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Control: Organizational and Economic Approaches

This paper explores control variables for organization design, focusing on reward structure, task characteristics, and information systems. It also discusses theoretical integration and empirical testing in organizational theory.

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Control: Organizational and Economic Approaches

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  1. Control: Organizational and Economic Approaches Kathleen M. Eisenhardt Department of Industrial Engineering and Engineering management, Stanford University Presenter: Wen Zheng

  2. Contents Introduction Theory Empirical Discussion Conclusion

  3. Problem Statement Introduction Theory Empirical Discussion Conclusion • This paper want to explore control variables for organization design

  4. Problem Statement Introduction Theory Empirical Discussion Conclusion • This paper want to explore control variables for organization design • Reward structure • Task characteristics • Information system

  5. Problem Statement Introduction Theory Empirical Discussion Conclusion • This paper want to explore control variables for organization design • Organization design often focus on structure solution. • Reward structure • Task characteristics • Information system

  6. Problem Statement Introduction Theory Empirical Discussion Conclusion • This paper want to explore control variables for organization design • Theoretical Integration • Empirical Test

  7. Organization Theory • Information Characteristics • Task Programmability • Outcome measurability Thompson(1967) Ouchi (1979) Introduction Theory Empirical Discussion Conclusion

  8. Organizational Theory Introduction Theory Empirical Discussion Conclusion Task Outcome • Adapted from Ouchi (1979)

  9. Agency Theory Determine the optimal contract for the Agent Services Introduction Theory Empirical Discussion Conclusion • -Risk sharing • -Outcome measurement • -Behavior measurement Assumptions: -Uncertain outcome and risk averse agent -Effort averse agent

  10. Comparison(Similarity) Introduction Theory Empirical Discussion Conclusion • Concerned with determinants of control strategy • Rational • Efficiency oriented • Information based • Distinguish between behavior and outcome based control

  11. Comparison(Difference) Introduction Theory Empirical Discussion Conclusion

  12. Hypothesis Introduction Theory Empirical Discussion Conclusion Task Characteristics -Task Programmability Control Strategy -Behavior based -outcome based Information System -Behavior Measurement -Outcome Measurement Uncertainty

  13. Hypothesis Introduction Theory Empirical Discussion Conclusion Task Characteristics -Task Programmability Control Strategy -Behavior based -outcome based Information System -Behavior Measurement -Outcome Measurement Uncertainty

  14. Hypothesis Introduction Theory Empirical Discussion Conclusion Task Characteristics -Task Programmability Control Strategy -Behavior based -outcome based Information System -Behavior Measurement -Outcome Measurement Uncertainty

  15. Hypothesis Introduction Theory Empirical Discussion Conclusion Task Characteristics -Task Programmability Control Strategy -Behavior based -outcome based Information System -Behavior Measurement -Outcome Measurement Uncertainty

  16. Organization Sampling Introduction Theory Empirical Discussion Conclusion • Sample: 95 specialty stores in a Suburban Bay Area shopping center

  17. Organization Sampling Introduction Theory Empirical Discussion Conclusion • Sample: 95 specialty stores in a Suburban Bay Area shopping center • Definition: Stores with less than 8,000 square feet of selling space • Characteristics: Size, turnover, promotion • Reason: • Provide a relative large number of comparable organizations which are conveniently located • Provide a setting in which a normative and efficiency model should be descriptively accurate • Social or “people ” control is not relevant

  18. Measures (Construct) Introduction Theory Empirical Discussion Conclusion • Task Programmability • Behavior Measurement • Outcome Uncertainty • Cost of outcome Measurement • Control • Alternative Explanations

  19. Measures (Construct) • Preliminary interview • The amount of service in selling process. (less programmable) • Service • Product • Selling time • Training time Introduction Theory Empirical Discussion Conclusion • Task Programmability • Behavior Measurement • Outcome Uncertainty • Cost of outcome Measurement • Control • Alternative Explanations

  20. Measures (Construct) Introduction Theory Empirical Discussion Conclusion • Task Programmability • Behavior Measurement • Outcome Uncertainty • Cost of outcome Measurement • Control • Alternative Explanations • Preliminary interview • Physical limitations on observation of salespeople by management • Selling Space Square footage of the store • Total number of store employees • Number of salespeople per store supervisor (managers, assistant managers

  21. Measures (Construct) Introduction Theory Empirical Discussion Conclusion • Task Programmability • Behavior Measurement • Outcome Uncertainty • Cost of outcome Measurement • Control • Alternative Explanations • Secondary source • Three measures • Number of competitors in the San Francisco SMSA by merchandise category. • Failure rates in 1975 by merchandise category • Failure rates in 1979 by merchandise category

  22. Measures (Construct) Introduction Theory Empirical Discussion Conclusion • Task Programmability • Behavior Measurement • Outcome Uncertainty • Cost of outcome Measurement • Control • Alternative Explanations • Depend on the cost of the outcome measurement system. • The number of stores in the store chain. • The dichotomous ownership variable

  23. Measures (Construct) Introduction Theory Empirical Discussion Conclusion • Task Programmability • Behavior Measurement • Outcome Uncertainty • Cost of outcome Measurement • Control • Alternative Explanations • Behavior based vs. outcome based reward structures. • Outcome based: Commission, commission against law and salary plus commission • Behavior based: Salary or hourly rate compensation

  24. Measures (Construct) Introduction Theory Empirical Discussion Conclusion • Task Programmability • Behavior Measurement • Outcome Uncertainty • Cost of outcome Measurement • Control • Alternative Explanations • Talbert and Bose (1978) • Sex composition • Price • Type (specialty vs. department) • Location (city vs. suburbs)

  25. Measures (Accuracy) Introduction Theory Empirical Discussion Conclusion Note: 1. Measured by Standardized Cronbach Alpha 2. Measured by Range of correlations 3. Measured by # cross construct correlations>within correlations construct 4. Significant level: * 0.1 **0.05 ***0.01

  26. Results Introduction Theory Empirical Discussion Conclusion • Correlation Matrix • Discriminant Analysis

  27. Results Introduction Theory Empirical Discussion Conclusion • Discriminant Analysis Classification Table (N=54)

  28. Implications Introduction Theory Empirical Discussion Conclusion • Humanist/attributionist argument that salient extrinsic reward diminishes intrinsic motivation should be used cautiously outside of the experimental laboratory. • Responsibility need not match controllability.

  29. Organization Design Strategy Introduction Theory Empirical Discussion Conclusion • Job Design----Simple and Routine job • Invest in information System • Outcomes based control---Simple evaluation scheme, a flexible job content • Employ people whose preference coincide with those of management----selection, training and socialization

  30. Thank You !

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