CIA Test Preparation
Part I
Study Unit Six:
Control Aspects of Management
June 2012
©2012 Deloitte Touche Tohmatsu Jaiyos
Agenda:
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•
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Control Implications of Organizational Structures
Control Implications of Leadership Styles
Change Management
Conflict Management
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6.1 Control Implications of Organizational Structures
Overview
1. Elements of an organization
1.
2.
3.
4.
Coordination of effort in a cooperative social arrangement
A common objective or purpose
Divisions of labor (efficient specialization)
A hierarchy of authority
2. If the organizational culture is strong, key values are intensely held and
widely shared:
1. Substantial training is provided to achieve this high degree of acceptance,
minimizing the need for formal, written policies
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6.1 Control Implications of Organizational Structures
Overview
3. Basic approaches to organizational design:
1. The traditional approach (also known as classical, structural, or formal)
emphasizes such factors as authority, responsibility, tasks, hierarchy, and
span of control
• The traditional approach to organizing prescribes relationships and
then places people in them.
• Management’s primary goal is profit
2. The behavioral approach emphasizes the limits, strengths, availability,
and interests of the people available.
• Less deterministic than the traditional approach because group
dynamics and the feelings of subordinates are included
• The job is designed for the person.
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6.1 Control Implications of Organizational Structures
Overview
3. Basic approaches to organizational design (Cont’d):
3. The modern (contingency) approach, designs the organization for tis
unique situation
• It combines classical and behavioral principles of organization: the job
and the person must fit each other
• Classical theory assumed workers have only economic motives. The
modern approach assumes they have multiple motives
4. An organizational must have unity of objective. Accordingly, the objectives
of individuals must facilitate the achievement of the organization’s
objectives
• An organizational structure is effective if it contributes to unity of
objective. An organizational structure is efficient if it does so with a
minimum of waste.
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6.1 Control Implications of Organizational Structures
Relationships
•
Authority: Right to direct and demand performance from others, including
the right to determine the means and methods by which the work will be
done.
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Responsibility: Obligation to perform
•
•
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In the classical view, this obligation is formally imposed by a superior and is
inherent in any job
In the behavioral view, responsibility must be delegated. Responsibility is
successively divided and passed down.
Accountability: Duty to account to superiors for the fulfillment of the
responsibility. Accountability therefore relates to performance measurement.
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Span of Control
•
A manager’s span of control is the number of subordinates he supervises.
•
•
A Factors in determining the span of control include:
1. Managers’ and employees’ preferences, skills, and experiences
2. The organizational culture
3. Tasks to be performed
4. Physical location
5. Established policies and procedures
Span of control is largely determined by the choice of a tall or flat
organizational hierarchy
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Tall organizational structure have many levels between top and bottom
‒
Faster and more effective at problem resolution: increased frequency of
interaction between superior and subordinate and the greater order
imposed by the hierarchy
Flat organizational structures have relatively few levels from top to bottom
‒
Have the advantages of fast information flow from top to bottom of the
organization and increased employee satisfaction
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Elements of Structure
•
Differentiation
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Vertical differentiation: Depth of the hierarchy. More levels mean more
complexity. Thus, information distortion will be more likely, coordination of
management activities will be more difficult, and the response to change will
be slower and less effective.
Horizontal differentiation: Extent to which tasks require special skills and
knowledge. As these become more diverse, communication and coordination
become more difficult.
Spatial differentiation: Geographical separation of operations
•
Formalization: the extent to which job performance is standardized by job
description and clear procedures that define how tasks are to be
accomplished.
•
Centralization: Concentration of authority in an organization and the degree
and levels at which it occurs.
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Elements of Structure
•
Relationship between environmental complexity and the organization’s
balance between differentiation and integration
•
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Differentiation: caused by the division of labor and technical specialization.
