Mcs2 Result Control

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RESULT CONTROL

SESSION 2



Results controlsIt involves rewarding individuals for generatinggood results, or punishing them for poor results.

Results accountability

It influences actions because it causesemployees to be concerned about theconsequences of the actions they take.

However, the employees’ actions are not constrained ;On the contrary, employees are empowered totake whatever actions they believe will bestproduce the desired results.



Result Control

Pay-for-performance (not pay for position)Rewarding employees for generating goodresult

MeritocraciesRewards are given to the most talented andhardest working employees rather than those

with the longest tenure or the right socialconnection



Who is a professional?

“A professional is someone who isresponsible for achieving a result ratherthan [for] performing a task” [ Michael Hammer, Re-engineering guru]



Management by Objective (MBO)

Result control are often implemented under theframework of MBO

A process whereby the superior and subordinatemanagers of an organization jointly identify common

goals, define each employee’s major areas ofresponsibilities in terms of the results expected of them,and use these measures as guides for operating the unitand assessing the contribution of each of its membersSuatu proses dimana atasan dan bawahannya padasuatu organisasi bersama-sama mengidentifikasi tujuanbersama, kemudian tanggungjawab dan hasil yang ingindicapai dirinci untuk setiap karyawan, kemudianmenggunakan ukuran tersebut sebagai dasar untukmenjalankan unit organisasi dan untuk mengukurkontribusi tiap-tiap anggota organisasi.



Elements of Result Controls

Defining the performance dimensions Example: profitability, customer satisfaction, productdefect

What you measure is what you get ; hence,If not congruent with the organization’s objectives, thecontrols will actually encourage employees to do thewrong things!

Measuring performance on these dimensions Objective > financial > market-based: e.g., stock price; > accounting-based: e.g., return on assets; > non-financial: e.g., market share, cycle-time, waste;Subjective: e.g., managerial characteristics (“being ateam player”).



Elements of Result ControlsSetting performance targets

Motivational effects [stimulate action andimprove motivation]

Specific target, not vague statement like“do the best you can” or “work at areasonable pace”

Performance targets allow to interpret(own) performance.

Providing rewards or punishments Salary increases, bonuses, promotions, jobsecurity, recognition, training opportunities,freedom, power, etc.



Expectancy theory

Individuals’ motivational force, or effort, isa function of:(1). Their expectancies: their belief that certain

outcomes will result from their behavior(example: bonus for increased effort)

(2). The valences of (the strength of their

preference for) those outcome



Conditions determining theeffectiveness of result control

Results controls work best only when all ofthe following three conditions are present:

Superiors / managers mustknow

what results aredesired in the areas being controlled;

The individuals whose behaviors are being controlledmust have significant influence on the results in thedesired performance dimensions;

Superiors / managers must be able to measure theresults effectively.



Knowledge of desired result

For result control to work managers mustknow what results are desired in the areasthey wish to controlThey must communicate those desireseffectively to the employees working inthose areas.Ex: Purchasing managers???Result areas quality, cost, schedule



Ability to measure resultseffectively

The “effectiveness” of results measures must be judged by their ...

Ability to evoke the desired behaviors

Results measures should be:

Precise;Objective;Timely;Understandable.



Precision

Measurement precision refers to theamount of randomness in the measure.Precision is an important quality becausewithout it the measure loses much of itsinformation value.Ex. 120,3 = between 100-130



Objectivity

Freedom from biasMeasurement of quality

Managers have two main alternatives forincreasing measurement objectivity1. The actual measuring done by

independent of the process. Ex. IC2. Independent person. Ex. Auditor



Timelines

The lag between the employee’sperformance and the measurement ofresults.Employee need consistent



Understandability

The employees whose behaviors arebeing controlled must understand what arebeing held accountable for.The employees involved must understandwhat they must do to influence themeasure.



Pros and cons of results controls

Behavior can be influenced whileallowing significant autonomy.

They yield greater employeecommitment and motivation .

They are often inexpensive.

e.g. performance measuresare often collected forreasons not directlyrelated to managementcontrol.

Often less than perfect indicators ofwhether good actions have been taken.

They shift risk to employees (becauseof uncontrollable factors). Hence, they oftenrequire a risk premium for risk averse employees.

Sometimes conflicting functions:Motivation to achieve

targets should be “challenging” Communication among entities

targets should be slightlyconservative

PRO CON



Exercise

Result control;1.Defining performance dimensions

2.Measuring performance3.Setting performance targets4.Providing rewards and punishment



New Open Customer/outletDaily sales

Item productGrowth productPareto

ReturnDiscount rate



Tele selling

Mcs2 Result Control

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