Organizations As Systems
Organization as Systems, 3 Perspectives - Form, Function, and Management - to Improve Understanding
Organizations as Systems
The notion of "Organization as Systems" refers to an approach to conceptualizing organizations as systems, based on systems thinking and theory, in order to give clarity and perspective to studying and analyzing organizations. The term system, implies an orderly arrangement, an interrelationship of parts; in the arrangement, every part has a place and plays a definite role, and they (the parts) are hound by interaction. A system has well-defined boundaries - the limits that identify its components, processes, and interrelationships when it interfaces with other system(s) external to it, or its environment. To understand the functioning of a system you have to analyze and identify its core parts (subsystems) and understand how these various subsystems enter into specific relationships in the fulfillment of the system's intended mission/goals.
Systems theory likens the enterprise to an organism with interdependent parts, each with its own specific function and interrelated responsibilities. To ascertain certain subsystems requirements properly and to design appropriate organization form - structure, functions, and sub-systems - it is of primary importance to understand the purpose and mission of the organization as a whole, and the relationship to its environment. Systems thinking is integral thinking of analysis and synthesis which looks at things by looking at the whole (i.e., an organization, human body, etc.), where the parts should always work to benefit the whole. Systems thinking is concerned with how things work and fit together. Systems thinking informs strategic thinking which is concerned with where, for example, the organization should go and how to get there.
For example, the human body can be conceptualized as a organic system, is comprised of subsystems such as circulatory, nervous, digestive, excretion systems, etc. and their specific relations in the fulfillment of the organic functions of the body. The business organization conceptualized as a system may be comprised of subsystems such as production/operations system that creates and delivers value to customers, and other subsystems built around the production subsystem.
Using systems overlay to understand organizations allows for the acknowledgement of the idea of the organization as a system - an open/social system - composed of subsystems, their inter-relatedness and interdependence; the existence of boundaries that allow or prevent the interaction between various organization units and elements of other subsystems and environments. Organizations viewed as systems, are composed of smaller interrelated subsystems serving specialized functions. Each of these subsystems receives inputs from the other subsystems and turns them into outputs for use by other subsystems. From a systems perspective, an organization is an adaptive whole with constituent elements and emergent properties, making it more than the sum of its parts. The form/ structure of the organization determines how each of the subsystems relate to each other in terms of control, and communication through out the organization. A well designed organization ensures appropriate levels of energy is generated and maintained in the organization as system.
The notion of "Organization as Systems" refers to an approach to conceptualizing organizations as systems, based on systems thinking and theory, in order to give clarity and perspective to studying and analyzing organizations. The term system, implies an orderly arrangement, an interrelationship of parts; in the arrangement, every part has a place and plays a definite role, and they (the parts) are hound by interaction. A system has well-defined boundaries - the limits that identify its components, processes, and interrelationships when it interfaces with other system(s) external to it, or its environment. To understand the functioning of a system you have to analyze and identify its core parts (subsystems) and understand how these various subsystems enter into specific relationships in the fulfillment of the system's intended mission/goals.
Systems theory likens the enterprise to an organism with interdependent parts, each with its own specific function and interrelated responsibilities. To ascertain certain subsystems requirements properly and to design appropriate organization form - structure, functions, and sub-systems - it is of primary importance to understand the purpose and mission of the organization as a whole, and the relationship to its environment. Systems thinking is integral thinking of analysis and synthesis which looks at things by looking at the whole (i.e., an organization, human body, etc.), where the parts should always work to benefit the whole. Systems thinking is concerned with how things work and fit together. Systems thinking informs strategic thinking which is concerned with where, for example, the organization should go and how to get there.
For example, the human body can be conceptualized as a organic system, is comprised of subsystems such as circulatory, nervous, digestive, excretion systems, etc. and their specific relations in the fulfillment of the organic functions of the body. The business organization conceptualized as a system may be comprised of subsystems such as production/operations system that creates and delivers value to customers, and other subsystems built around the production subsystem.
- Production Subsystems - These are the components that transform inputs into outputs such as goods and services. A Production system may comprise any method used in industry to create goods and services from various resources - labor, materials, equipment and space (facility, land, etc). All production systems when viewed from the most abstract level, might be said to be "transformation processes" - processes that transform/convert resources into useful goods and services.
- Supportive Subsystem - These perform acquisition and distribution functions within the organization. Acquisition activities include securing resources such as employees and raw materials from the external environment. Human resources and purchasing functions would typically be included in this group. Distribution activities encompass efforts to transfer the products or services outside of the organization. Supportive subsystems of distribution type includes sales and marketing functions, public relations departments and lobbying efforts.
- Maintenance Subsystem - These systems maintain the social involment of employees in the organization. Activities in this group includes providing employee benefits and compensation that motivate workers, creating favorable work conditions, empoering employees, and other forms of satisfying human needs.
- Adaptive Subsystems - These subsystems serve to gather information about problems and opportunities in the environment then respond with innovation that allow the organization to adapt. A firm's research lab and product development departments would be part of an adaptive subsystem.
- Managerial Subsystems - These direct the activities of other subsystems in the organization. These management systems set goals and policies, allocate resources, settle disputes, and generally work to facilitate the efficiency of the organization.
Using systems overlay to understand organizations allows for the acknowledgement of the idea of the organization as a system - an open/social system - composed of subsystems, their inter-relatedness and interdependence; the existence of boundaries that allow or prevent the interaction between various organization units and elements of other subsystems and environments. Organizations viewed as systems, are composed of smaller interrelated subsystems serving specialized functions. Each of these subsystems receives inputs from the other subsystems and turns them into outputs for use by other subsystems. From a systems perspective, an organization is an adaptive whole with constituent elements and emergent properties, making it more than the sum of its parts. The form/ structure of the organization determines how each of the subsystems relate to each other in terms of control, and communication through out the organization. A well designed organization ensures appropriate levels of energy is generated and maintained in the organization as system.
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Open Systems
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Social Systems
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Transformation Systems
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Operations Systems
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Management System
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Organization as Open Systems
Organizations viewed as Open systems are essentially, goal-seeking, information feedback systems. Open system theory (Ludwig von Bertanlanffy,, 1956), defines the concept of a system, where "all systems are characterized by an assemblage or combination of parts whose relations make them interdependent" (Scott p. 77). Open systems have open, or porous, boundaries that allow feedback exchanges from inside and outside the system (e.g., business organization). Open systems tend to devise more than one way to accomplish goals or reach similar results with different conditions and operations--what von Bertanlanffy called “equifinality.” This is in direct contrast to closed systems that function under the assumption that there is only one way to achieve a result: a direct relationship between cause and effect. Closed systems have no interaction with their environment. Openness refers to the free flow of information within the system. All non-living systems are closed systems.