Integration: Coordination of effort required for achievement of mutual
objectives
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A hierarchy of authority
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A framework of rules
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Departmentation
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Formation of cross-functional groups
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Computer systems
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Liaison bodies
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Human relations training
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Elements of Structure
•
Relationship between environmental complexity and the organization’s
balance between differentiation and integration
•
A dynamic equilibrium exists between the tendencies of fragmentation and
coordination
‒
Differentiation and integration are related to environmental complexity
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The higher the differentiation, the greater the obstacles to integration
‒
An unsuccessful organization in a complex environment is likely to be
highly differentiated but poorly integrated
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Departmentation V. Matrix Structure
•
By function: the most widely used method. The most common departments
are selling, production, and finance
•
By territory: favored by national or multinational entities and government
agencies with scattered offices or plants
•
By product: important for multiline, large-scale entities.
•
By customer: permits a department head to manage service to a customer.
This form of departmentation is found most often at middle levels
•
Project departmentation: experimental or onetime activities
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Mechanistic & Organic Structures
•
Mechanistic Structure
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Organizations focusing on a cost-minimization strategy through: tight control,
extensive division of labor, high formalization and centralization
Organic Structure
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Decentralized and has low complexity and formalization. It has an extensive
information system, and employees participate in decision making. It tends to
be flexible and adaptive.
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Mechanistic & Organic Structures
•
Choice of structure is a function of the organization’s fundamental strategy:
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•
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Innovation: focuses on developing important new products or services – An
organic structure provides the flexibility for this strategy
Cost-minimization: imposes tight controls over expenses and reduces product
prices – The mechanic structure is appropriate
Imitation: not adopted by true innovators but by organizations that enter new
markets only after smaller competitors have demonstrated the potential for
success – The organization that combines mechanistic and organic
components.
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Mechanistic & Organic Structures
•
Structure is also a function of the following:
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Size: Larger organization tend to be mechanistic because greater
formalization is needed. Strategies also change as size changes. A growing
organization often expands activities within its industry
Technology: An organic structure may be best for coping with nonroutine
technology because formalization is low
Environment: The more stable the environment, the more mechanistic the
organization. A mechanistic structure also is appropriate when the
environment has little capacity for growth.
•
Uncertainty: is a general environment factor
‒
Capacity
‒
Volatility
‒
Complexity
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Organizational Components
•
Operating core: workers who perform the basic tasks related to production
•
Strategic apex: top managers
•
Middle line: managers who connect the core to the apex
•
Technostructure: analysts who achieve a certain standardization
•
Support staff: indirect support services
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6.1 Control Implications of Organizational Structures
Organizational Components
•
Simple Structure:
•
•
Machine bureaucracy:
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Low complexity and formality. Authority is centralized
A complex, formal, and centralized organization that
‒
Performs highly routine tasks
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Groups activities into functional departments
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Has a strict chain of command
‒
Distinguishes between line and staff relationships
Professional bureaucracy:
•
A complex and formal but decentralized organization in which highly trained
specialists have great autonomy.
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Organizational Components
•
Divisional structure:
•
•
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Self-contained organization
Characterized by substantial duplication of functions compared with more
centralized structures.
Adhocracy:
•
Low complexity, formality and centralized. Vertical differentiation is low and
horizontal differentiation is high.
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Centralization V. Decentralization
•
Centralization: Concentration of authority in an organization and the degree
and levels at which it occurs
•
Decentralization: pushes significant decisions down and across the
hierarchy
•
Degree of decentralization will be greater if:
•
•
•
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More decisions are made lower in the management hierarchy
Some important decisions are made lower in the management hierarchy
More functions are affected by decisions made at lower levels
Fewer approvals are required before implementation of a decision
©2012 Deloitte Touche Tohmatsu Jaiyos
6.1 Control Implications of Organizational Structures
Organizational Components
•
Degree of centralization or decentralization depends upon:
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Information
Ability
Timeliness
Degree of coordination
Significance of decision
Morale
Strategic Business Unit (SBUs): is a means of decentralization
•
Independent business: not a supplier of the parent, encounters competition, a
profit center, makes all important decision
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6.1 Control Implications of Organizational Structures
New Organizational
• Hour Glass Organization:
•
•
A small group of middle managers coordinates a variety of lower-level, crossfunctional activities
Empower technical specialists : lateral transfers, challenging work, training in
new skills, pay-for-performance.
