct contribution to control in organizations; this is because socialization, distinctive the of cultures' offers advantages over external control management control through accomplished through rewards and sanction52,although empirical evidence suggests that the be (Kotter between Heskett, 1992). and culture performance can strong complex and relationship it has been leadership, to widely believed (e.g. Pfeffer, 1977; Calder, 1971) that. With respect 14-35

On Strategic Control Of Investment

Chapter 14

leadership effects are attributed, particularly in uncertain situations, to achieve a feeling of ` (e. Eccles Nohria, however, 1992) g. and evidence shows that control mastery or control; "' is believed become language (Peters, 1978). in to very effective premised managerial The role of self controls Self controls generally refer to controls which people exert over their own behaviour (Johnson inside from derived from the than 1993) Gill, rather are which controls outside entail and and the stricter in that it is the objective needs of the tasks rather than orders from hierarchical (Drucker, has 1954). It been from influences that control argued effect peers superiors or (Hopwood, 1974) that, for social and administrative controls to be effective, orders or influences be have behaviour to through the expressed actions and attitudes of organizational members' on in the administrative or social that the the embodied norms controlled; the controller and individuals' have be to controls as personal over attitudes and operate exerted controls to behaviour; and that the administrative and social controls to be exerted have to convey rewards controls desire. In derive from the individual essence, self and the members actually value (the behavioural to the prescribed norms regarding organization of an conformity of members this inputs, of any operations, and conformity of norms the outputs and processes aspects of) different forms forms three by itself three of self control underpin which possible manifests (Kelman, 1961): (i) compliance, (ii) identification, and (iii) internalization. behaviour (1961), to the Kelman conforming of adopted mode compliance refers According to by an individual who is motivated by a desire to gain a reward or avoid a punishment; identification refers to the conforming response to social influence brought about by a desire of individuals like influence be the to the who are exerting the individuals who are receiving the internal imperatives development the internalization to the of the of moral influence; and refers beliefs, in influence their they the perceptual world as adopt individuals who are receiving influence. individuals the the exerting who are norms, and values of in involvement the practice may witness of self control the of Arguably, processual nature initially from Figure individuals be 14-12, the forms may seen can different of self controls: as daily interactions due through demands then, to social of various and sanctions, `obey' external identification, leads develops to and ultimately and eventually kinds, emotional attachment dependent influencees' hugely inter internalization, the leads to on, all alia, identification influencees' be is demanded the can achieved, and motivations what and what on expectations the the towards the to conformity of norms such as rewards on norms themselves to commit offer. have) kinds don't demands have (or that individuals certain of may perceive For example, individuals (or or negative valency; may perceive positive politically) socially or economically for their trade-off the physiological, safety, social, ego-esteem or selfremains that control is depicted how demonstrate 14-13 Figure to expectations, and motivations needs. actualization influenced. by those jointly the are who performance obtained affect perceptions

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Chapter 14

On Strategic Control Of Investment

Figure

14-12: Organizational

to control:

approaches

the dynamics

of control

at work

Behavioural outcomes Expectationsi Identification

('ompliance

Internalization

controls

110 Motivations

Perceptions

SF

,

controls

Figure

14-13: Relationships

between

performance, motivations, expectations (Sources: Adapted from Porter and Lawler, 1968)

and perceptions

r imcteuce

Rewards (intrinsic and /or

(e.g. traits, ability, skills)

Satisfaction with performance

extrinsic) Job performance

Efforts

Fit

Demands

Perceived equality of rewards/punishments Perceived values of outcomes

Outcomes Punishments intrinsic and /or

Role perceptions

Perception of the probability that cltiirt expended lead to desired outcomes

extrinsic)

In brief, practical

control situations

in any organization

can only he understood

and explained

fully in terms of the interaction of administrative, social and self controls (please see Figure 14from involve, the systems vantage point, a variety of possible interrelationships they can 9), and Figures (please 14-10 & 14-11 ), various kinds of control types different of control see between operators

(e. g. people who design the control

space), changeable

sets of tasks, and varying

14-7). Figure (please see control spaces

to Economics control approaches 14.3.5.4 have involved interpretations: different historically, control in to control Economics approaches influenced by Smith's doctrine (1893) h. `invisible the of analyses, ºnd' of the the main stream focused on exchanges between individuals has through actin; equilibrating system, price hierarchy the the superiority of market over as a mode of' optimal markets and promoted the that consequence than general equilibrium remain with other controls resources of allocation in favour of disequilihrium, (Bator, 1957); 5 modern interpretations of control unnecessary hand' (1936) `invisible that the Keynes' by critique could send the wrong signals, have inspired has `economics limited (e. g. as a process' of which promoted the view perspective spawned (I. 1968); the more modern interpretations control eijonhufvud, on expectations) of rational control

emerge

from

the `new institutionalist'

economics,

14-37

which,

based on the beliefI that

Chapter 14

On Strategic Control Of Investment

production function is not technologically determined, emphasizes the contractual perspectives idea that controls other than general equilibrium theory remain necessary in the and promotes that the production function is imperfectly specified as the result of informational asymmetries, bounded rationality, opportunitism, small numbers, atmosphere and other lacunae of the (Spicer Ballew, 1983). However, it seems that economics approaches to and contractual world control prevailing in the micro level theoretical economics / accounting literature (e.g. Meyers Emery Finnerty, 1984; 1997; Croutchley Nicholas, and and Hansen, 1989) have mainly and focused on agency theories (Seal, 1993; 1995).56 Agency theories consider an organization as a nexus of contracts and a legal myth (Jensen and Meckling, 1976), " and argue that, with the traditional interest in contracting, organizations set for the optimal contract form for the ubiquitous control relationship in which some members of delegate (Ross, the to the 1973). Agency work others, principals, agents an organization, from (1932) Berle Mean's and recognition that separation of ownership stem theories originally difficulty to the corporations gives rise of controllers' pursuit of the best and control of modem interests of the owners beyond the minimum and legal requirements; modern agency theories are (1976) from Jensen Meckling's based and classic analysis on agency costs; and the primarily derived from theories the Jensen Meckling's (1976) are refinement agency of and modem more (1983). Fama Jensen (1980) Fama by and and analysis Theoretically speaking, agency theories boast two distinguishable streams (Eisenhardt, 1989): (i) (e. Fama, 1980; Jensen, 1984) its focus g. with approach on the special case of the positivist (ii) between the owners and enterprise appointed managers, and principal-agent relationships Raviv, 1978) intent Harris the (e. to with and achieve a general theory of agency g. approach between range of a wide relationships various principals and agents. covering relationships however, agency theories essentially deal with the problem of moral Practically speaking, information remains asymmetric (i. e. hidden information) or hazard which arises either when (i. e. hidden action), and this problem can remain unobservable actions the agent's when (Arrow, face 1985; Tiessen and Waterhouse, in the and ex uncertainty of ex ante post deteriorate have two control options (Eisenhardt, 1985) which directly the this, To tackle principals 1983). forms behaviour two contracts to of contract and outcome contract recognized contribute is 1983). Figure 14-14 depicted illustrate Waterhouse, to the role (of control) of (Tiessen and in providing measures and rewards such that members of organizations pursuing theories agency interests. the individual will also pursue collective self-interests their own

based the can either reward agents the on outcomes such as profitability Seemingly, principals in in the that despite agents an unfair way good rewarding outcomes can occur although risking despite information can occur outcomes good efforts, poor or and purchase about poor efforts behaviours then by those behaviours reward and or punish means of purchasing the agents' budgeting cost such as accounting measures, systems or additional surveillance mechanisms 58 layers of management.