Open Systems Components/Elements
Organizations Open Systems continuously interact with their environments through acquisition of input, production of output, and exchange of information; they survive and grow by continuously adapting to their environment through learning. When a business regularly interacts with its environment, and exchanges and processes feedback, it is an open system organization. The key elements of Open Systems include:
Outputs and Inputs
The outputs of a system define the value produced by the system from its inputs for the benefit of the system's users. Determining the output is a critical step in specifying the nature, amount, and regularity of the inputs needed to operate the system.
Processors
Processors are elements of a system that actually transforms inputs into outputs. Transformation involve processors which are the elements of a system that actually transforms inputs into outputs. Processors may include resources such as people/human resources, equipment, etc., which can be organized according to how work gets done, i.e., processes for creating and delivering value, and how they are managed i.e., organization functions, divisions, etc.
Control Systems
Systems Controls - Feedback is a form of systems control. As systems, organizations use planning and control to manage their resources effectively. System's outputs are used as feedback that compares performance with goals. This comparison in turn helps managers formulate more specific goals as inputs. Feedback is received from within the organization and from the outside environments around it.
Feedback Mechanism
Feedback is a return of information about a result or the return portion of a process. Feedback measures output against a standard in some form of cybernetic procedure that includes communication and control. Feedback can be positive or negative; routine or informational. Negative feedback generally provides the controller with information for action. Positive feedback reinforces the performance of the system, and is routine in nature.
Environments
The enabling environment is comprised of the external and internal factors.
Organization Boundaries and Interfaces
All systems are contained by boundaries separating them from the environment. Organizational boundaries exist on a continuum ranging from extremely permeable - open - to almost impermeable - closed. Openness and closedness of organizations is related to the concept of external boundary permeability. Openness and closedness exist on a continuum.
For an organization to continue to adapt, survive and grow it must be able to import resources - people, raw materials, and information - through its boundaries (inputs), and then exchange the outputs - finished products, services, and information - with its environment (the outside world). The internal environments of an organization can be characterized by degree of openness and closeness, which might differ across departments, organizational units, or even systems of projects and programs.
Organizations viewed as Open systems are essentially, goal-seeking, information feedback systems. Open system theory (Ludwig von Bertanlanffy,, 1956), defines the concept of a system, where "all systems are characterized by an assemblage or combination of parts whose relations make them interdependent" (Scott p. 77). Open systems have open, or porous, boundaries that allow feedback exchanges from inside and outside the system (e.g., business organization). Open systems tend to devise more than one way to accomplish goals or reach similar results with different conditions and operations--what von Bertanlanffy called “equifinality.” This is in direct contrast to closed systems that function under the assumption that there is only one way to achieve a result: a direct relationship between cause and effect. Closed systems have no interaction with their environment. Openness refers to the free flow of information within the system. All non-living systems are closed systems.
Open Systems Components/Elements
Organizations Open Systems continuously interact with their environments through acquisition of input, production of output, and exchange of information; they survive and grow by continuously adapting to their environment through learning. When a business regularly interacts with its environment, and exchanges and processes feedback, it is an open system organization. The key elements of Open Systems include:
- Output and Inputs
- Processors
- Control System
- Feedback Mechanism
- Environment
- Boundaries and Interfaces
Outputs and Inputs
The outputs of a system define the value produced by the system from its inputs for the benefit of the system's users. Determining the output is a critical step in specifying the nature, amount, and regularity of the inputs needed to operate the system.
- Inputs - An organization as a living entity must take in energy to survive and grow. An organization must obtain information from the external environment such as industry trends, the needs of market segments, as well as financial, human, and material resources from the external environment in order to survive and achieve sustainable growth. When an organization lacks suffucuent resources from the external environment, it begins to weaken and ultimately die.
- Outputs - The outputs of a system define the value produced by the system from its inputs for the benefit of the system's users. The determining the output is a critical step in is specifying the nature, amount, and regularity of the inputs needed to operate the system. The products and services produced from the inputs through the transformation processes are exported top the external environment by the organization to meet the tangible needs of customers, thus fulfilling the organization's purpose and making good on its commitments that managers and key personnel made in their implicit contract with the external environment.
Processors
Processors are elements of a system that actually transforms inputs into outputs. Transformation involve processors which are the elements of a system that actually transforms inputs into outputs. Processors may include resources such as people/human resources, equipment, etc., which can be organized according to how work gets done, i.e., processes for creating and delivering value, and how they are managed i.e., organization functions, divisions, etc.
- Process - A process is an orderly grouping of interdependent activities/tasks linked together according to a plan (flow chart) to achieve a specific objective (produce an output of a specified type). An activity is associated with assignment policies that defines the rules and criteria for match between role definition and the specification of the required skills and qualifications to perform the activity/task. The policy can be resolved at run-time to any available resource with the requisite skills and qualifications. These resources may be tangible assets/resources such as human resources (people), capital assets (i.e., property, plant and equipment).
Control Systems
Systems Controls - Feedback is a form of systems control. As systems, organizations use planning and control to manage their resources effectively. System's outputs are used as feedback that compares performance with goals. This comparison in turn helps managers formulate more specific goals as inputs. Feedback is received from within the organization and from the outside environments around it.
Feedback Mechanism
Feedback is a return of information about a result or the return portion of a process. Feedback measures output against a standard in some form of cybernetic procedure that includes communication and control. Feedback can be positive or negative; routine or informational. Negative feedback generally provides the controller with information for action. Positive feedback reinforces the performance of the system, and is routine in nature.
- Tactical Feedback - This relates to business results - measures of the product and operational tactical performance of a business. Business results demonstrate the quality and value of products and services that lead to customer satisfaction and engagement.
- Strategic Feedback - This relates to the strategic context and helps explain, at a high level, the reason for the entity's existence, what it exists to achieve, and the powers and functions it may exercise to help achieve its goals. Strategy organizes the internal and external context of an organization, using concepts like SWOTs and Porter’s Five Forces, to help us make sense or meaning of the environment we operate in. Strategy helps us make meaning of our context, and therefore helps us create a path forward. It provides others in the organization with a mental model to understand the organization, its’ environment and the path that it has chosen.
- Feedback Loop - The feedback loop is a process in which a system receives internal/external environmental responses to its behavior and in turn, reacts to those received responses by accommodating and assimilating the energy/information received, by altering the system's structure, and then engaging in altered exchanges of energy/information.
Environments
The enabling environment is comprised of the external and internal factors.
