Summary by Christine Masek
Master of Accountancy Program
University of South Florida, Fall 2001
One of the most difficult problems managers face today is maintaining control, efficiency, and productivity while still giving employees the freedom to be creative, innovative and flexible. Giving employees too much autonomy has led to disaster for many companies, including such well-known names as Sears and Standard Chartered Bank. In these companies and many others, employees had enough independence that they were able to engage in and mask underhanded, and sometimes illegal, activities. When these deviant behaviors finally came to light, the companies incurred substantial losses not only financially, but also in internal company morale and external public relations.
One method of preventing these kinds of incidents is for companies to revert to the “machinelike bureaucracies” of the 1950s and 60s. In these work environments, employees were given very specific instructions on how to do their jobs and then were watched constantly by superiors to ensure the instructions were carried out properly.
In the modern corporate world, this method of managing employees has all but been abandoned except in those industries that lend themselves to standardization and repetition of work activities (e.g., in casinos and on assembly lines). In most industries, managers simply do not have time to watch everyone all the time. They must find ways to encourage employees to think for themselves, to create new processes and methods, while still retaining enough control to ensure that employee creativity will ultimately benefit and improve the company.
There are four control levers or “systems” that can aid managers in achieving the balance between employee empowerment and effective control:
1. Diagnostic control systems,
2. Beliefs systems,
3. Boundary systems, and
4. Interactive control systems.
Diagnostic Control Systems
This control lever relies on quantitative data, statistical analyses and variance analyses. Managers use these and other numerical comparisons (e.g., actual to budget, increases/decreases in overhead from month to month, etc.) to periodically scan for anything unusual that might indicate a potential problem.
Diagnostic systems can be very useful for detecting some kinds of problems, but they can also induce employees and even managers to behave unethically in order to meet some kind of preset goal. Meeting the goal, no matter how it’s done, ensures the numbers won’t fluctuate in a manner that would draw negative attention to a particular department or person.
Employee bonuses (and sometimes even employment, itself) are often based on how well performance goals have been met or exceeded, measured in quantitative terms. If the goals are reasonable and attainable, the diagnostic system works quite well. It enables managers to assign tasks and go on to other things, releasing them from the leash of perpetual surveillance. Empowered employees are free to complete their work, under some but not undue pressure to meet a deadline, productivity level, or other goal, and to do it in a way that may be new or innovative.
However, when goals become unrealistic, empowered employees may sometimes use their capacity for creativity to manipulate the factors under their control in order not to fall short of their manager’s expectations. Such manipulations can only have very short-term positive effects and can very possibly, depending on their magnitude, lead to long-run disaster for the company.
This control lever is used to communicate the tenets of corporate culture to every employee of the company. Beliefs systems are generally broad and designed to appeal to many different types of people working in many different departments.
In order for beliefs systems to be an effective lever of control, employees must be able to see key values and ethics being upheld by those in supervisory and other top executive positions. Senior management must be careful not to adopt a particular belief or mission simply because it is in vogue to do so at the time, but because it reflects the true nature and value system of the company as a whole.
It is easier for employees to understand on an informal, innate level the mission and credo of a company that operates in only one industry, as did many companies in the past. As companies grow more complex, however, it is becoming more and more necessary to establish formal, written mission statements and codes of ethics so that there can be no mistaking where the company is going and how it is going to get there.
This control lever is based on the idea that in an age of empowered employees, it has become easier and more effective to set the rules regarding what is inappropriate rather than what is appropriate. The effect of this kind of thinking is to allow employees to create and define new solutions and methods within defined constraints. The constraints are set by top management and are meant to steer employees clear of certain industries, types of clients, etc. They are also intended to focus employee efforts on areas that have been determined to be best for the company, in terms of profitability, productivity, efficiency, etc.
Boundary systems can be thought of in terms of “minimum standards,” and can help to guard the good name of a company, an asset that can be very difficult to rebuild once damaged. Examples of these kinds of standards include forbidding employees to discuss client matters outside the office or with anyone not employed by the company (sometimes including even spouses) and refusing to work on projects or with clients deemed to be “undesirable.”
Many times a company will implement a boundary system only after it has suffered a major crisis due to the lack of one. It is important that companies begin to be proactive in establishing boundaries before they are needed.
Boundary systems are the flipside of belief systems. They are the “dark, cold constraints” to the “warm, positive, inspirational” tenets of belief systems.
Interactive Control Systems
The key to this control lever is the word “interactive.” In order for this kind of control system to work, it is critical that subordinates and supervisors maintain regular, face-to-face contact. Management must be able to glean what is most critical from all aspects of an organization’s operations so that they can establish and maintain on a daily basis their overall strategic plan for the company.
Companies use many different tools to accomplish this kind of regular communication. One popular method of doing this is to analyze data from reports that are frequently released (for example, the Nielsen ratings), internally generated productions reports, and professional journals.
Though this may seem somewhat like the diagnostic control system discussed earlier, there are four important characteristics which set the interactive control system apart: the interactive system focuses on constantly changing data of an overall strategic nature, 2) the strategic nature of the data warrants attention from all levels of management on a regular basis, 3) the data is best analyzed in a face-to-face setting in groups that include all levels of employees, and 4) the system itself stimulates these regular discussions.
Empowering employees is necessary for the continuing health and improvement of most companies. Using the four levers of control discussed above in conjunction with one another, managers can unleash the creative potential of their subordinates without losing overall control of their team and its objectives.
|Harness Employees’ Creativity with the Four Levers of Control|
|To achieve||Lack of focus or of resources.||Build and support clear targets.||Diagnostic control systems.|
|To contribute||Uncertainty about purpose.||Communicate core values and mission.||Beliefs systems.|
|To do right||Pressure or temptation.||Specify and enforce rules of the game.||Boundary systems.|
|To create||Lack of opportunity or fear of risk.||Open organizational dialogue to encourage learning.||Interactive control systems.|
For a graphic illustration of the levers of control and a note about how they are related to the Balanced Scorecard see Simon's Levers of Control.
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