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On Strategic Control Of Investment

Chapter 14

Figure 14-14: Economics approaches to control: the 3C control model of agency theories

C

Choose the least expansive alternative, implement and evaluate the chosen option When immediateaction is desirable I

2

3

B

(a) If the cost of behaviourcontrol is less than that of the outcomecontrol, consider behaviour contract (b) If the cost of outcomecontrol is less than that of the behaviour control, consider outcome contract (c) If the cost of outcomecontrol is analogousto that of the behaviour control, consider either or both When immediate action is not desirable (a) Reserveoptions by not immediately choosing any contract (b) Createoptions by choosingstrategiccontracts (c) Go back to observationsleading to new information When a large body of information turns out to be inconsistent with the current knowledge (a) Check everything including assumptions,theories,and evaluation methods (b) Conduct more researchto find out why and then searchfor new solutions (c) Adopt new ways of thinking and conduct new observationsor new experiments

Compare the data and the results (costs of behaviour control and of outcome control) carefully Performanceevaluationon both behavioursand outcomes (a) Gather standards (b) Select methods (c) Preparefor the measurements (d) Go back to standardgatheringif measurementsare incomparable (e) Conduct the comparisoncalculation if measurementsare comparable (f) (g)

A

Conduct new observations, or select new methods or standards if measurements are unsatisfactory Provide a report on the performance evaluation

Check performance by means of observations or experiments, and record the data & results Information asymmetry (a) (b) (c)

In the caseof complete information, considerbehaviour contract Hypothesisone: the more symmetric the information, the more optimal the behaviour contract. In the caseof incomplete information, Purchaseinformation on behaviour via surveillancemechanisms(e.g. PCA) i Rewardthe agentbasedon outcomes(e.g. profitability) ii

Outcome Uncertainty (a) (b) (c)

In the caseof outcome certainty, the choice between behaviour and outcome contract reduces to simply their comparativemeasurementcosts The hypothesis:the more uncertain the outcome, the more complex the choice between behaviour and outcomecontracts,and the more likely control is to be basedupon behaviours In the case of uncertainty, apply modern techniques to approximate the uncertainty (e.g. probability)

Risk averse (a) (b) (c)

In the caseof risk sharing, the choice betweenbehaviour and outcome contract reducesto simply their comparativemeasurementcosts The hypothesis: the more risk aversive, the more complex the choice between behaviour and outcome contract, and the more likely control is to be basedupon outcome In the caseof risk averse,consideroutcome contract to sharerisks among organizational members

between by two the options or contracts, perhaps, rests upon, as suggested The optional choice Waterhouse (1983), Tiessen between (1985) the trade-off the costs of and and Eisenhardt both behaviour and the costs of measuring outcomes and transferring risk to the agents, measuring in impact its the through plays in that a role choice of control strategy uncertainty bearing mind and information in that systems a play role maintaining behaviour control on risk sharing costs information behaviour remains the control to when about outcome agents' as an alternative incomplete. otherwise

Chapter 14

On Strategic Control Of Investment

14.3.5.5The anthropologicapproachesto control Anthropologic approaches to control have exclusively emphasised the importance of the cultures, ideologies, and values of both the controllers and the potentially controlled. "' Research evidence (e.g. Allaire and Firsirotu, 1984; Smircich, 1983) shows that control-relevant literatures on have diverse ideologies to and values, seem a nature: some perceive them as the cultures, influences, the them tools controller, some see of passively as constraining proactive and some devices. feelings them as spontaneous control view with mixed

Cultural controls control in the line of cultures has been centring on three promising in organizations: integration, differentiation, towards uniformity cultural and mechanisms 60 Meryerson, 1988). The use of cultural control as an integrating ambiguity (Martin and mechanism has been popularized by Peters and Waterman's (1982) assertion on cultures that The anthropologic

organizational culture remains a variable or contingency which can be manipulated in order to achieve organizational excellence; the thesis of this cultural approach lies in that the role of from is flow, to appropriate culture which control will promote naturally resulting management imposed bureaucratic than internal rather externally self-control from rules and regulations; 61 in this to the active approach operator control control consists of cultures and, seemingly, be imposed things been has which can as or encouraged by the controllers and conceived (which develop to their the controlled own culture or resist cultural control are potentially of the ability away). assumed simply is the the view that culture remains a cultural control of continuum end On the other extreme dynamic differentiation: maintains a culture and symbolic to element of which needs mechanism be determined but (Dyer, 1984; Martin, 1992); this cannot externally which of be taken account ineffective both inefficient in control as that cultures are more and cultural regards approach (Dyer, 1984); factor to change strategic only resist and, seemingly, the control a as likely to act factors things, entailing people, change and events. varying of consists operator is integral that ambiguity simply of accepts ambiguity the mechanism an and central Cultures as in which members of an organization agree on some viewpoints, part of, organizational reality ignorant indifferent (Martin to, of, or are others and and Meryerson, 1988); disagree about some, `organization control as playing mediating cultural a role such regards as this, approach 62 though not necessarily the operational (e.g. instruments of administrative development', for the controllers; and, seemingly, the control operator in this vein consists of change control) 63 only. for example, research on the organizational life-cycle development, Consider organization 1982) Kennedy, founding that, Deal the reveals cultural and control 1985; at stage may (Schein, `Ai like (a) to the things () b which elements controllers pay attention, powerful entail such (c) to crises, role modelling and coaching, (d) criteria for organizational controllers' reactions for (e) criteria recruitment, selection, promotion, and retirement (Schein, and rewards allocating 14-40

Chapter 14

On Strategic Control Of Investment

1985), and "that cultural control for organizations in mid-life might more often than less see flexible rather than `strong', monolithic cultures (sometimes, perhaps, to the extent that cultural control simply means cultural change). Ideological controls in the line of ideologies has been enriched by Brusson's (1985) notion control that actions are often promoted by ideologies - predetermined ideas about what is the appropriate way for individuals to proceed actions. This suggests that control in organizations Anthropologic

between weak and strong consideration: strong ideologies indicates greater ideologies less likely the weak should proceed, and actions make way actions to on agreement " This suggests that ideological control becomes plausible in that the alignment of the proceed. differentiates

facilitate the that to potentially of controlled can easier control controllers' ideological for the management, although control may not necessarily be mechanisms required ideologically how insight to operationalize of a control system. to an provide able ideology

Clan controls line in :Anthropologic control the of values can be richly reflected by the notion of `clan control' individual the to 1980) social control exerted on refers which (Ouchi, members of an because they are part of a group and identify with the group and the common organization Within Ouchi (1980), to organization, an according there the three group. are of values bureaucracies (Table 14-5). namely, markets, mechanisms, and control clans organizational through the price mechanisms under umbrella of a shared norm of achieved are Market controls bureaucracy in trust; controls are achieved through formal rules under the embedded reciprocity in honesty in embedded to an agreement on reciprocity of norm addition shared a of umbrella implicitly clan while controls are authority; through of traditions achieved source legitimate the the umbrella of, a range of shared values and beliefs on the forms of proper behaviours, under behaviours. those to level commitment high of and of

be to effective very on many the occasions especially 'controls when prove outputs are can Clan behaviour controls are inappropriate, due to, difficult to or measure the and say, ambiguous has (Ouchi, It been 1980). (Alvesson process argued and Lindkvist, ünknöwn transformation least types three blood of control: clan economic, social, there at and are relationship. 1993) that lies in beliefs behaviour the is that controls clan co-operative economic a good way logic of The higher output which scores the organization's financial equity to achieve and for an organization

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On Strategic Control Of Investment

Chapter 14

hopefully results in long term prosperity; the social clan controls are grounded on the emotional belong the to the members of organization and communicatewith each other and social needs of blood is based biological the relationship clan controls organization; upon an of as part imperatives (i. e. family relationships).In brief, most, if not all, of modem organizations rely to the that there exists sharedvalues a clan exists although on ground controls, clan on extent some and beliefs and organizational commitment.

14.3.5.6The politics approachesto control The politics approaches to control in organizations consider control as much more of a political is, involves (Pettigrew, 1979): that control working within rather than an economic or social act into it it `knock (Pfeffer, 1980). than to seeking shape' rather moulding the political system and From the political perspective, control in organizations becomes necessary not only because of 65 labour' (Taylor, from `division 1967), but because inherent the of also of the the efficiency between due the the to the controllers and controlled needs conflicting and/or reciprocal 66 (Marx, 1973). between them inequalities of power in labour' `division central authority engaging signifies setting up reward and of Seemingly, leaders, but the conflicting needs and and establishing cultures; appointing systems, sanction individual for benefits, demand less formal less as for as well task and accomplishment wants formal line done. Literately has been the things speaking, of control getting of hierarchical ways bureaucracy (Weber, 1958); while in the less formal (or informal) line of linked to essentially influence has heavily drawn (Follet, 1987), upon and power and attention control, scholarly (Pfeffer, 1997). participants organizational negotiations among device control Bureaucracy as a bureaucracy for line large in that the the suggests more systematic of way any political control is by the office or position rather than by a control to control effective achieve organization is believed It (e. (Weber, 1958). Weiss, 1983) bureaucracy that g. person or patrimonial from to transition ease an construct organization's control effective an smallremains essentially large-scale professional management". It has been argued (Weber, 1958) to scale entrepreneurial basis knowledge is is the upon of exercised and control achieved control bureaucratic that between the and/or co-relationships authority relationships and activity. structural through (i. legitimate) types three socially acceptable of pure e. (1958) authority, postulates Weber 68 (c) (b) traditional, charismatic. and (a) rational-legal, namely, is based `legality the those to right or of on elevated authority which authority, In rational-legal 1947), in Parsons, the the obedience and of an controlled issue commands'(Henderson to is owed to the legally established hierarchy such as a strategic business unit, an organization in flows terms to headquarter, control sub-business, and of obedience authority or a in the office /or In the traditional case ranks. of authority, and on which relies positions established through immemorial legitimacy traditions the the those in of the and sanctity of status of belief `a 1947), is Parsons, them'(Henderson through under and control obtained authority exercising 14-42