- The external environment is defined by external factors such as characterized by PESTEL factors e.g., tight lending conditions, government regulations and competition. These factors are uncontrollable, and can be modeled as "Influencer" concept abstraction borrowed from Business Motivational Model by the OMG. The category of external factors (influencer) is large and inclusive. Every business has hundreds of potential influencer. There will always be too many influencer to model. The decision as to what influencer to model is determined by the influencer's impact the organization's mission or mandate and if its of strategic relevance.
- The internal environment is defined by the set of internal factors resulting from either the way the business is run, or decisions made, or both. The factors resulting from how the business is run include the business reputation and image, credit worthiness, etc. The factors resulting from business decisions include management structure and staffing, physical decor of facilities/offices, etc. Internal factors can be conceptualized as "strengths"/"weaknesses" that can be controlled directly or indirectly; but changing these factors usually involves indirect costs such as lost productivity for example, while new employees are being trained, some direct costs such as a penalty for terminating a lease before it expires.
Organization Boundaries and Interfaces
All systems are contained by boundaries separating them from the environment. Organizational boundaries exist on a continuum ranging from extremely permeable - open - to almost impermeable - closed. Openness and closedness of organizations is related to the concept of external boundary permeability. Openness and closedness exist on a continuum.
- Openness - refers to the free flow of information within the organization. Creative departments are often characterized as open, with free flow of ideas among participants and very few restrictions on who gets what information, and at what time when a creative project is in its infancy.
- Closedness - refers to obstacles to the free flow of information within the organization. This is at the opposite end of the continuum; examples might be the defense department unit assigned to work on top secret defense planning affecting national security.
For an organization to continue to adapt, survive and grow it must be able to import resources - people, raw materials, and information - through its boundaries (inputs), and then exchange the outputs - finished products, services, and information - with its environment (the outside world). The internal environments of an organization can be characterized by degree of openness and closeness, which might differ across departments, organizational units, or even systems of projects and programs.
Organizations as Social Systems
Social system refers to an orderly arrangement, an interrelationship of parts. In the arrangement, every part has a fixed place and a role to play. The parts are hound by interaction. Systems signifies, thus, patterned relationships among constituent parts of a structure which is based on functional relations and which makes these parts active and binds them into reality.
Social system is the patterned series of interrelationships between individuals, groups, and institutions, and forming a coherent whole social structure. A social system may be defined, after Parsons, a plurality of social actors who are engaged in more or less stable interaction "according to shared cultural norms and meanings." Individuals constitute the basic interaction units. But the interaction units may be groups or organization of individuals within the system. Social system is a comprehensive arrangement which takes in its orbit all the diverse subsystems such as the economic, political, religious and other institutions and their interrelations too.
Component Elements of a Social System
Society may be viewed as a system of interrelated parts which cooperate to preserve a recognizable whole and to satisfy satisfy some purpose or goal. Social system may be described as an arrangement of social interactions based on shared norms and values. Individuals constitute it and each has a place and function to perform within it.
All social organizations are "social system', since they consist of interacting individuals. In the social system each of the interacting individuals has a function or role to perform in terms of the status/position they occupy in the system. For example, in the family parents, sons and daughters are required to perform certain socially recognized functions or roles.
The elements of social system are:
[TBD]
A Business organization is a dynamic social system in that it has a purpose and is greater than the sum of its parts. Organizations and their members are usually conceptualized as systems designed to accomplish predetermined goals and objectives through people and other resources that they employ. The organization conceptualized as a social system, is complexes of people and/or groups that according to commonly agreed rules and procedures as well as norms strive to realize one or more preset objectives. The significance of conceptualizing organizations as complex systems is that systems principles allow insight into how organizations work. An organization as system secures, expends, and conserves energy (resources) to maintain the system and further the achievement of its mission/purpose.
An organizational system is the structure of how an organization is set up. That structure defines how each division of a business is set up, the hierarchy of who reports to whom and how communication flows throughout the organization. The organization conceptualized as a part of a larger social system, is complexes of people, and/or groups that according to commonly agreed rules and procedures as well as norms of interactions that arise among and between the people in the organization. An organization as a system is a combination of interrelated parts operating as a whole. It becomes a social system when it relates to people. The subject of business and society covers relationships to the broader social system outside its own organization. The basic operation of a system is that it receives inputs from its environment, processes these in some way, and then releases outputs to the environment.
Organizations as social structures is a perspective that focuses on the hardware of human association, the durable factors that govern people’s ways of being together as they achieve common goals by coordinated means. Social structure is what permits the organization’s persistence over time; it describes relations among differentiated positions, and references an agency or institutional will that transcends that of individuals. Structure implies wholeness rather than aggregates, predictable patterns of transformation, self-regulation, and closure.
Structure itself is a term borrowed from architecture, hence the spatial emphasis on prescribed places that people can inhabit. But if the architect designs the structure before it is inhabited, the organizational cognate can be discerned only after the fact by means of analysis. As the building goes up, its structure is visible to the untrained eye. Only the effects of social structures are visibly manifest in human responses to institutional circumstances – their material is not so much physical as latent.
Components of social structure include
The demands made on business are part of a larger series of changes occurring throughout the social system. Many difficult problems are arising because of very rapid change which is upsetting the delicate equilibrium in our complex society. It is clearly a system relationship in which social, educational, technological, and other types of change are closely interwoven.
Social system refers to an orderly arrangement, an interrelationship of parts. In the arrangement, every part has a fixed place and a role to play. The parts are hound by interaction. Systems signifies, thus, patterned relationships among constituent parts of a structure which is based on functional relations and which makes these parts active and binds them into reality.
Social system is the patterned series of interrelationships between individuals, groups, and institutions, and forming a coherent whole social structure. A social system may be defined, after Parsons, a plurality of social actors who are engaged in more or less stable interaction "according to shared cultural norms and meanings." Individuals constitute the basic interaction units. But the interaction units may be groups or organization of individuals within the system. Social system is a comprehensive arrangement which takes in its orbit all the diverse subsystems such as the economic, political, religious and other institutions and their interrelations too.
Component Elements of a Social System
Society may be viewed as a system of interrelated parts which cooperate to preserve a recognizable whole and to satisfy satisfy some purpose or goal. Social system may be described as an arrangement of social interactions based on shared norms and values. Individuals constitute it and each has a place and function to perform within it.
All social organizations are "social system', since they consist of interacting individuals. In the social system each of the interacting individuals has a function or role to perform in terms of the status/position they occupy in the system. For example, in the family parents, sons and daughters are required to perform certain socially recognized functions or roles.