• Cluster Organization
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Network Organization
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A group of team.
Workers are multi-skilled and move among teams as needed.
Coordinate through adaptation
Long-term, strategic relationship based on implicit contracts
Virtual Organization
•
Emphasis is on speed and constant and cross-function team
©2012 Deloitte Touche Tohmatsu Jaiyos
Key Concept:
• The elements of organizations are coordination of effort, a common purpose,
divisions of labor, and a hierarchy of authority.
• A number of relationships are present in the structure of an organization,
including authority, responsibility, and accountability.
• The elements of structure are differentiation, formalization and centralization
• Departmentation may be by function, customer, territory, product, or project.
Matrix organization has horizontal and vertical lines of authority.
• Structures may be mechanistic or organic depending on the entity’s structure,
size, technology and environment.
• Organization components are the operating core, strategic apex, middle line,
technostructure, and support staff.
• New types of organizations include the hourglass, cluster, network and virtual
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6.1 Control Implications of Organizational Structures
New Organizational
• Hour Glass Organization:
•
•
A small group of middle managers coordinates a variety of lower-level, crossfunctional activities
Empower technical specialists : lateral transfers, challenging work, training in
new skills, pay-for-performance.
• Cluster Organization
•
•
•
Network Organization
•
•
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A group of team.
Workers are multi-skilled and move among teams as needed.
Coordinate through adaptation
Long-term, strategic relationship based on implicit contracts
Virtual Organization
•
Emphasis is on speed and constant and cross-function team
©2012 Deloitte Touche Tohmatsu Jaiyos
Key Concept:
• The elements of organizations are coordination of effort, a common purpose,
divisions of labor, and a hierarchy of authority.
• A number of relationships are present in the structure of an organization,
including authority, responsibility, and accountability.
• The elements of structure are differentiation, formalization and centralization
• Departmentation may be by function, customer, territory, product, or project.
Matrix organization has horizontal and vertical lines of authority.
• Structures may be mechanistic or organic depending on the entity’s structure,
size, technology and environment.
• Organization components are the operating core, strategic apex, middle line,
technostructure, and support staff.
• New types of organizations include the hourglass, cluster, network and virtual
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6.2 Control Implications of Leadership Styles
Aspects of Leadership
• Management and Leadership
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•
Management: Arranging the work of others to achieve organizational objectives
Leadership: A special type of management. It is the act or process of
influencing, inspiring, and guiding people so they will strive willingly toward the
achievement of group objective through common effort.
• Power
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Legitimate or position power
Reward power
Expert power
Referent or charismatic
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6.2 Control Implications of Leadership Styles
Leadership Theory
• Classic Management Theory
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•
•
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Authority, decision making, and responsibility all may be decentralized in the
organization to some extent.
Based on belief that leadership qualities are inherent, not developed.
Leadership effectiveness composes of intelligence, maturity, social participation
and interest, socioeconomic status.
Emotional Intelligence of leaders: social skills, judgment, maturity and
emotional control
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6.2 Control Implications of Leadership Styles
Leadership Theory
• Style of leadership
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Autocratic: manager dictates all decisions to the employees. This is considered
the classical approach to leadership. Relies on treats and punishment and do
not trust employees.
Consultative: manager considers employees’ views but still makes the
decisions.
Participative (democratic): employees provide definite input in decision making,
and the manager must include their views in decisions. Employees are
encouraged to grow on the job and be promoted.
Free-rein (laisser-faire): employees make their own decisions.