Chapter 14

On Strategic Control Of Investment

those persons who occupy the traditionally sanctioned position of authority. In charismatic `devotion to the specific and exceptional sanctity, heroism, or rests on authority, which individual of persons'(Henderson and Parsons, 1947), the controllers character exemplary by `the achieve of grace' control gift virtue of the controllers' personal trust and belief enjoying in the controllers' powers and revelations (Weiss, 1983). For the Weberians (e.g. Weber, 1958; Weiss, 1983; Henderson and Parsons, 1947), the rationallegal authority provides the basis for a bureaucracy which directly facilitates administrative " lay down foundations tradition for self-control or as charisma authority while might controls, As in bureaucratic the the regard controllers respectively. control control space, there social or in leaders lead by fact technical who can virtue competences of and not whim, and by ability are 70 Among Weber's essential elements of bureaucratic favouritism. control are: (a) a and not division of labour in which authority and responsibility are clearly and legitimately defined for both the controllers and the controlled, (b) the offices or positions are organized in a hierarchy in the (c) a of chain command or scalar resulting principle, all organizational of authority basis by the or on of selected merits or virtue of training or education, recruited members are disciplines, for the (d) the and procedures set controllers and the controlled apply in rules, and Parson, 1947). (Henderson and all cases

Power as a control device line influence in the of power and suggests that `being in control' means the Political control in `actively (Storey, 1983), and that to control in engaged applying power' are controllers is to exercise power by the controllers so as to funnel the controlled into the organizations (Johnson Gill, 1993). In general, the literature on operation processes and service or production in to from to control organizations reference seems suffer particular ambiguous power with from deriving conflicting philosophical assumptions including the definitions and applications (Clegg, 1989). and plural functional, radical interpretation of power rests on the assumption that the exercise of power benefits an organization's whole membership (Parsons, 1951), and something which

The functional remains

becomes by organizations for regulating in a generalized this resource created sense power therefore to the relates collective ability to of and all organizational members relations social by This their achieving common objectives. system to unitary social a approach power maintain in bears becomes inextricably organization a non-zero that sum effect control and suggests " Thus, drives directly from bureaucracy. effective control to effective authority in the linked be in terms of various pathological causes (e. g. conflicts can explained interests of all, and any inevitable the than (Fox, 1974), regardless of rational, rather natural, or stupidity) or ignorance divisions the interest which characterize the the power and of clash of nature of hierarchical the Willmott, 1985). (Knights and modern world interpretation the emphasizes of power zero-sum nature of the exercise of the powerThe plural benefits (i. the one group at control expense of another), e. and considers conflicts control related

14-43

Chapter 14

On Strategic Control Of Investment

not as abnormal

between the controllers

and the potentially

controlled

so long as they are not so

be harmonized they through compromising that accommodated and cannot great procedures (Fox, 1974). To pluralists (e. g. Pfeffer and Salancik, 1978), power becomes a medium through individuals interests interests secure and are resolved as of with conflicting which conflicts in different their pursuit of sectional or self interests, and there exists a resources power mobilise balance of power between these conflicting others continuously

parties so that no group of members can dominate power). This suggests that administrative controls in the

(i. e. countervailing

can not function effectively until proper attention has been paid to both the 72 1961), (Dahl, the and encourages the pluralist controllers to consider controlled and

line of bureaucracy controllers

the effects of power as well as the distribution For example,

Dahl's

(1957,1961)

view

of power resources. on power

based upon the power-effects

research

being in the face of oppositions, that is `A to realize objectives that able means control suggests has power over B to the extent that A can get B to do something that 13 would not otherwise (10' (Dahl, 1957); classification potentially coercive

French which

controlled: resources

and Raven's

(1959)

analysis

of

power

resources

can be all possessed and used by the controllers (a) rewards such as cash, promotions, disciplines as such

recognition

rested on the fear of

enlists

to gain control

a Fivefold over the

and job satisfaction,

psychological

(b)

and material

(d) expert power associated with specialized (c) such as charisma, power referent punishment, legitimate " (e) derived from formal technical and power skills, knowledge or authority; intraorganir. theory of ational power (i. e. ability to Hickson immediacy workflow centrality, and substitutability) that there suggests uncertainty, with cope in interdependencies between imbalance the organizational that, the an segments such exists it is, less the it is, the uncertainty more can cope with and segment a substitutable more central " it have; Marchington (1982) and that can there exists a recognizes power the more then between structural power-resource possession and the subsequent exercise of that gap potential 14-15), and proposes that the management might he able to attcnlht to control the (Figure power dependency (a) reducing via power on such a particular of group of members manifestations in the automobile industry, (h) inhibiting the development of solidarity and such as stock-piling (1971) strategic contingency et al's

Figure

14-15: The dynamics (Source: Adapted

of intraorganizational

from Marrhington,

14-44

19X2)

power

Chapter 14

On Strategic Control Of Investment

beliefs in the legitimacy of industrial action such as the use of personal letters in times of conflicts, or (c) ensuring that, if power is tested, the outcome is to weaken rather than affirm the its power. of perception group's The radical interpretation of power also emphasizes the zero-sum nature of the exercise of the (i. benefits e. control control one group at the expense of another), but considers power-related between fundamentally the the controllers and potentially controlled as conflicts opposed and due irreconcilable interests to their (Brown, 1978; class-based abnormal vested principledly Clegg, 1979; Bachrach and Baratz, 1962; Lukes, 1974). In essence, the radical approach to in the the countervailing power on of members an organization. control concentrates It has been claimed (Lukes, 1974) that there are arguably three dimensions of power, namely, (a) the the over controlled - whereas control aims at the overt conflicts in controller of power decision-making situations (Dahl, 1961), (b) the rebellion of the controlled against the benefits held by the controller relative to the controlled - whereas control refers to subtle and less visible (i. is through output control) setting e. which power exercised to prevent activity such as agenda decisions being taken over potential issues which can result in a conflict of interests (Bachrach 75 (c) the powerlessness of the controlled relative to the controller 1962), Baratz, and and to shape preferences, perceptions, and cognitions so that the potentially means control whereas in the existing order of things either because they can see or `accept their role controlled imagine no alternative to it, or because they see it as natural and unchangeable, or because they beneficial' (Lukes, 1974). divinely it and ordained as value infers the that exercising power multi-dimensional nature of speaking, power Theoretically ideologies, opinions, and cultures eventually leads to socializing values, through control of organizational members into their unquestioning acceptance of the traditional, natural order of is in Marxist to this of power coincidentally view parallel multi-dimension analyses things, and domination. deeper of roots of the however, the multi-dimensional nature of power draws much attention to Practically speaking, impact the towards of output controls orientated further of avoiding the articulation aspects the into behavioural controls orientated those agendas organizational and of conflicts of existing in the first place by means of shaping organizational members' forestalling conflict towards 76 latter (Clegg, 1975), the `managerial the of which pinpoints preferences and role of cognitions " (Storey, the to to 1983), has been management's right manage refers which and prerogative' kings' `divine `calling' by God the the likened to right of or or Heaven (Weber, 1958, frequently basis fundamental in 1992) of any managerial attempt at as control organizations Sunzi, (Storey, 1983). boundaries 1983) that, (Storey, the although believed of managerial prerogatives which It is functional in tasks delineate turn engender management its distinctiveness, those which to serve " depending ideologies, the upon the managerial to shifting, controllers' right are constantly is, taken-for-granted, that the sheer status of being an controller is somewhat remains control