The elements of social system are:
- Belief/Faith and Knowledge
- Sentiment
- Eng Goal and Objective
- Ideals and Norms
- Status-Position
- Role
- Power
- Sanction
[TBD]
A Business organization is a dynamic social system in that it has a purpose and is greater than the sum of its parts. Organizations and their members are usually conceptualized as systems designed to accomplish predetermined goals and objectives through people and other resources that they employ. The organization conceptualized as a social system, is complexes of people and/or groups that according to commonly agreed rules and procedures as well as norms strive to realize one or more preset objectives. The significance of conceptualizing organizations as complex systems is that systems principles allow insight into how organizations work. An organization as system secures, expends, and conserves energy (resources) to maintain the system and further the achievement of its mission/purpose.
An organizational system is the structure of how an organization is set up. That structure defines how each division of a business is set up, the hierarchy of who reports to whom and how communication flows throughout the organization. The organization conceptualized as a part of a larger social system, is complexes of people, and/or groups that according to commonly agreed rules and procedures as well as norms of interactions that arise among and between the people in the organization. An organization as a system is a combination of interrelated parts operating as a whole. It becomes a social system when it relates to people. The subject of business and society covers relationships to the broader social system outside its own organization. The basic operation of a system is that it receives inputs from its environment, processes these in some way, and then releases outputs to the environment.
Organizations as social structures is a perspective that focuses on the hardware of human association, the durable factors that govern people’s ways of being together as they achieve common goals by coordinated means. Social structure is what permits the organization’s persistence over time; it describes relations among differentiated positions, and references an agency or institutional will that transcends that of individuals. Structure implies wholeness rather than aggregates, predictable patterns of transformation, self-regulation, and closure.
Structure itself is a term borrowed from architecture, hence the spatial emphasis on prescribed places that people can inhabit. But if the architect designs the structure before it is inhabited, the organizational cognate can be discerned only after the fact by means of analysis. As the building goes up, its structure is visible to the untrained eye. Only the effects of social structures are visibly manifest in human responses to institutional circumstances – their material is not so much physical as latent.
Components of social structure include
- Culture
- Social Class
- Social Status
- Roles
- Groups
- Social Institutions
The demands made on business are part of a larger series of changes occurring throughout the social system. Many difficult problems are arising because of very rapid change which is upsetting the delicate equilibrium in our complex society. It is clearly a system relationship in which social, educational, technological, and other types of change are closely interwoven.
Transformation Systems
A transformation system converts inputs into outputs. Operations is often defined as a transformation process. Inputs such as raw materials, labor, equipment, and capital are transformed into outputs (goods and services). Customer feedback is used to adjust the transformation process. Operations systems can be categorized in terms of the types of transformation, such as:
Several different transformations are usually required in operations to produce a good or service.
The input resources to any transformation process include workers, equipment used for production, raw materials, information, and clients. Inputs are the resources invested in accomplishing a task, and typically include time, money, and effort. Process refers to what is done in order to accomplish a task. The output is, obviously, the accomplishment itself. If you can get the same outcome with less work involved, this would be an improvement.
Transformation Processes
A transformation process is any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides outputs for customers or clients. Where the inputs are raw materials, it is relatively easy to identify the transformation involved, as when milk is transformed into cheese and butter. Where the inputs are information or people, the nature of the transformation may be less obvious. For example, a hospital transforms ill patients (the input) into healthy patients (the output).
Types of Transformation Processes
One useful way of categorizing the transformation process is in terms of different types of transformation changes that occur in the processes such as:
Often all three (3) types of input – materials, information and customers – to processes are transformed by the same organization. For example, withdrawing money from a bank account involves information about the customer's account, materials such as checks and currency, and the customer. Treating a patient in hospital involves not only the ‘customer's’ state of health, but also any materials used in treatment and information about the patient.
Transforming Resources
The transforming resource (i.e., facility, human resource, and equipment), and process technology (that define the production of goods and service delivery systems). The main type of transforming resources used in transformation processes include facilities and buildings, equipment, process technology, and people involved in the operations process possibly including the customer in some types of services processes. For example, in a restaurant the transforming resources include equipment such as cookers, refrigerators, tables and chairs, and the chefs and waiters; the transformed resources of a restaurant include food and drink.
Transformed Resources
Transformed Resources are a mixture of materials, customers and information that are processed in such as manner to form a specific product or service. Value added: the changing of the various parts into something new. i.e. the value of the original inputs has been changed.
Production Systems
A Production system is any method used in industry to create goods and services from various resources - labor, materials, equipment and space (facility, land, etc). All production systems when viewed from the most abstract level, might be said to be "transformation processes" - processes that transform/convert resources into useful goods and services. The transformation processes may be characterized by flows (channels of movement) in the process: both the physical flow of materials, work in the intermediate stages of manufacture (work in process) and finished goods; and the flow of information and the documents that carry and accompany the physical flows.
The physical flows are subject to the constraints of the capacity of the production system, which also limits the system's ability to meet output expectations. Also, the capacity of the information handling channel of the production system may also be an important measure of a system's output. Managing the information flow, or the planning and control of the system to achieve acceptable outputs is an important task of operations management.
While the capacity of the production system is a major factor in determining system output levels, the additional consideration of quality of the goods and services is also a limiting factor. The quality of a product measured against some objective standard may include appearance, performance characteristics, durability, serviceability, and other physical characteristics; timeliness of delivery; cost; appropriateness of documentation and supporting materials,etc. Quality of output is an important part of the definition of a production system.
Types of Production Systems
There are three (3) common types of production systems: the batch system, the continuous system, and and the project system.
Batch and continuous systems are often found in combination in the production of goods and services such as integrated circuits for electronic equipment, quick service restaurants, etc.
A transformation system converts inputs into outputs. Operations is often defined as a transformation process. Inputs such as raw materials, labor, equipment, and capital are transformed into outputs (goods and services). Customer feedback is used to adjust the transformation process. Operations systems can be categorized in terms of the types of transformation, such as:
- Manufacturing – the physical creation of products (for example cars)
- Transport/Logistics – the movement of materials or customers (for example a taxi service)
- Supply – change in ownership of goods (for example in retailing)
- Service – the treatment of customers or the storage of materials (for example hospital wards, warehouses).
Several different transformations are usually required in operations to produce a good or service.
The input resources to any transformation process include workers, equipment used for production, raw materials, information, and clients. Inputs are the resources invested in accomplishing a task, and typically include time, money, and effort. Process refers to what is done in order to accomplish a task. The output is, obviously, the accomplishment itself. If you can get the same outcome with less work involved, this would be an improvement.