Bureaucratic: manager does everything according to procedures or policies. If
no policy covers a situation, the manager refers to the next higher level.
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6.2 Control Implications of Leadership Styles
Situational Leadership
• Contingency Theory
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•
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Position Power: function of the formal authority structure.
Task structure: how clearly and carefully members’ responsibilities for various
tasks are defined.
Leader-member relations: reflect the extent to which group members are willing
to follower a leader.
Task-motivated style: most effective when the situation is very favorable or very
unfavorable.
Relationship-motivated style: most effective in middle, less extreme situations,
when favorable and unfavorable factors are mixed.
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6.2 Control Implications of Leadership Styles
Situational Leadership
• Situational Leadership Theory
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•
•
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Selling Leadership style: explains decisions and provide opportunity for
clarification (high task and high relationship)
Telling Leadership style: provides specific instructions and closely supervises
performance (high task and low relationship)
Participating Leadership style: encourages the sharing of ideas and facilitates
decision making (low task and high relationship)
Delegating Leadership style: turns over responsibility for decisions and
implementation (low task and low relationship)
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6.2 Control Implications of Leadership Styles
Situational Leadership
• Path-Goal Theory (Motivation)
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•
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Leaders should motivate employees by clarifying their understanding of work
goals, the relationship of achieving goals and rewards and how the goals may
be achieved.
Leaders should increase payoffs, define the path to success, remove obstacles,
and increase the chances of individual satisfaction.
Environment and subordinate affect the relationship between leadership and
outcomes
• Leadership Style:
•
•
•
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Directive: lets employees know what is expected, schedules work to be done,
and gives specific guidance on tasks
Supportive: friendly and shows concerns for employees needs.
Participative: consults with employees and uses their suggestions before
making a decision.
Achievement-oriented: a facilitator who sets challenging goals and expects
employees to perform at their highest level.
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Key Concept:
• Leadership is the act or process of influencing, inspiring, and guiding people so
they will strive willingly toward the achievement of group objectives through
common effort.
• A modern traitist approach to leadership is based on the emotional intelligence
of leaders, that is, their social skills and judgment, maturity, and emotional
control
• Styles of leadership are emphasized in behavioral approach. The personal
background of the manager and the personalities and backgrounds of the
employees supervised are factors. These styles have been characterized as (1)
authorization (2) democratic (3) free-rein (4) consultative (5) bureaucratic
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Key Concept (Cont’d):
• According to contingency theory, people become leaders not only because of
personality attributes, but also because of various situational factors and the
interaction between the leaders and the situation. The contingency theory
model has three dimensions: position power, task structure, and leadermember relations.
• According to situational leadership theory, the appropriate leadership style
depends on the followers’ maturity.
• Path-goal theory emphasizes motivation. It combines the research on initiating
structure and consideration with expectancy theory.
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6.3 Change Management
• Change management is important to all organizations. An appropriate
balance between change and stability is necessary if an organization is to
thrive.
• Organization change is conducted through change agents
• Type of change:
•
•
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Culture change: change in attitudes and mindset
Product change: change in a product’s physical attributes and usefulness to
customers
Structural change: change in an organization’s systems or structures
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6.3 Change Management
Resistance
• Organizational and procedural changes often are resisted by the individuals
and groups affected:
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Misunderstandings or lack of needed skills
Lack of trust, or conflicts with, management
Emotional reactions when change is forced
Bad timing
Insensitivity to employees’ needs
Perceived threats to employees’ status or job security
Dissolution of tightly knit work groups
Interference with achievement of other objectives
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6.3 Change Management
Resistance
• Methods of coping with resistance:
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Prevention through education and communication
Participation in designing and implementing a change
Facilitation and support through training and counseling
Negotiation by providing a benefit in exchange for cooperation
Manipulation of information or events
Co-operation through allowing some participation but without meaningful input
Coercion
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6.3 Change Management
Models for Planned Change
• Kurt Lewin’s process model:
•
•
•
Unfreezing: diagnosis stage. It involves choosing a change strategy, preparing
employees for the change, and offsetting resistance.