14-45

Chapter 14

On Strategic Control Of Investment

enough to ensure the compliance to orders of the potentially controlled. Some have attributed this tendency of not challenging management prerogatives to the prior socialization of the controlled, which promotes a tendency to accept most aspects of the status quo and to narrow down any changes to `aggressive economism' (Storey, 1983). Evidence (Knights and Wilmott, 1985; Hammersley and Atkinson, 1983) seems to support the importance of the managerial prerogatives which have been practically employed to into the controlled culturally potentially accepting their being controlled and the precondition 79 leads This to control. management theorists to further suggest that controllers' right impossible become first may control without establishing such a prerogative management's legitimises because in the to the establishment of control right control, partly way some which dyadic largely the on cultural aspects of power, which, in effect, forestall relies and prerogative in demands first the non-negotiable place and in a way independent of the generation of (Storey, 1983). and actions managerial strategies As regards how to exert power to achieve effective control, Pfeffer (1992) has articulated a for the tactics the (a) control exerting via use of power, and among of most useful are: number including delay, do first 80 (Schwartz, timing having to 1974), (b) waiting, and with moving those interpersonal influence strategies such as social proof, liking, commitment, contrast, reciprocity 81 1980; Cialdini, Schmidt, 1988; 1988), (c) (Kipnis et al, strategic presentation of and scarcity information and analysis and selective use of data to strengthen one's case (Pfeffer, 1997), (d) break up the ability of one's opponents to coalesce to to or power consolidate reorganization (e) 1977), Salancik, use of evocative, emotion-producing language to mobilize (Pfefer and $2 (Rafaeli Sutton, 1991), (f) forces and opposition task and quiet use of or and support 83 (Gargiulo, 1993). to opposition co-opt committees Negotiation

control device as a

line in biases the inherent in the the negotiations of emphasizes cognitive Political control interorganizational influence, interpersonal or the and contrasts theoretic with of game process in interaction (e.g. the zero-sum or non-zero sum economics to strategic analyzing approach implies `the that the negotiation determines its outcomes' (Neale structure of which paradigm) 1990). This cognitive-bias approach also contrasts itself with the study of the Northcraft, and differences individual locus such as and gender, of control, self-esteem, and effect of personality (Lax Sebenius, 1986). processes and outcomes negotiation and on risk preference

is bias built in the biases the cognitive approach upon extensive work Broadly speaking, on Tversky Kahneman, 1974) under the premise that `negotiations (e. and g. decision-making decision-making' (Neale Northcraft, 1990). It has been argued of case and special a represent have been identified heuristics distort which `a of the negotiation systematically variety that bias negotiation outcomes', those and potentially among most crucial cognitive and process heuristics are framing, anchoring-and-adjustment,availability, and over-confidence ((Neale and 1990). Northcraft,

14-46

Chapter 14

On Strategic Control Of Investment

Evidence seems to support that, people who negotiate control tend to rely so much on available information that colourful, dynamic, concrete, or otherwise vivid or distinctive' stimuli often disproportionately attract attention and influence decision-makers' deliberation (Neale, 1984), 84 loss depending framed be or a on the control negotiators' can as a gain that the same outcome initial negotiating position and expectations in that they can become risk-averse when choosing between certain gains and the risk of larger or no gains, but become risk-seeking when choosing between certain losses and the risk of larger or no loses (Kahneman and Tversky, 1979), that an initial offer in bargaining which represents an arbitrarily chosen reference point can significantly 1987), Neale, (Northcraft that tend and control and negotiators adjustments anchor subsequent favourable (Neale in their to their build accomplish outcomes ability and to up overconfidence Bazerman, 1985), thus decreasing their willingness to, make concessions (Neale and Bazerman, for due to the assumption to the gains mutual partly negotiate opportunity 1985), overlooking becoming (Bazerman 1985), by is trapped et al, as well as zero that the situation -sum (Northcraft Neale, in 1986). and commitment of a process previously chosen positions by that, the can achieve negotiators effective control control shows Research evidence also (Kramer the makes control negotiators which accountable context social a presumed presence of identity (Tetlock, 1985), because induction by the social a particular of social 1993) or et al, by in task structure subtle on occasion changes accomplished when identity and accountability, for have 1985), Blount, activating cooperative or consequences significant can (Larrick and 85 1993). (Kramer behaviours al, et competitive facilitates integrative induction bargaining found that the is it mood of a positive also Moreover, higher in become 1986), that Isen, and control negotiators self-esteem more (Carnevale and doing in their to the and more confident about negotiating prior well optimistic confident and brief, In 1993). the (Kramer to through negotiation approach control et al, negotiation process if by the the effective, one of most not only, remains processes compromise, bargaining and however, (Follett, 1987), be the to adjusted negotiation can approach policy which control in the potential for managing self-enhancing or self-decreasing bias towards the lies control between the controllers and the potentially controlled. relationship

to control The approaches 14.3.5.7 contingency being fundamentally based idea be that the as theories regarded on can Contingency organizations are not merely a social system, nor an information-decision system, but an open(Tilles, 1963); interrelated they the and parts well reflect recognition many of system ended Taylor, (e. Follett, 1973,1987; 1967; Fayol, Sunzi, 1992) 1949; thinkers g. great numerous among different This to that ways organize and manage. suggests not only exist always there that techniques, but also principles, should be flexible (Sunzi, 1992) so that decision management decide, and do, all depending on the specific situation literately act, in can organizations makers 86 best (Odiorne, 1966). way one no universals, no there are `it depends... ' the denote have theories that echo phrase and controllers In essence, contingency

Chapter

14

On Strategic Control Of Investment

to identify

situation,

between

the relationships

understand

the

and their interactions,

variables control

in each control

the variables

Figure

situation.

and recognize the complexities of cause and effect in every 14-16 is depicted to show possible environmental contingencies that

in organizations. control

might influence

Figure 14-16: The contingency theory approach to control in organizations:

I: ffectiý eness space with constraints

Purpose

T ----------------LlIo%0c (c., ' ,! r, s'iron ,, Iwllutiooll ticrap,

-- -ý

ici ,. wul s:rtiýliý d titatirlin nh IL 'cri _

f -f-f--+tf -f I'iui. ut lurniaiinn

_1

c ".

C

C

t: fticicncv SI acc ýsith constraints

space

ýýith goals states

Ö f

a general view

C

input up uhrlily. IIIfurm:ui m., kills, kHIMleniput titakchuldcrs.capital, land. raw material, ',(ructIre, capacity, wIcIIcc, trrhnolor'y i r . _. -. -. -. -. -. -. -. -. -. -... 4

cc L

1

ß

Ov

U a' 0

implies theory contingency Practically possible procedural speaking, shifts of control in the face of increasing uncertainty: control in organizations tend to shift Bronn mechanisms behavioural control, first by personal means and then by impersonal means reinfi)rcecl by hierarchical subsequently

supervision, to

to

long-run

short-run

output

output

control

control

with

with

decentralized

centralized coordination,

coordination, eventually

and the

become so great that output goals can no longer be set and the prime form of may uncertainty inputs, training especially personnel technology. over and selection, and shifts control however, be theories contingency can argued to entail five a1)1)1-oaches: spcaking, "Theoretically technological contingencies,

contingencies,

environmental

and hohulation-ecology

contingencies,

organizational

fit,

structural

(l osi and Slocum, 1984).

theory

'I, hc technological

contingency

1 /r(- wchnologicell

(Woodward, thu'on' 'Xnrc)' ( o/ltilr,

1965-, Perrow,

1967) corresponds

to the

1966) that there exists a general theory of nianagcnfcrit but it hclicl- (Frederick, described, been ' in nor and emphasizes that the answer to it depends uncovered hasn't yet ... design lies in technology that is, technology functions as the dominant control organization Figure 14-I6) consists of'technologics (i. e. things). (please sec operator 1963; Odiorne,

through the complexity of the technology, fhr example, Woodward F;y classifying influences organizational technology that structure anti consctIucntIV ('0111101 1965) proposes organizations

14-48

Chapter 14

On Strategic Control Of Investment

less the with complex and more advanced technologies tend to exert mechanisms: organizations less personnel control (e.g. less emphasis on precise job descriptions, loosely organized work in interests self-controls); successful organizations with averagely complex groups, and, more controls (e.g. closer supervision over leads This techniques). control elaborate more management theorists such as and personnel, Woodward (1965) and Perrow (1967) to assume that what matters in terms of organizational is, is be is to their technology, that to to to control organizations adapt able to adjust success technologies

tend to exercise more administrative

in technology through to scientific advances needs so as to gain suitable customers' readily (Figure in 14-17). flexibility the arena competitive organizational Figure 14-17: Contingency theory approach to control: the technology as control operator Degreeof control task predictability

Technology

The environmental

Degreeof control specification

Type of control structure

contingency theory

(e. Lorsch, Lawrence 1967) accords with the theory g. and The environmental contingency (Follett, 1987) best is to that the to and assumes control there way solution one that no maxim depends the the technicalsuch as exigencies market, on environmental problems control dominating This that the the control suggests operator now consists scientific. of and economic (i. to the those the e. events) closely related interaction exigencies market, marketing among the i. R&D the e. general conditions, subsystem economic capital, natural and and subsystem industry, 87 (Figure 14-18). technology, market, and government human resources, culture, Figure 14-18: Contingency theory approach to control: the environment Market technology Financialresources

ö_

human resources Government

Control situation in Organizations

Raw rnateria, General economic conditions

as control operator

Culture

vövbüy ö a U0 `!