Transformation Processes
A transformation process is any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides outputs for customers or clients. Where the inputs are raw materials, it is relatively easy to identify the transformation involved, as when milk is transformed into cheese and butter. Where the inputs are information or people, the nature of the transformation may be less obvious. For example, a hospital transforms ill patients (the input) into healthy patients (the output).
Types of Transformation Processes
One useful way of categorizing the transformation process is in terms of different types of transformation changes that occur in the processes such as:
- Physical Transformation - Changes in the physical characteristics of materials or customers.
- Location Transformation - Changes in the location of materials, information or customers.
- Possession Transformation - Changes in the ownership of materials or information.
- Storage Transformation - Storage or accommodation of materials, information or customers.
- Information Transformation - Changes in the purpose or form of information.
- Physiological Transformation - Changes in the physiological or psychological state of customers.
Often all three (3) types of input – materials, information and customers – to processes are transformed by the same organization. For example, withdrawing money from a bank account involves information about the customer's account, materials such as checks and currency, and the customer. Treating a patient in hospital involves not only the ‘customer's’ state of health, but also any materials used in treatment and information about the patient.
Transforming Resources
The transforming resource (i.e., facility, human resource, and equipment), and process technology (that define the production of goods and service delivery systems). The main type of transforming resources used in transformation processes include facilities and buildings, equipment, process technology, and people involved in the operations process possibly including the customer in some types of services processes. For example, in a restaurant the transforming resources include equipment such as cookers, refrigerators, tables and chairs, and the chefs and waiters; the transformed resources of a restaurant include food and drink.
Transformed Resources
Transformed Resources are a mixture of materials, customers and information that are processed in such as manner to form a specific product or service. Value added: the changing of the various parts into something new. i.e. the value of the original inputs has been changed.
Production Systems
A Production system is any method used in industry to create goods and services from various resources - labor, materials, equipment and space (facility, land, etc). All production systems when viewed from the most abstract level, might be said to be "transformation processes" - processes that transform/convert resources into useful goods and services. The transformation processes may be characterized by flows (channels of movement) in the process: both the physical flow of materials, work in the intermediate stages of manufacture (work in process) and finished goods; and the flow of information and the documents that carry and accompany the physical flows.
The physical flows are subject to the constraints of the capacity of the production system, which also limits the system's ability to meet output expectations. Also, the capacity of the information handling channel of the production system may also be an important measure of a system's output. Managing the information flow, or the planning and control of the system to achieve acceptable outputs is an important task of operations management.
While the capacity of the production system is a major factor in determining system output levels, the additional consideration of quality of the goods and services is also a limiting factor. The quality of a product measured against some objective standard may include appearance, performance characteristics, durability, serviceability, and other physical characteristics; timeliness of delivery; cost; appropriateness of documentation and supporting materials,etc. Quality of output is an important part of the definition of a production system.
Types of Production Systems
There are three (3) common types of production systems: the batch system, the continuous system, and and the project system.
- Batch System - In the batch system, general purpose equipment and methods are used to produce small quantities of output (goods or services) with specifications that vary greatly from one batch to the next. A given quantity of a product is moved as a batch through one or more steps, and the total volume emerges simultaneously at the end of the production cycle. Examples include systems for producing specialized machine tools, or heavy duty construction equipment, specialty chemicals, and processed food products; or in the service sector, the system for processing claims in large insurance companies. Batch production systems are often referred to as job shops.
- Continuous System - In the continuous system, items to be processed flow through a series of steps, or operations that are common to most other products being processed. Examples include system for assembling automobile engines, and the automobiles themselves, as well as other consumer products such as washing machines, televisions, and personal computers. These systems are are often referred to as assembly/assembly line systems and are common in mass production operations.
- Project System - A project is a single focused endeavor. A project system is an undertaking to create a single, one of a kind product (good or service) where resources are brought together only once. Examples include a building, a ship, or the prototype of a product such as an aircraft or a large computer. Because of the singular nature of project systems, special methods of management have been developed to contain the costs of production within reasonable levels. A collection of projects is referred to as a program.
Batch and continuous systems are often found in combination in the production of goods and services such as integrated circuits for electronic equipment, quick service restaurants, etc.
Operations Systems
An Operations system is the joint configuration of resources and processes such that the resulting competencies are aligned with the organization's desired competitive position. The task of operations strategy is to design the operations system for an organization. Operations management involves the planning and coordination of work. Strategically, this involves the long-term structuring of work. Tactically, the task of operations management is to utilize the operations system and provide the best match of supply with demand.
The operations system is comprised of the following elements:
Most firms share access to the same processes and technology, so they usually differ very little in the areas of distinctive competencies. What is different is the degree to which operations matches its processes and infrastructure to its strategic objectives and goals. Resources form a plant’s foundation, consisting of the plant’s capacity and all of its stocks (Wang & Ahmed, 2007). In contrast, operational practices such as just in time are fairly standardized activities, programs, or procedures that have been developed to address the attainment of specific operational goals or objectives (Flynn et al., 1995).
Core Competencies and Distinctive Competencies
Core competency refers to a company's set of skills or experience in some activity, rather than the physical or financial assets. Core competence is anything that a business does extremely well, and is generally considered to be critical to the business's overall performance. For example, a marketing agency's ability to generate data-led campaign ideas would be a core competence. An organization's core competency is an organization's strategic strength. For example, Honda's strategic strength (core competency) lies in its engine and propulsion systems.
A distinctive competence is a competence unique to a business organization, which enables the production of a unique value proposition in the function of the business. A distinctive competence is one of the characteristics that sets your business apart from the competition. A distinctive competence is maintainable in the face of competition. In a dynamic environment, ultimately, distinctive competencies or the uniqueness of the value proposition produced using them, become less distinct or unique.
A distinctive competency is the basis for the development of an unassailable competitive advantage. Distinctive competencies can occur in a range of different areas, including: marketing, personnel, customer relations, technology, manufacturing, etc. Distinctive competencies, as a basis for competitive advantage, can come from a number of sources including: technology, industry position, market relations, cost, business processes, manufacturing processes, people, customer service, etc. For a business to develop and sustain a competitive advantage, it must have some sort of competitive advantage based on a distinctive competency, which enables it to produce a unique value proposition. The strongest form of competitive advantage known comes from the insightful integration of complementary elements of the business model. This is because it is difficult for competitors to understand and even more difficult to replicate.