Change is the intervention in the status quo
Refreezing: makes the change relatively permanent so that old habits will not
reassert themselves.
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6.3 Change Management
Continuous change process model
• Force for change accumulate
• Organization recognizes that a problem exists and defines it
• Problem is submitted to the organization’s problem-solving process
• Change is implemented
• Success in implementation is measured and evaluated.
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6.3 Change Management
Organizational Development (OD)
• Characteristics of OD
•
•
•
Change must be planned and deliberate
Change must actually improve the organization. Changes forced by regulatory
requirements or changes that merely attempt to follow management trends and
fads are not included.
The change must be implemented using the findings of the behavioral
sciences, such as organizational behavior and group psychology.
• Objective of OD
•
•
•
•
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•
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Deepen the sense of organizational purpose and align individuals with it
Promote interpersonal trust, communication, cooperation, and support
Encourage a problem-solving approach
Develop a satisfying work experience
Supplement formal authority with authority based on expertise
Increase personal responsibility
Encourage willingness to change
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Key Concept:
• Effective change management is important because an appropriate balance
between stability and change is necessary if an organization is to thrive
• OD is planned, fundamental change using behavioral science techniques in a
systematic way.
• The three stages of Kurt Lewin’s process model are unfreezing, change,
refreezing.
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6.4 Conflict Management
Good Conflict and Bad Conflict
• Conflict is “a process resulting in the perceptions of two parties that they are
working in opposition to each other in ways that result in feelings of
discomfort and/or animosity”
• Conflict may be beneficial because it encourages self-criticism, creativity, and
necessary change
•
•
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Ambiguous or threatening communications
Hiring outsiders with different values, managerial styles, attitudes, and
background
Designating an individual to argue against the majority opinions of the group
Restructuring the organization to disrupt the status quo
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6.4 Conflict Management
Response to Conflict
• Problem solving: resolves the conflict by confronting it and removing its
causes.
• Smoothing: a short-term avoidance approach
• Forcing: occurs when a superior uses his/her formal authority to order a
particular outcome.
• Superordinate goals: overriding goals of the entity to which subunit and
personal goals are subordinate.
• Compromise: negotiation
• Competition: parties’ goals are incompatible and interactions are important to
achieving goals.
• Expanding resources: resolves conflicts that result from scarcity
• Avoidance: non-action
• Accommodation: willingness of one party to the conflict to place another’s
needs and concern above their own.
• Interest-based bargaining: interests underlying the positions may be both
conflicting and compatible.
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6.4 Conflict Management
Effective Negotiation
• Negotiation is “a decision-making process among interdependent parties who
do not share identical preferences”
• Effective negotiation emphasizes:
•
•
Win-win attitude
Seeking mutual benefit and satisfaction
• Best Alternative to a negotiated agreement (BETNA)
•
•
The acceptable minimum outcome if a negotiator cannot obtain the desired
result
Avoid accepting an unfavorable agreement or rejecting a favorable agreement
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6.4 Conflict Management
Overcoming Resistance
• Attempt to determine the reason behind the resistance
• Stop the meeting and address the other party’s concerns privately
• Restate the negotiator’s position regarding the issue
• Research the other party to determine its views and requirements
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Key Concept:
• Conflict is “a process resulting in the perceptions of two parties that they are
working in opposition to each other in ways that result in feelings of
discomfort and/or animosity”
• Negotiation is “a decision-making process among interdependent parties who
do not share identical preferences”
• Managers may address competitive conflicts in the following ways
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Problem solving
Smoothing
Forcing
Appeal to superordinate goals
Compromise
Expanding resources
Avoidance
Accommodation
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Thank you
Alisa Glankwamdee, CIA
E-mail : pangalisa@gmail.com
Mobile: 081-949-4638
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