öö LJ

F-

Industry

degree in `differentiation' to the term which refers of segmentation an the of By using how by to they to the relate external respect environment and with using subunits organization's " which can be achieved either by more formal means (e.g. the use of `integration', the term of formal hierarchy of authority, plans, procedures, rules and other formal management by flexible (e. the use of cross-functional means more adjustments or g. practices), management Lawrence Lorsch (1967) that the more successful and notice efforts), coordinating of those which adjust themselves to their relevant environments: organizations are organization formal integration differentiation through less can successfully achieve more means of featuring featuring differentiation centralized; more organizations can more maintaining while control

On Strategic Control Of Investment

Chapter 14

integration flexible through more meansof control while maintaining more achieve successfully de-centralized. fit theory

The organizational

The organizational fit theory, which is coined by Galbraith and Nathanson (1978), unnoticeably is bound (1987) that to permeate all elements of Follett's observation effective control echoes the undertaking including personnel, technology, execution of plans, quality of work, financial information. fit In the theory essence, organizational and remains an extended security activities, possibility the control mechanisms, strategy, general contingency theory which promotes incorporated be (Wren, 1987). theory can more closely organization and management For the organizational fit. theorists, any way of controlling is not equally effective (Galbraith, 1973) and what contributes to an organization's successful control lies in its ability to maintain a `match' or `congruence' between varying factors such as structure, size, technology, people, Nathanson, 1978). (Galbraith It leadership in thus that and seems and tasks, rewards, culture, fitness (Figure from 14-19). the the organization of results control principle, successful Figure 14-19: Contingency theory approach to control: the organizational The level of fitness on demand

The level of fitness on demand

Value judgements

Value4udgements Fitness assessments

Fitness

Actions of improvement

Realiryjudgements The level of fitness in supply

,, Actions of improvement

assessments Reality judgements ;

Control situation at Time slice T1.ß

The level of fitness in supply

Control situation at Time slice T,

fit theory

The level of fitness on demand Value, udgements Fitness assessments

Actionso f improvement

Reality judgenients

The level of fitness in supply Control situation at Time slice Tt

internal it the that however, operator control consists of seems conditions or In practice, in things, that to and change; and events, effect people, successful e. control competence -i. is to contract or stretch organizational resources from time to time so as to create, organizations internal the the conditions which promptly match external environments maintain and/or nurture

of the organization. theory Structural contingency fit the theory and theory an offspring remains of organizational Structural contingency between an organization's structure the and as other variables such match emphasizes 89 In follows theory structural and environment. principle contingency size, technology, strategy, its has be `consistent' that to (1949) an organization's structure with observation Fayol's `objectives, resources, and requirements'.

implications: first, it indicates the consonancehypothesis it has twofold however, In practice, have structures that more closely match' or fit `the `organizations that that 1982) (Pfeffer, be `more do it implies than those that that the will context, effective not'; and of requirements 14-50

Chapter 14

On Strategic Control Of Investment

by their moving out of misfit so as to restore effectiveness and structure organizations adapt 1995). (Donaldson, performance Evidence (e. g. Rumelt, 1974; Hage and Aiken, 1969; Child, 1973; Burns and Stalker, 1961) in in that, to organizational structure general, varies predictably association with suggest seems i. like technology and size, environment strategy, such variations - e. control operator consists of 90 for example, more diversified organizations tend to 14-5): (please Figure things and events see larger (Rumelt, 1974); be formalized, divisionalized tend to organizations structure more adopt a (Child, less 1973); centralized organizations employing non-routine, more specialized and decentralized informalized tend to technologies employ and structures variable or unpredictable (Hage and Aiken, 1969); and organizations in a more stable and certain environment enjoy more bureaucratic structures (Burns and Stalker, 1961). The research evidence has supported the view that the .variation of organizational structure can in is heavily that the `nested' in the to structure of control of control structure relate significantly Mintzberg, 1979); 1973; Tables (Child, 14-6 & 14-7 and provide a organizational structures between the structure of organization and the the possible relationship bird's eye view of structure of control.

contingency theory (Source: Pfeffer, 1997) Structural elements affected

Table 14-6: An overview of the major structural Major contingencies which affect structure

Form Multidividsional, functional, and matrix

Strategy: Product differentiation, price

Size of the administrative component Degree of bureaucratization Formalization, standardization, functional

Size Technology: Production process, Information technology,

specialization,centralization, formalization,

amount of variability

Differentiation:

Environment:

degree munificence Amount of change, resource uncertainty unpredictability, competition, of

Table 14-7: Structural

contingencies and control mechanism (Source: Mintzberg, 1979)

Organizational forms Simple structure Machine bureaucracy bureaucracy Professional Form Divisionalized Adhocracy

Number of levels, number of departments/ divisions

Prime control mechanism Direct supervision Standardizationof work processes Standardizationof skills Standardizationof outputs Mutual adjustment

(e. Hannan Freeman, 1977; Aldrich, 1979), far though g. and view still The population ecology knowledge be into (Pfeffer, to translated 1997), action permits theory which sees the from a in which organizations operate as more active in shaping and controlling the environment for a selection natural process those provides organizations, environment which organization: for the given environment (Hannan and Freeman, 1977); suitable are being ones which survive less able to adapt to the environment, and survival depends as are seen and thus organizations 9' (Aldrich, 1979). for the changing environment upon fitness

14-51

On Strategic Control Of Investment

Chapter 14

In principle, the population ecology view supports the social Darwinists' allegations (Hofstadter, 1945) that it is nature that provides that the `most fit' in a competitive situation wins, and that through unrestricted competition, the fittest organizations or individuals survive and move up the social ladder of success and the unfit occupy the lower class structures and eventually be " (Jones, 1968). eliminated through evolution As a theory of control, however, population ecology practically focuses on some factors - e.g. be the organizations which may substantively significant of competing number age, size and but over which there is virtually no organizational control except to the extent organizations can indicates Population is that, ecology once arena. a niche niche their chosen competitive choose in hands fate lies forces build, the to inertia of others and selection an organization's starts and

its very own control. which are outside of insulated have mechanisms which control organizations This suggests a paradoxical concern: life insulate their therefore enhanced chance, can also and from competitive pressure foster learning - the choice posed is between from the which pressures selection organizations implies from learning This in that competitive pressure. control enhanced enhanced survival and (derived from human desire illusion for feeling just be the common a of an can organizations if have in individuals they they that act as control even situations where control) mastery and best is 1990), that there Lumsden, a way to control - only a way and never (Singh don't and in the the the the conditions past, given of has controlled environment out-controlled which (i. e. the control operator consists of change). time that at which prevailed to theory that control well approaches may explain organizations In short, contingency because of their successful matching between control structure and strategy or prospered it can not really predict what `fits' will lead to successful control of organizational but whatever, in the future. Therefore, the solution to control problems is more complex than `fit' or activities definite number of factors between two ends of a continuum (e.g. between a `congruence' best is to the to way achieve control perhaps efficiency employ markets); and hierarchies all contingencies. of levels combination of various

in the inorganizations: problems common practice 14.3.6 Control do function in the that systems control not always organizational ways which reveals Experience limit how It that to control evident contains seems a much control can expected. or are required by human drives, biases because, needs, compressed and suchlike, be exerted on organizations beings human living in today's modem and working due selection, to natural perhaps hardwired that, triumph mentalities emotions can such over reasons, retain still civilisation This that there exist some classification over and calculus. suggests realism, over confidence for managing control in organizations which may run counter to the major problems the management are sought after. which performances (perhaps partially, though) relies on the existence of hierarchical levels inevitably First, control, inheres the disadvantages of bureaucracy (Nicholson, 1998) which thus informal, and formal or 14-52