Organizational Capabilities
A capability is the ability to do something. Organizational capabilities represent a distinctive and superior way of deploying, allocating, and coordinating resources (Amit & Schoemaker, 1993; Cavusgil, Seggie, & Talay, 2007; Schreyogg & Kliesch-Eberl, 2007). Thus, organizational capabilities are tacit social processes that emerge gradually over time, so gradually that participants may not even be aware of their existence and ultimately take them for granted (Leonard-Barron, 1992). As social processes, organizational capabilities are path dependent, influenced by factors such as firm history (Teece, Pisano, & Shuen, 1997), actions of decision makers (Rothaermel & Hess, 2007), and the firm’s learning process (Schreyogg & KlieschEberl, 2007). Furthermore, these paths are unique to a firm (Teece et al., 1997), described by Eisenhardt and Martin (2000) as “equifinality”; there are multiple paths to achieving the same organizational capability. Thus, the paths to a specific organizational capability can arise from very different starting points (Mosey, 2005).
Operational Capabilities
Operational capabilities are firm-specific sets of skills, processes, and routines, developed within the operations management system, that are regularly used in solving its problems through configuring its operational resources. Operational capabilities provide unity, integration, and direction to resources and operational practices. They encapsulate both explicit elements (e.g., resources, practices) and tacit elements (e.g., know-how, skill sets, leadership) for handling a variety of problems or dealing with uncertainty. That is, operational capabilities draw on resources and operational practices to generate outcomes consistent with desired results, helping a plant develop solutions that make sense.
An Operations system is the joint configuration of resources and processes such that the resulting competencies are aligned with the organization's desired competitive position. The task of operations strategy is to design the operations system for an organization. Operations management involves the planning and coordination of work. Strategically, this involves the long-term structuring of work. Tactically, the task of operations management is to utilize the operations system and provide the best match of supply with demand.
The operations system is comprised of the following elements:
- Operations Process - This refers to the organizational method for transforming input resources into goods or services. A process involves the use of an organization's resources to provide something of value . Major process decisions include: process structure, and customer involvement. Some examples of operations processes are: new product development, manufacturing, logistics, and distribution. Production processes can be of different types such as: make-to-order, mass production, and mass customization. Examples of administrative processes are production planning, budgeting and performance measurement processes.
- Resources - This refers to operations resources, i.e., the machines, tools, workers, facilities, physical areas, or vendors who perform the activities of an operations process (project or production process). Resources can be of different types, and have different capabilities. Examples of resources include buildings, plant, equipment, exclusive licenses, patents, stocks, land, debtors, employees. Generally tangible resources can be touched or felt; they have a physical shape.
- Competencies - A competency is the capability to apply or use a related set of skills, knowledge, and abilities required to successfully perform "critical work functions" or tasks in a defined work setting. Organizational competencies are core masteries that define what the organization requires of its employees to succeed, and how it expects overall goals to be accomplished. Most organizations define 15 to 25 competencies that lay out how employees are expected to act, and common traits everyone needs to succeed. Core competency refers to a company's set of skills or experience in some activity, rather than the physical or financial assets. Core competence is anything that a business does extremely well, and is generally considered to be critical to the business's overall performance. For example, a marketing agency's ability to generate data-led campaign ideas would be a core competence. An organization's core competency is an organization's strategic strength. For example, Honda's strategic strength (core competency) lies in its engine and propulsion systems.
Most firms share access to the same processes and technology, so they usually differ very little in the areas of distinctive competencies. What is different is the degree to which operations matches its processes and infrastructure to its strategic objectives and goals. Resources form a plant’s foundation, consisting of the plant’s capacity and all of its stocks (Wang & Ahmed, 2007). In contrast, operational practices such as just in time are fairly standardized activities, programs, or procedures that have been developed to address the attainment of specific operational goals or objectives (Flynn et al., 1995).
Core Competencies and Distinctive Competencies
Core competency refers to a company's set of skills or experience in some activity, rather than the physical or financial assets. Core competence is anything that a business does extremely well, and is generally considered to be critical to the business's overall performance. For example, a marketing agency's ability to generate data-led campaign ideas would be a core competence. An organization's core competency is an organization's strategic strength. For example, Honda's strategic strength (core competency) lies in its engine and propulsion systems.
A distinctive competence is a competence unique to a business organization, which enables the production of a unique value proposition in the function of the business. A distinctive competence is one of the characteristics that sets your business apart from the competition. A distinctive competence is maintainable in the face of competition. In a dynamic environment, ultimately, distinctive competencies or the uniqueness of the value proposition produced using them, become less distinct or unique.
A distinctive competency is the basis for the development of an unassailable competitive advantage. Distinctive competencies can occur in a range of different areas, including: marketing, personnel, customer relations, technology, manufacturing, etc. Distinctive competencies, as a basis for competitive advantage, can come from a number of sources including: technology, industry position, market relations, cost, business processes, manufacturing processes, people, customer service, etc. For a business to develop and sustain a competitive advantage, it must have some sort of competitive advantage based on a distinctive competency, which enables it to produce a unique value proposition. The strongest form of competitive advantage known comes from the insightful integration of complementary elements of the business model. This is because it is difficult for competitors to understand and even more difficult to replicate.
Organizational Capabilities
A capability is the ability to do something. Organizational capabilities represent a distinctive and superior way of deploying, allocating, and coordinating resources (Amit & Schoemaker, 1993; Cavusgil, Seggie, & Talay, 2007; Schreyogg & Kliesch-Eberl, 2007). Thus, organizational capabilities are tacit social processes that emerge gradually over time, so gradually that participants may not even be aware of their existence and ultimately take them for granted (Leonard-Barron, 1992). As social processes, organizational capabilities are path dependent, influenced by factors such as firm history (Teece, Pisano, & Shuen, 1997), actions of decision makers (Rothaermel & Hess, 2007), and the firm’s learning process (Schreyogg & KlieschEberl, 2007). Furthermore, these paths are unique to a firm (Teece et al., 1997), described by Eisenhardt and Martin (2000) as “equifinality”; there are multiple paths to achieving the same organizational capability. Thus, the paths to a specific organizational capability can arise from very different starting points (Mosey, 2005).
Operational Capabilities
Operational capabilities are firm-specific sets of skills, processes, and routines, developed within the operations management system, that are regularly used in solving its problems through configuring its operational resources. Operational capabilities provide unity, integration, and direction to resources and operational practices. They encapsulate both explicit elements (e.g., resources, practices) and tacit elements (e.g., know-how, skill sets, leadership) for handling a variety of problems or dealing with uncertainty. That is, operational capabilities draw on resources and operational practices to generate outcomes consistent with desired results, helping a plant develop solutions that make sense.
