Cluster 4

Merchant & Van der Stede chapter 4 Tight Control

Tight result controls

- For the result controls to be considered tight, the results must be congruent with the “true”
organizational objectives; specific performance targets; effectively communicated desired
results to those who are being controlled; the measures must be complete.
- The actual clarity of the results wanted is not necessarily that well in all organizations. Of
course, selling more is a clear goal of a company involved in sales. However, what are the
goals of a non-profit or a governmental agency? (Congruence)
- The performance expectations must be described in specific terms. This makes the use of
result controls difficult in more qualitative areas. (Specificity)
- The performance targets must be communicated effectively and internalized by those
charged with their accomplishment. It is only when this is in place that result controls can
influence performance. (Communication)
- Completeness means that the result areas defined in the MCS include all the areas in which
the organization desires good performance and over which the employees involved can have
some impact.
- Tight controls can also depend on the adequacy of the performance measures that are used.
As presented in chapter 2, performance measures must be precise, objective, timely, and
understandable.
- The result controls will also be tight if meaningful rewards are directly and definitely linked
to the accomplishment of the desired results.
 Directly linked means that the accomplishment of results translates explicitly and
unambiguously into rewards
 Definitely linked means that no excuses are tolerated.

Tight action controls

- Behavioral constraints: Such constraints can either be physical or administrative. Restricting

decision authority to higher organizational levels provides tighter controls given that higher-
level personnel will make more reliable decisions. Segregation of duties is one way of
controlling that harmful actions will have less negative effect on the company.
- Preaction reviews: Such reviews can make MCS tight if the reviews are frequent, detailed,
and performed by diligent, knowledgeable reviewers. Preaction reviews are an important
part of companies involved in large resource allocations as wrongdoings here can become
severely costly for the firm. It is however worth noting that there can be occasional rubber
stamping in which the reviewer merely approves without actually reading or checking.
- Action accountability: To achieve tight action-accountability controls, the definition of
actions must be congruent, specific, well communicated, and complete, just as with result
controls. Congruence means that the performance of the actions will indeed lead to the
intended achievement. Tighter controls can also be achieved by making the definitions of
actions specific in the form of work rules or policies. Furthermore, tight action controls
depend on the understanding and acceptance of the work rules, policies and guidance by
those whose behaviors are being controlled. If the MCS relies extensively on action-
accountability, the definitions of (un)desired actions must be complete. Action-accountability
will not produce tight action control in situations where the desired actions cannot be
 defined properly. In such cases it can actually work counterproductively by limiting
professional judgement.
 Action tracking: Control in an action-accountability control system can also be made
tighter by improving the effectiveness of the action-tracking system. When
employees feel and sees that their actions are monitored and noticed, they will be
highly affected by the action-accountability controls and behave accordingly.
 Action reinforcement: Finally, control can be made tighter by making the rewards or
punishments more significant to the employees affected.

Tight personnel/cultural controls

- In some situations, MCS dominated by personnel/cultural controls also can be considered

tight. For example, in charitable and voluntary organization, personnel controls usually
provide a significant amount of control, as most volunteers derive a keen sense of
satisfaction just from doing a good job. Also, for-profit organization can experience tight
control through personnel/cultural controls. Especially in small family-owned businesses,
where there is a high congruence between organizational interest and the interest of the
owning family.
- In most cases, control systems based on cannot be said to be tight. A survey by KPMG
Forensic found that in most cases, the fraudster in a firm is a trusted male executive.
- The conclusion is that tight controls cannot be achieved by personnel/cultural controls alone
but rather through a mixture of the three forms of control.

Conclusion

- It is important for the authors to note that managers are not limited to tinkering with only
one form of action control or changing one for another. To really ensure tight controls they
should implement aspects or characteristics of all three in such a way that the highest degree
of tightness is achieved.

MANAGING INTERORGANIZATIONAL (ALLIANCE) TEAMS

Dyer & Dyer Chapter 12

There has been a growth in company alliances

 Driven by outsourcing and companies focusing on a narrower set of skills (core
competence)
 Team up with companies with complementary skills
 Made possible by advances in communication technology, making interorganizational
coordination possible
 To achieve synergies, companies must build an interorganizational alliance team to
coordinate efforts from both companies
 30-50 % of alliances fail to meet the objectives
o Differences in partner culture (LAZY)
o Incompatible partner objectives
o Poor alliance leadership
o Poor integration process
  Interorganizational teams tend to be temporary, virtual teams. This makes them more
difficult to manage
 If an alliance team regularly gathers data and assesses its performance, it then can
engage in various team-building activities to improve its functioning and performance
 To the extent that an organization thoughtfully creates interorganizational alliance
teams, actively manage them, regularly manage their progress, and takes corrective
actions as needed, such teams can be the difference between success and failure

Alliance teams differ from other teams (internal teams)

 Organizational culture clashes
 Lack of trust
 Shared decision making
o Need approval from management in both organizations
o Lack of complete control over decisions
 Team size and expertise duplication
o Often larger than internal teams because functional expertise is often
duplicated on alliance teams to ensure that each partner’s knowledge is fully
utilized in completing tasks and making decisions

Case: Eli Lilly

Lilly (drug company) is successful in doing alliances. The main reason is that they do a
thorough due diligence process. They evaluate the potential partners on the dimensions in the
web chart below.
OKRs – Objectives and Key Results

Puropose: connect company, team, and personal goals to measurable results while having all team
members and leaders work together in one, unified direction

How

 3-5 high-level objectives

o 3-5 measurable key results under each objective
 Your daily poster on the wall:
o What should I do next?
o What should I focus on?
o How far am I?

Methodology
  Set quarterly goals – objectives
 Measure metrics process – key results
 Share it with leaders and co-workers
 One direction everyone works against
 Aligned and linked hierarchy
Company > Department > Team > Individual
 Transparency and open, clearly communicated team work

OKRs vs Balanced Scorecard

 Both are focused on objectives and metrics that helps you reach the objectives
 Balanced scorecard: most companies draft objectives that are meant to stay in place for a
year or longer
 OKR: organizations change their objectives and key results every quarter
 BSC creates objectives and measures in four dimensions (financial, customer, internal
processes and learning & growth), while OKRs don’t rely on perspectives
 With a rapid change, OKRs are better because they have a quarterly perspective while BSC is
more long-term
 The benefit of BSC is that it forces organizations to think holistically (helhetlig) about the
business and how the different perspectives effect each other