Chapter 14

On Strategic Control Of Investment

include that establishing rules is always easier than discarding them and that there is always a danger that organizational members become so used to automatically following rules that they for learning (Blau, 1955). themselves thinking and stop Second, control, related to the first problem, can especially lead to `rigid bureaucratic behaviour' such that organizational members may undergo a natural selection process and behave in ways leaders in by the the than the absolute interests of the systems or control rather required because it is ' normally the pre-set standards in the control process that organization as a whole, dictate what to do and who receives promotion (Lawler, 1976). Third, control can lead to resistance' to change when it threatens needs satisfaction or creates hostility (Dunnette, 1976), and this can become commonplace, especially when the control in involve human themselves automating skill and expertise, creating new systems actually disrupting power, of social grouping opportunities, or reducing sources new experts with 93 (Ridley, 1998). intrinsic for `I need satisfaction opportunities Fourth, control can become handicapped by the incompetent leaderships in that, for example, direction leader fail does have the desire lead the a under to of who not can systems or control (Wright, 1994). for efficiency the passion

Fifth, control can be initiated by poor objectives (such as those unmeasurableor unchallenging) directly linked to poor standards of performance for that objectives poor extent to such an improbable (Hrebiniak Joyce, can make control results systems actual with and comparison 1984). by involves negative exception and poor evaluation of performance management Sixth, control (such as concentrating on poor performance only), and this can exert a negative impact on the depends in that control successful on an appreciation process premised on good process control deviations from of evaluation reasons underlying sound significant and plans, communication (Hrebiniak Joyce, 1984). and negative and both positive

be brought into the control process and jeopardise the can appraisal Seventh, poor performance demands because that is good performance sufficient attention paid to the systems control integration of short-and long- term organizational needs, and requires the reinforcement of (Hrebiniak Joyce, 1984). objectives and with behaviour consistent involved in become avoiding and embracing errors becausecontrol naturally Eighth, control can both avoidance of error a strict and a strict reinforcement entail of error - prone can practices to a strong concern with defensibility of errors can but give embracing rise and avoiding rules, behaviour foster (Hrebiniak and Joyce, 1984). rigidity conservatism of may and and action / (plan designs and or mode) may not always provide appropriate criteria for Ninth, control is true dealing this particularly when organizations are and with complexity via action, differentiated structures and procedures or when organizational members are not pursuing the 1968). (Hofstede, same goals 14-53

Chapter

On Strategic Control Of Investment

14

Tenth, control involves uncertainty avoidance in that organizational members can set out to in they than especially when uncertainty cannot predict anything accurately engage avoid rather 94 lead this 1998), (Nicholson, organizations to create and mirror the varieties of chaos can and in defences disturb letting tumble their face across and randomly uncertainty they such as which (Schon, 1983). be believed to orderly patterns what are insufficient be for the control information faulty can processing capabilities Eleventh, the in incomplete insufficient in structure can or poor operating result that communications process information (Hrebiniak Joyce, in 1984). difficulties due the and to collecting information it becomes into led be information the and inaccurate control process, even more can Twelfth, feel important is that the the happen organizational or when members likely to so measure when (Lawler, imposed 1976). them are unfair or unreasonable on the process control standards of

investments: towards successful controllership Strategic of 14.4 control 14.4.1 Controllership

in organizations

in be the managerially resolved frightening, a composite above control problems can However largely instance, For 1990). the can rely on an management effective (Emmanuel al, et manner in by to terms, theoretical refers a process which a which, controllership, efficient as well as influence the and/or with potentially over controlled evaluates and exercises, nurtures, controller try to can viz., management simply help performance, avoid pre-established achieve to so as by the use of good control problem-avoidance techniques, or, behavioural problems some if the above control problems simply remain, try to engage themselves proactively alternatively, the remaining problems. the against organization in protecting between to the the the relationship controllers pertains and terms, controllership In practical if through all control activities, and, effectively permeates managed, and controlled potentially an organization's chances of successful accomplishment of enhance actually can controllership increasing its the to as as well activities ability all meet organizational all the goals of including to the obtain a competitive advantage, the need to need challenges contemporary diverse fairly to the behaviour, a workforce need manage and equitably. and foster ethical demands individuals the only not qualities or of some controllership However, a competitive but them the the that controllers, also make willingness of controllers systems some or groups, instructions to exercise self-control such as giving or modest controlled the potentially and of implies that successful controllership in organizations should This instructions. complying with leadership imperial healthier control principles, competent styles, control least embrace at control strategies, workable control techniques, suitable control structurally-fit mentalities, implementation of control, and, above all, the effective as for the foundations processes, solid in full the of varying control paradoxes organizational management context. efficient as well

14-54

Chapter

14

14.4.2 Successful controllership:

On Strategic Control Of Investment

the first principles .

It seems that, a careful examination of various approachesrelevant to control in organizations (please see Figure 2-5; Figure 3-2, Figure 4-3; Figures 12-3,4,5,8,9&10; Figures 14-5,6,7,8, Table 5-3; Tables 14-5&6), gives rise to the concern that one of 9,12,14,15,16,17,18&19; the most arresting elementsof control lies in the fact that control has to be a continuing activity, with Follett's (1987) fact that more psychological attack on the problems corresponds a ' in Controllers in practices. organizationscan never really get out of the control concurrent with fallacy that they can solve problems until they look on control as a continuing activity, because they themselves are living, changing,developing and decaying organisms(Follett, 1987). Besides, once a problem is `solved', the very process of solving invites new elements or forces into the situation and thus ignites new problems which require new processes (Davis, 1951). This suggests a practical control paradox that men solve a control problem but create a new become Thus, documented theories they processes and can obsolete after are problem. control (Popper, 1959), and human's only guides to actions rest on the first principles which may serve for thinking to method of people observe the control world and to shorthand or as convenient articulate new, more pertinent principles which might eventually contribute to the solution of the emerging problems. it that, be remains unwise to pretend that the understanding of the principles It can argued is in in incomplete that, their yet to organizations as perfect, and even control present relevant better far a guide to the effective as well as efficient integration of form some principles are balancing of power between various than or politics or a precarious personalities resources Among the articulated principles relevant to control in organizations are: interests. vested the exception, unity. and utility, comparison, uniformity, (Urwick, 1974) maintains that all figures and reports used for the The principle of uniformity in be terms of the organization structure. This suggests that authority should control of purposes because responsibility is accountability for the discharge of must correspond: and responsibility is in figures the accountability recorded must equally correspond with which the duties, implication (Child, 1984). The derived from this principle of managerial individuals' authority is that no individuals' effort should be expressed in any figures which they are not in uniformity influence (Holbrook and Prichard, 1964). to a position figures that maintains all and reports used for the purposes of The principle of comparison in be terms of standards of performance required, and, where necessary, of should control 1974). This (Urwick, figures that, suggests no or reports remain very previous performance between show a comparison merely which performance in some arbitrary period informative in the in figures that, period arbitrary, past; and, equally contrast, other, set against and some behaviours (e. intend g. and the outcomes) which to reach performance management pre-planned intentions being the into are whether trigger realized least the or not and exhibit enquiry why at discrepancies (Urwick, 1974). One implication of primal practical the wherefore of this and

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is that the controllers should always have a kind of mark to aim at and of comparison principle force themselves to examine and to explain all the reasons for deviation from that mark, 95even if the mark itself does not approximate an accurate estimate of what the actual achievement such in face in the sense common prevails where of reason (March and Sevon, 1984; cases as Northcraft and Wolf, 1984). (Urwick,

1974) maintains that all figures and reports used for the have directly usable should value associated with the appropriateness of the control of purposes in the to end view as well as the time separating the end of the period covered period covered from their use. This suggests that figures and reports which are completed some time after the The principle

of utility

become less they to the which refer progressively useful with every second that period close of in detailed immediate to the thus, management need engage and control actions. elapses, and, This principle of utility reinforces a lesson that a piece of information in time saves a great deal from lesson business knowledge so a which many capital, new or school MBAs or PhDs are of it learning; also encourage professions such as management accountants to search for still figures of useful value and reports of practical value. The exception principle (Taylor, 1967) dictates that the top management should process `only invariably however, and comparative reports, covering, summarized, all of the condensed, This into that the those management'. suggests even chosen summaries should entering elements be `carefully gone over by an assistant' to the top management before they reach the top; this `all the the that to the should cover summaries of exceptions to past averages or suggests also both bad the the especially out, good and especially pointed exceptions' (Taylor, the standards implication is the The that the effective as well as of exception principle underlying 1967). likely be by is being to the free achieved to management's more control consider the efficient fitness to the lines study character and and of the controlled or being able to go of policy broader full is being few (Taylor, in 1967). of a view progress which minutes made a through The principle of unity refers to the reciprocal relating, co-ordinating, unifying process in which interacting depends the the to of on elements of an environmental complex problems solution held (Follett, 1987) is It that, the parts of an organization, `should so move 1940). (Follett, that they in their adjusting activities make a working unit, not a congeries reciprocally together that, the the it is activity reciprocal of the and parts changes pieces', while parts of separate bears implication for However, this the management that genuine authority an the unity. creating in the process of building up an integrated unity i. e. the show runs itselfarises spontaneously is do to the interrelated weave accumulative the should authority out of the management all functional in the belief those some the total are performing who part of all of activity experience functions has different beyond the a value of addition of the parts. the relating that 14.4.3 Successful controllership:

the competent leadership styles

the`psychology control, imperial of principles of control will recede to occupy the whole Given in it important although Agreed organizations still remains control very and relevant. of story 14-56