Management Systems and Control
The systems approach to management recognizes that all organizations are comprised of multiple sub-systems, each of which receives inputs from other subsystems and turns them into outputs for use by other subsystems. The systems approach to management of business organizations emphasizes the importance of managers understanding the overall organization as system so that they will realize how actions in various parts of the organization (board of directors, executive functions, business functions and departments) affect the organization as a whole, and the other parts.
The systems approach to management recognizes both open and closed systems. A closed system, such as a clock, is self contained and operates relatively free from outside influences. In contrast, most organizations are open systems and are highly dependent on outside resources, such as suppliers, labor market, and buyers/customers. Specifically, organizations as systems are impacted by a number of spheres of outside influence: education and skills of workers, legal and political, economic, cultural, etc. Management system processes that interface with the external environment must be designed to adapt to these influences. An organization is designed to accomplish predefined set of goals and objectives. The people that comprise the organization can be organized into groups, teams or organization units. The design of the formal organization is guided by the purpose/mission and values subscribed to by the members of the organization.
Management Control Systems
Management control system provides an organized approach to defining goals and measuring results across the different departments. Management control systems are meant to be adaptable to each of these departments thus creating unified and highly productive workplaces. Managerial control is the management function involving monitoring performance against a plan and then making adjustments either in the plan or in operations as necessary. It involves carefully collecting information about a system, process, person, or group of people in order to make necessary decisions about each. Managers set up control system that typically involves four steps:
These steps must be repeated periodically until the organizational goals are achieved.
Management control systems are systems businesses use to understand how successfully they are achieving their goals, for example in productivity, profitability or efficiency. Businesses usually have different and separately managed departments, each with different responsibilities, that are required for the overall enterprise - the organization viewed as a system - to succeed.
Management Control Levels
In management there are varying levels of control; strategic, operational and tactical controls. These controls help managers at various levels make better and informed decisions. Controls make plans effective and the organization efficient.
Strategic Control Systems
Managers want to know if the company is headed in the right direction, and if current company trends and changes are keeping them on the right path. To answer this question requires the implementation of strategic controls. Strategic controls are designed by managers to help them successfully implement and execute the organization's strategies. Strategic control involves monitoring a strategy as it is being implemented, evaluating deviations and making necessary adjustments. An important task of managers is to design strategic control systems for successfully implementing a strategy.
Strategic control provides managers the tools to regulate and govern their activities through both proactive (feed forward) and reactive (feedback) methods.
Strategic control is concerned with managing organizational financial performance, productivity (output) supplemented with behavior control to ensure the organization efficiently achieves its goals. It involves actions such as monitoring internal and external environments' factors to identify issues and enable you to react to any substantial changes in the business environment.
Organizational change refers to the constant shifts that occur within an organizational system to enable it to better adapt or react to changes in its environments. These changes may include people entering or leaving the organization, shift in market conditions, change in supply sources, or introduction of adaptations in the processes for accomplishing work. Through managed change, leaders in an organization can intentionally shape how these shifts occur over time. Strategic control systems make employees more responsive to customers through monitoring and evaluating employees' behavior and contact with customers.
Types of Strategic Controls
Strategic controls are mainly of three types: financial, output and behavior controls. Strategic managers can measure efficiency by comparing the total inputs with the total outputs (how many units of inputs are used to produce a unit of output). Strategic managers should ensure that financial controls and output controls are supplemented with behavior controls for efficient achievement of goals.
An important task of managers is to design strategic control systems for successfully implementing a strategy.
Operational Control
Operational control or task control is the process of assuring that specific tasks are carried out effectively and efficiently. Its focus is on individual tasks or operations. Operational control involves control over intermediate term operations and processes but not over strategies. Operational control systems ensure that activities are consistent with established plans. Mid-level managers use operational controls for intermediate-term decisions. When performance does not meet standards, managers enforce corrective actions which include training, discipline, motivation, or termination.
For example, it is concerned with scheduling and controlling individual jobs through a shop rather than with measuring the performance of the shop as a whole. Operational control is concerned with activities that can be programmed. Examples include, automated plants, production scheduling, inventory control (inventory levels and procurement scheduling like JIT), order processing, payroll accounting, check handling, etc. Controlling costs, quality and schedules are the important functions here.
Unlike strategic control, operational control focuses more on internal sources of information and affects aspects of the organization such as production levels, or choice of equipment. Errors in operational control might mean failing to complete projects on time.
Tactical Control
Tactical control emphasizes the current operations of an organization. Managers determine what the various parts of the organization must do (tactics) for the organization to be successful in the near future. A tactic is a method that meets a specific objective of an overall plan.
Organizational Control Systems
Organizational control is the process of assigning, evaluating and regulating resources on an ongoing basis to accomplish an organization's goals. To successfully control an organization, managers need to not only know what the performance standards are, but also figure out how to share that information with employees. Controls can be defined, narrowly, as the process a manager takes to assure that actual performance conforms to the organization's plans. More broadly, controls can be defined as anything that regulates the processes or activities of an organization.
Organizational control systems allow executives and managers to track how well the organization is performing, identify areas of concern, and then take address the concerns. Three (3) basic types of control systems are available to executives;
Different organizations emphasize different types of control, but most organizations use a mix of all three controls. It is worth noting that control systems, once embedded an an organization are very difficult to change.
Objective control is based on facts that can be measured and tested. Objective controls measure output or observable behavior. Normative controls govern behavior through accepted patterns of action rather than written policies and procedures. Normative control uses values and beliefs called norms, which are established standards. Normative controls reflect the organization's culture,the shared values among the members of the organization.
The systems approach to management recognizes that all organizations are comprised of multiple sub-systems, each of which receives inputs from other subsystems and turns them into outputs for use by other subsystems. The systems approach to management of business organizations emphasizes the importance of managers understanding the overall organization as system so that they will realize how actions in various parts of the organization (board of directors, executive functions, business functions and departments) affect the organization as a whole, and the other parts.
The systems approach to management recognizes both open and closed systems. A closed system, such as a clock, is self contained and operates relatively free from outside influences. In contrast, most organizations are open systems and are highly dependent on outside resources, such as suppliers, labor market, and buyers/customers. Specifically, organizations as systems are impacted by a number of spheres of outside influence: education and skills of workers, legal and political, economic, cultural, etc. Management system processes that interface with the external environment must be designed to adapt to these influences. An organization is designed to accomplish predefined set of goals and objectives. The people that comprise the organization can be organized into groups, teams or organization units. The design of the formal organization is guided by the purpose/mission and values subscribed to by the members of the organization.
