Worldcom Case Study
How could managers encourage innovation unwelcome surprises?
Control in an Era oj
by simply Robert Simons
A fundamental issue facing managers in the 1990s is how you can exercise enough control in organizations that demand versatility, innovation, and creativity. Competitive businesses with demanding and informed consumers must rely on employee initiative to seek out possibilities and interact to customers' requires. But going after some possibilities can show businesses to excessive risk or bring behaviors which could damage a company's sincerity. Consider the spate of management control failures which may have made statements in the past a few years: Kidder, Peabody&. Company shed $350 , 000, 000 when a dealer allegedly ordered fictitious profits; Sears, Roebuck and Business took a $60 million charge against earnings after admitting that this recommended pointless repairs to customers in the automobile service business; Normal Chartered Traditional bank was suspended from trading on the Hong Kong stock market following being implicated in an improper share support scheme. The list goes on. In each case, personnel broke through existing control mechanisms and jeopardized the franchise of the business. The fee to the companies- in ruined reputations, fines, business failures, missed chances, and diversion of managing attention to manage the crises-was enormous. How do senior managers protect their companies via control failures when strengthened employees 70
are encouraged to redefine how they start doing all their jobs? Just how do managers make sure that subordinates with an pioneeringup-and-coming flair usually do not put the health and wellness of the business at risk? One particular solution is always to go back to the basic principles of control developed in the 1950s and sixties for machinelike bureaucracies. Because era, managers exercised control by sharing with people how to do all their jobs and monitoring associated with constant surveillance to guard against surprises. Even though this approach noises anachronistic for modern businesses, it is even now effective the moment standardization is crucial for effectiveness and produce, such as on an assembly line; if the risk of fraud of important assets is definitely high, just like in a casinoi or when ever quality and safety are essential to product performance, including at a nuclear engine power. However , for most organizations functioning indynamic and highly competitive markets, managers cannot use all their time and effort making sure that everybody is doing what is expected. Nor is it reasonable to think that managers is capable of control simply by hiring very good people, aiming incentives, and hoping for the very best. Instead, present managers must encourage personnel to start process advancements and innovative ways of addressing customers' needs-but in a controlled way. Luckily, the tools to reconcile the conflict between creativity and control have reached hand. Many DRAWINGS BY SIMPLY EDWARD GOREY
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managers are likely to define control narrowly-as computing progress against plans to ensure the estimated achievement of goals. Such diagnostic control systems happen to be, however , merely one ingredient of control. Three other levers are essential in today's organization environment: values systems, boundary systems, and interactive control systems. Each of the four control levers contains a distinct purpose for managers attempting to control the creative imagination of workers. Diagnostic control systems allow managers to ensure that important desired goals are getting achieved efficiently and effectively. Beliefs devices empower individuals and cause them to become search for new opportunities. They will communicate main values and inspire all members to agree to the organization's purpose. Border systems build the rules from the game and identify ' actions and pitfalls that employees need to avoid. Interactive control systems enable top-level managers to pay attention to strategic uncertainties, to learn about threats and opportunities since competitive circumstances change, and to...