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be imply that members can organizational entirely committed to management's goals principles is finding the thus, solving of control problems simply one of and a style of and policies, leadership which is acceptable. Obviously, the power found in the controller is a key component of effective controllership because the wise use of legitimate, reward, coercive, expert, and referent power can significantly benefit control activities in organizations (French and Raven, 1959). Empowerment, which be the the tasks of potentially controlled, and responsibilities can to also a expanding refers 1995). Traits (Simon, and personal characteristics related useful tool of effective controllership knowledge intelligence, dominance, leadership and expertise, as such selfto effective integrity for honesty high tolerance stress, and and maturity, can greatly, energy, confidence, (Kirpatrick Locke, to 1991). controllership effective contribute and though not necessarily, Controllers engaging in both consideration (by means of trusting, respecting, and caring about initiating and

structure (by means of ensuring that tasks get

the potentially controlled) done though that are activities effective and efficient) organizational may also, and acceptably to controllership. effective contribute not sufficiently,

be taking through account of the complexity also obtained can Effective controllership law (Follett, `the 1987). For the the of situation' role of example, and controllership surrounding (i. leader task(1967) or oriented) and situational e. relationship-oriented style on study Fiedler's (i. e. leader-member relations, task structure, and position power) reveals that characteristics leaders as controllers can greatly improve organizational effectiveness in relationship-oriented is favourable leading leaders by that the task-oriented and moderately control where situations in effectiveness situations enhance organizational where control significantly can as controllers (1971) House's favourable theory is unfavourable. very path-goal or very leading either by (i. directive behaviour, behaviours behaviours, kinds four by e. supportive of that, aided suggests behaviours, and achievement-oriented behaviours), 96leaders as controllers can be participative (a) finding through the improve effectiveness out organizational what outcomes to guided (b) from the tasks the the organization, and to rewarding subordinates as achieve controlled aim for high performance and goal attainment with the outcomes they desire, and (c) controlled for high to to subordinates, removing attainment any goal obstacles the paths clarifying in Jermier's Kerr the the capabilities of confidence controlled. and expressing and performance, implies that sometimes the controlled can perform highly leadership model (1978) situational in both that the personal characteristics controlled such of controllership of the presence without knowledge, the and and motivation such situational characteristics experience, abilities, as skills, is interesting, fulfilling, in task though the enjoyable and not can to general, which as the extent become substitutes for controllership (Podsakoff et al, 1993). necessarily, have dramatic effects on the leadership the of controllers can also The transformational inspiring well as as and energizing the potentially controlled to controllership organizational improve (e. Bass, 1985; Miller, 1995): organizational and performance g. problems solve control intellectually stimulating the controlled, by leader, by being by charismatic a for example,

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/ in developmental by in transactional leadership consideration, and or engaging engaging through the use of reward and coercive powers to encourage high performance, transformational leaders as controllers can, (a) make the potentially controlled aware of the importance of their tasks and the necessity of performance to the organization, (b) make the potentially controlled development, for (c) their accomplishment, personal growth, and needs and motivate of aware the potentially controlled to work for the good of the organization as a whole, not just for their interests. own personal vested

14.4.4 Successful controllership: the healthier control mentalities A successful controllership rests on healthier control mentalities. A problem is not solved unless it does not start or until it is solved. Once a problem looms large, however, the solution rests on deal dynamics the the perceive and with of the problem which per se the ways problem-solvers time. over evolves 14.4.4.1 The `putting prevention first' mentality It seems arguable that the most efficient controllership rests on the mentality of putting in the work of control (i. e. preventionist mentality) simply because `a stitch in first prevention (a) Among to techniques established prevent control problems are automation, time saves nine'. (d) (c) and elimination of an entity or operation. Automation risk-sharing, (b) centralization, by the advent of advanced computers and automata because appealing more and becomes more due human to to organizations' exposure control reduces problems automation the use of de-humanization. times the though some at cost of even inconsistency, important decisions try to to themselves and thus some control reserve Top management can deteriorate in face interthe which can of problems sophisticated control avoid some its be limited due information to though can effectiveness possible overload. relationships, even be harm to the can partly relied on reduce potential which might arrangements Risk sharing behave inappropriately. if Elimination members organizational of control the befall organization involved divesting by the the duties them to of control activity or restricting or operations been have the they over confident or under confident, not that can greatly cool off activities become do have the to especially when effective, concerned not seem a problem-and control be to tackled. the of problems comprehensive understanding

first' `putting The mentality process 14.4.4.2 the that most effective controllership rests on the mentality of putting arguable It seems equally first in the work of control (i. e. protectionist mentality) because `a man reaps what he process in resolving control problems, the controllers need to be aware of To process prioritise sows'. (please to to, desired control problems, solutions can relate problem representation the fact that, (please Figure 2-1 for 2-5), paradigm see an example), Figure and structure problem-solving see It in 2-6). (please Figure can, 2-4&8), also, Figures appear varying patterns see see (please (please Figure 2-9), techniques see require the adoption of varying strategies demand unique

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(please see Figures 2-10&11). Moreover, this `putting process first' mentality should also dig into the realm of cognitive traps (please see Table 2-4 for examples), contexts (please see Table 2-3 and Figure 3-1 for examples), and procedures (please see Figure 2-5 for an example). Consider the operators' (please see Figure 2-5), for example, emphasis on the process of events (i. e. the situationalist mentality) promotes self-fit and encourages integration of situational forces; emphasis on the process of `hard' things such as technologies (i. e. the determinist development innovations technologic and encourages and creativity; and promotes mentality) `sot' (i. things the as structure such and capital of e. the rationalist process emphasis on mentality) promotes competencies and encourages maximum utilization. 14.4.4.3 The `putting people first' mentality However, the argument that, the fact that problems can never be eliminated in that the solution is, because birth humans fail to discover lead to the of another problem, to one problem will Figure 2-4), Table 5-2 (please that the suggests and most ultimate efficient see uniformity in first (i. the the the of mentality putting people work of control on rests e. controllership determinist mentality) in that there is not any absolutely self-efficient or self-effective in invest therefore, in to and, organisations space, need control constantly any controllership it is knowledge because that improve their people and ultimately create or experience, to people human in because behaviours to organizations are still so and problems discover solutions hundred both thousand that two the controlling and the they years ago were hardwired as inner their against circuitry. work can controlled potentially look inward into inner to first, their the need controllers world as well as looking To put people them. Human beings are still seeking those traits into the surrounding world outside outward long before having instinct fight frantically to and an possible when survival made which humans as operators (please see Figure 2-5), for example, Consider the of nature threatened. individuality (i. individualist the on e. emphasis, mentality) promotes self potential genetically for thus scarce resources; genetically potential emphasis competition encourages interests and (i. the thus mentality) promotes common communalist values and e. encourages on collectivity the combination of people, event, change and things (i. e. the the on emphasis cooperation; interests through the and sectional encourages promotes conflict-resolving mentality) pluralist interaction between the the things emphasis on people, and event, and change power; of medium definition interests unbounded promotes mentality) of and encourages (i. e. the experimentalist synthesis. non-relativist

first' `putting mentality The change 14.4.4.4 be in the that the solution to one problem will can that never eliminated problem The argument is because is birth the turbulent problem that change another of environment so the to lead that, the the inevitable, most suggests ultimately effective controllership on rests becomes in first (i. the the evolutionist or revolutionist work of e. change control putting of mentality because an organization, living in an environment sophisticated by the interactions mentality), 14-59