Management Control Systems
Management control system provides an organized approach to defining goals and measuring results across the different departments. Management control systems are meant to be adaptable to each of these departments thus creating unified and highly productive workplaces. Managerial control is the management function involving monitoring performance against a plan and then making adjustments either in the plan or in operations as necessary. It involves carefully collecting information about a system, process, person, or group of people in order to make necessary decisions about each. Managers set up control system that typically involves four steps:
- Establish standards
- Measure performance,
- Compare performance,
- Take corrective action as needed
These steps must be repeated periodically until the organizational goals are achieved.
Management control systems are systems businesses use to understand how successfully they are achieving their goals, for example in productivity, profitability or efficiency. Businesses usually have different and separately managed departments, each with different responsibilities, that are required for the overall enterprise - the organization viewed as a system - to succeed.
Management Control Levels
In management there are varying levels of control; strategic, operational and tactical controls. These controls help managers at various levels make better and informed decisions. Controls make plans effective and the organization efficient.
Strategic Control Systems
Managers want to know if the company is headed in the right direction, and if current company trends and changes are keeping them on the right path. To answer this question requires the implementation of strategic controls. Strategic controls are designed by managers to help them successfully implement and execute the organization's strategies. Strategic control involves monitoring a strategy as it is being implemented, evaluating deviations and making necessary adjustments. An important task of managers is to design strategic control systems for successfully implementing a strategy.
Strategic control provides managers the tools to regulate and govern their activities through both proactive (feed forward) and reactive (feedback) methods.
- Proactive control - These systems help in keeping an organization on track, anticipating future events and responding to opportunities and threats.
- Reactive control - These systems help detect deviations after events have occurred and then take corrective actions. Managers can adopt corrective actions through adjustments in the strategy if variations are detected.
Strategic control is concerned with managing organizational financial performance, productivity (output) supplemented with behavior control to ensure the organization efficiently achieves its goals. It involves actions such as monitoring internal and external environments' factors to identify issues and enable you to react to any substantial changes in the business environment.
Organizational change refers to the constant shifts that occur within an organizational system to enable it to better adapt or react to changes in its environments. These changes may include people entering or leaving the organization, shift in market conditions, change in supply sources, or introduction of adaptations in the processes for accomplishing work. Through managed change, leaders in an organization can intentionally shape how these shifts occur over time. Strategic control systems make employees more responsive to customers through monitoring and evaluating employees' behavior and contact with customers.
Types of Strategic Controls
Strategic controls are mainly of three types: financial, output and behavior controls. Strategic managers can measure efficiency by comparing the total inputs with the total outputs (how many units of inputs are used to produce a unit of output). Strategic managers should ensure that financial controls and output controls are supplemented with behavior controls for efficient achievement of goals.
- Financial Control - Managers use a financial control system to measure a company’s financial performance. For effective financial control, they establish financial goals (e.g., growth, profitability, return to shareholders) and then measure the actual achievement of those goals.
- Output Control - In the case of the output control system, managers forecast performance goals for each unit and employee. They measure the actual performance of the units and employees. Lastly, they compare the actual performance against the goals already set for them.
When the performance of employees or units is linked to the reward system, the output control itself provides an incentive structure for employee motivation in the organization. - Behavior Control - A behavior control system refers to a comprehensive system of rules and procedures. These are prescribed to direct the behavior/actions of employees at each level of the organization. Rules and procedures standardize the way of reaching the goals. Two forms of behavior control are;
- operating budgets and
- standardization of inputs, conversion activities (programming work activities so that they are done the same way time and again), and outputs.
An important task of managers is to design strategic control systems for successfully implementing a strategy.
Operational Control
Operational control or task control is the process of assuring that specific tasks are carried out effectively and efficiently. Its focus is on individual tasks or operations. Operational control involves control over intermediate term operations and processes but not over strategies. Operational control systems ensure that activities are consistent with established plans. Mid-level managers use operational controls for intermediate-term decisions. When performance does not meet standards, managers enforce corrective actions which include training, discipline, motivation, or termination.
For example, it is concerned with scheduling and controlling individual jobs through a shop rather than with measuring the performance of the shop as a whole. Operational control is concerned with activities that can be programmed. Examples include, automated plants, production scheduling, inventory control (inventory levels and procurement scheduling like JIT), order processing, payroll accounting, check handling, etc. Controlling costs, quality and schedules are the important functions here.
Unlike strategic control, operational control focuses more on internal sources of information and affects aspects of the organization such as production levels, or choice of equipment. Errors in operational control might mean failing to complete projects on time.
Tactical Control
Tactical control emphasizes the current operations of an organization. Managers determine what the various parts of the organization must do (tactics) for the organization to be successful in the near future. A tactic is a method that meets a specific objective of an overall plan.
Organizational Control Systems
Organizational control is the process of assigning, evaluating and regulating resources on an ongoing basis to accomplish an organization's goals. To successfully control an organization, managers need to not only know what the performance standards are, but also figure out how to share that information with employees. Controls can be defined, narrowly, as the process a manager takes to assure that actual performance conforms to the organization's plans. More broadly, controls can be defined as anything that regulates the processes or activities of an organization.
Organizational control systems allow executives and managers to track how well the organization is performing, identify areas of concern, and then take address the concerns. Three (3) basic types of control systems are available to executives;
- Output Control - Output controls are a form of objective controls that depend on measurable results (outputs/outcomes) within the organization. In the case of the output control system, managers forecast performance goals for each unit and employee. They measure the actual performance of the units and employees. Lastly, they compare the actual performance against the goals already set for them. When the performance of employees or units is linked to the reward system, the output control itself provides an incentive structure for employee motivation in the organization.
- Behavioral Control - A behavior control system refers to a comprehensive system of rules and procedures. These are prescribed to direct the behavior/actions of employees at each level of the organization. Rules and procedures standardize the way of reaching the goals. Two forms of behavior control are; operating budgets and standardization of inputs, conversion activities (programming work activities so that they are done the same way time and again), and outputs. Creating an effective reward structure is key to effectively managing behavior because people tend to focus their efforts on the rewarded behaviors.
- Clan Control - Instead of measuring results (as in output/outcomes controls), or dictating behavior (as in behavioral control), clan control is an informal type of control. Specifically, clan control relies on shared traditions, expectations, values, and norms to lead people to work towards the good of their organization.
Different organizations emphasize different types of control, but most organizations use a mix of all three controls. It is worth noting that control systems, once embedded an an organization are very difficult to change.
Objective control is based on facts that can be measured and tested. Objective controls measure output or observable behavior. Normative controls govern behavior through accepted patterns of action rather than written policies and procedures. Normative control uses values and beliefs called norms, which are established standards. Normative controls reflect the organization's culture,the shared values among the members of the organization.
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