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between people, event, things, change, has to be constantly strong, wise, fit, and leaner, viz., fit for the situational or optimisation. organization's always seeking To focus on change in the process of control, the controllers need to look at both the driving and in (e. historical, in forces the environment g. operational and social) which control constraining driving forces that the that account for past successes This processes or takes place. suggests footprints doubt be in future. Focuses the be the as which will any made without used must not is disorganize, that to to control organize, suggests change and reorganize on the process of inputs depending to them, to transform add value and on whether the activities so as is healthy the stable or unstable, organization or unhealthy, and environment surrounding For (i. the the emphasis on process example, of rapid change e. malfunctional. or progressive destructive methods and encourages reorganization via revolution radicalist mentality) promotes (be it quiet or abrupt); and emphasis on the process of steady change (i. e. the conventionalist encourages and reorganization methods via evolution. constructive promotes mentality) 14.4.4.5 Successful controllership:

the structurally

fit control strategies

focusing by looks the strategies on organizational choices on selection of control at Child (1984) dimensions, that there exist several in and maintains structural varying of respect control dimensions which need to be consulted before an organization selects a control design structural (a) degree delegation, (b) the the centralization of and controllership: to effective pursue strategy informality, formalization (c) degree between the and and of personal emphasis relative is argued (Child, 1984) that the choice of control strategy (whether it is a single It supervision. be dependent the methods) can accordingly of many made on combination a or method judgment (which can be informed by theory and practice on the appropriateness of controllers' for the the on choices particular situations. alternatives) the intended as well as between delegated be 1984) the that (Child, to centralized choice and control needs It is argued importance decision, for the the in the whole range of strategic and first, second, of respect made decisions in the light of varying contingencies and capabilities relevant to the of organizational full organizational context. is by that which means control strategy, exercised confining instance, centralization For is (Child, 1984), to controllers or even of senior one group controller small a decision-making following (Carlisle, (a) 1974): the be such as circumstances when under to promising, believed individuals who report up demands the activities sub-unit co-ordinated of or the control situation in better is know (b) to controllers are a going position what senior when to senior controllers, it confirms to the organization's chosen strategy, (c) when the control situation far how on and balance functional (e. the among various areas g. of organization demands an appropriate R&D), (d) it is desired to finance, and when operations, economize on managerial marketing, (e) when the control situation requires a significant amount of judgment and overheads, from the controllers. experience decision-making that is downwards means which passed or outwards within strategy, Delegation 14-60

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the formal structure given that there are strict limits imposed on the scope and the type of decisions that can be made without referral upwards (Child, 1984), is also believed to be (a) is there where, a need to relieve senior controllers from becoming appealing on occasions is for (b) (c) is there there a surging need motivational considerations, a need for over-burdened, judgment developed through appropriate. experience to cope with uncertainty, (d) there is a due larger flexibility for dispersion, to (e) organizational size or geographical greater request local for is of conditions of the problem, and (f) there is a demand understanding there a request for establishing relatively independent sub-units within an organization (Child, 1984). It has been argued (Weber, 1969) that organizations tend to start in an informal way but become is first established through Formalization that formalized they means control grow. as more job definitions and standing orders which prescribe correct or rules, written policies, procedures, for documented backed the then has systems up with recording and of what action, expected (Child, 1984). It can be a in the and performance results communication way of taken place delegation horizon in the to centralization especially along conditions moves complement desirable, where relative stability in organization becomes substantial, becomes delegation where is decision-making be framework and systems needed within which rules of can a and where (Child, 1984). However, informality can also results delegated with reasonably predictable initiatives beneficial where are superior to conformity, where spontaneous, become on occasions innovative, and organic type of approaches to problems are needed, and where informal ways of improve coordination among organizational members(Child, 1984). doing things substantially 1984) favours (Child, that thinking modern of organization is moves towards a It claimed by `self-control' (Follett, 1940) those encouraging emphasis, among supervisory of reduction `technological by control' with the aid of microelectronic substituting doing the work, or (Boulding, 1956). Supervisory human for emphasis generally refers to supervision technology imposition limits through the activities of subordinates' of checks or on supervision superiors' use. can discretion subordinates the be 1984) (Child, that, supervision believed personal can used as a complement to is It is keeping in there to that the to a need check where controlled situations are formalization job high involvement that down laid specifications; or a procedures, supervisory rules, formally the become that the where control situation on occasions requires necessary controllers also may hand discuss disparate types to or of activity remain on complex or novel widely coordinate become in to that can emphasis very suitable supervisory situations which technical problems; in lacking to their skill and commitment are organizational roles; and controlled the potentially become development in to also appropriate can periods of rapid human which supervision that behind. However, supervisory emphasis can incur significant lagged has formalization hierarchy, inevitably leads the this attenuation to the and of and cost overhead of disadvantages into the i. human structural the considerations capability of control e. study of incorporation of the optimum span of control

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14.4.5 Successful controllership:

On Strategic Control Of Investment

the optimal span of control

Span of control refers to the number of the potentially controlled for whose performance a Seemingly is the conceptsof span of control and hierarchy are closely controller responsible. broader fewer the the the number of levels in the hierarchy is the span of control, related: fewer between the the number of relationships and controllers and the controlled exist required, level. hierarchical at each This indicates that a narrow span of control creates vertical differentiation and a tall hierarchy but deteriorate facilitate promotion may also communication, and that a broad span which may delegation flat hierarchy effective and a encourages which may facilitate of control hamper (Huczynski but Buchanan, 1991). Evidence can also promotion and communication high that members enjoying self-actualization needs prefer flat hierarchies organizational shows focusing broader those control, while of on security needs tend to gravitate towards span with a (Koontz, 1966). hierarchies narrow span of control a tall with Literature on the desirable span of control is inconsistent but generally recommends a span of less than twelve. Evidence shows that for the ancient Chinese, Roman, Incas, and Egyptian, the is `rule (Polo, 1954; Thorndike, 1979; the ten' Flinders-Petrie, 1924). of control of span popular For the earlier industrial revolutionists, the span of control records an average of one first line 28 workers in British mining, construction, and textile organizations for every supervisor (Pollard, 1965). In the scientific management era, the span of control is reduced to `less than six, 97 first line have `only (Fayol, 1949). the In the supervisor' can more' and social man normally' by `seldom beyond the recommended to practitioners control twelve of the runs six span era, 1931); for military leaders, whether the span of control is three, four, five or (Dennison, people' `the larger by-law be that the the the smaller depends responsibility. on a may number of six .. [of head the the the and vice versa. nearer we the approach controlled] supreme of the group .. (Hamilton, the toward 1921); for we work groups more of six' and organization, whole Urwick's (1938) principle of span of control, `no superior to theorists, according management five or six subordinates whose work interlocks'. directly than the of more work can supervise

in frequently hampered by trying to the that controllers organizations are Experience reveals is reported lead, too (or this or coach, or manage) many supervise, or subordinates, and control be due desire 1937) `to to the Urwick, to controller's enhancetheir prestige and (Gulick and influence' by means of simply adding more subordinates and more departments to their This ego bolstering can be deadly, from the standpoints of delays, lack of responsibility. from trying to control too many subordinates, and this resulted confusion and coordination for (Graicunas, 1937; the Robbins, 1990) that a narrow or argument support much generates desirable. more remain limited span of control can (1937), American the Graicunas influence the consultant, under of Hamilton (1921) For example, (1938), generalizes from his observational data gathered from industrial managers Urwick and limited broad span of control because that human brain can than rather need that organizations

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increase time98 that there too variables at any one and exists an many exponential with not cope in the number of the total relationships (i. e. the sum of direct single relationships, direct group between the controllers and the potentially controlled relationships) cross and relationships, 99 increases, (Table 14-8 Figure 14-20). arithmetically and when the span of control Table 14-8: Relationship between span of control, hierarchical

level and total employees

(Source:Developedfrom Graicunas,1937) Specifications

Total hierarchical managers

Total shop floor workers

Total employeesrequired

Formula

E NKi-I

M*NK-I

Z NKi-1 + M*N K-I

If N=5, K=8, and M=12

19531

187500

207031

If N=8, K=8, and M=15

299593

2097152

2396745

Figure 14-20: Contrasting

spans of control (Source:Developedupon Robbins (1990) and Graicunas(1937))10° The hiýhestý

Level t

/i

Level 2

Level3 -..

-..

--"-""

-"

teý. el 4

512 - ^-°-

--"-

4096

Level5

32768

Levcl G ............ ......... 7_ -.. -.. - "- _Level .. -... Level K1

5 t

262144 tK-21

K

ýI ýýý u (M