Company
LOGO
Control: Organizational and
Economic Approaches
Kathleen M. Eisenhardt
Department of Industrial Engineering and
Engineering management, Stanford University
Presenter: Wen Zheng
Contents
Introduction
Theory
Empirical
Discussion
Conclusion
Introduction
Theory
Empirical
Discussion
Conclusion
This paper want to explore control
variables for organization design
Introduction
Theory
Empirical
Discussion
Conclusion
This paper want to explore control
variables for organization design
•Reward structure
•Task characteristics
•Information system
Introduction
Theory
Empirical
This paper want to explore control
variables for organization design
•Reward structure
•Task characteristics
•Information system
Discussion
Conclusion
Organization design often focus on
structure solution.
Introduction
Theory
Empirical
Discussion
Conclusion
This paper want to explore control
variables for organization design
 Theoretical Integration
 Empirical Test
Thompson(1967)
Ouchi (1979)
Performance
Evaluation
Control
Introduction
Theory
Empirical
Discussion
Conclusion
Behavioral
based control
Outcome
based control
Control
Strategy
Social or
“people” based
Control
Task
Programmability
Outcome
measurability
Information
Characteristics
Introduction
Theory
Empirical
Discussion
Task
Perfect
Imperfect
High
Behavior or
outcome control
Outcome control
Low
Behavior control
Socialization “Clan”
control
Outcome
Conclusion
Adapted from Ouchi (1979)
Determine the
optimal contract for
the Agent Services
Agency
Problem
Introduction
Incomplete
information
Theory
Complete
Information
Empirical
Discussion
Behavior Control
Outcome Control
Conclusion
-Behavior
measurement
-Risk sharing
-Outcome
measurement
Assumptions:
-Uncertain outcome
and risk averse
agent
-Effort averse agent
Introduction
Theory
Concerned with determinants of
control strategy
Rational
Empirical
Discussion
Conclusion
Efficiency oriented
Information based
Distinguish between behavior and
outcome based control
O
Introduction
Compare ability to measure
behaviors
Compare costs of behavior
control and outcome control
Reward
Control is a measurement
and evaluation process
Control is a measurement,
evaluation, and reward
process
Social or
”People”
Control
Assume divergent
performances for effort of
workforce
Possible to reduce divergent
preferences through social
control
Role of
Information
Task characteristics
determine the information
available
Information is a purchasable
commodity
Uncertainty
Control determined by
measurement issue
Control determined by
measurement and risk
bearing issues
Cost
Theory
Empirical
Discussion
Conclusion
A
Introduction
Task Characteristics
-Task Programmability
Theory
Empirical
Information System
-Behavior Measurement
-Outcome Measurement
Discussion
Conclusion
Uncertainty
Control Strategy
-Behavior based
-outcome based
Introduction
Task Characteristics
-Task Programmability
Theory
Empirical
Information System
-Behavior Measurement
-Outcome Measurement
Discussion
Conclusion
Uncertainty
Control Strategy
-Behavior based
-outcome based
Introduction
Task Characteristics
-Task Programmability
Theory
Empirical
Information System
-Behavior Measurement
-Outcome Measurement
Discussion
Conclusion
Uncertainty
Control Strategy
-Behavior based
-outcome based
Introduction
Task Characteristics
-Task Programmability
Theory
Empirical
Information System
-Behavior Measurement
-Outcome Measurement
Discussion
Conclusion
Uncertainty
Control Strategy
-Behavior based
-outcome based
Introduction
Theory
Empirical
Discussion
Conclusion
Sample: 95 specialty stores in a
Suburban Bay Area shopping center
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
 Task Programmability
Introduction
Theory
 Behavior
Measurement
Empirical
 Outcome Uncertainty
Discussion
 Cost of outcome
Measurement
Conclusion
 Control
 Alternative
Explanations
 Task Programmability
Introduction
Theory
 Behavior
Measurement
Empirical
 Outcome Uncertainty
Discussion
 Cost of outcome
Measurement
Conclusion
 Control
 Alternative
Explanations
Preliminary interview
The amount of service in selling
process. (less programmable)
Service
Product
Selling time
Training time
 Task Programmability
Introduction
Theory
 Behavior
Measurement
Empirical
 Outcome Uncertainty
Discussion
 Cost of outcome
Measurement
Conclusion
 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
 Task Programmability
Introduction
Theory
 Behavior
Measurement
Empirical
 Outcome Uncertainty
Discussion
 Cost of outcome
Measurement
Conclusion
 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
 Task Programmability
Introduction
Theory
 Behavior
Measurement
Empirical
 Outcome Uncertainty
Discussion
 Cost of outcome
Measurement
Conclusion
 Control
 Alternative
Explanations
 Depend on the cost of the outcome
measurement system.
The number of stores in the store
chain.
The dichotomous ownership
variable
 Task Programmability
Introduction
Theory
 Behavior
Measurement
Empirical
 Outcome Uncertainty
Discussion
 Cost of outcome
Measurement
Conclusion
 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
 Task Programmability
Introduction
Theory
 Behavior
Measurement
Empirical
 Outcome Uncertainty
Discussion
 Cost of outcome
Measurement
Conclusion
 Control
 Alternative
Explanations
Talbert and Bose (1978)
Sex composition
Price
Type (specialty vs. department)
Location (city vs. suburbs)
Construct
Internal
Consistency
Convergent
validity
Discriminant
validity
Introduction
Task
Programmability
0.72
0.33-0.54**
4 of 96
Theory
Behavior
Measurement
0.82
0.49-0.65***
0 of 54
Empirical
Outcome
Uncertainty
0.82
0.52-0.76**
0 of 54
Discussion
Cost of Outcome 0.75
Measurement
0.6**
0 of 20
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
Correlation Matrix
Introduction
Theory
Empirical
Discussion
Conclusion
Discriminant Analysis
 Discriminant Analysis Classification Table (N=54)
Introduction
Theory
Empirical
Discussion
Conclusion
Introduction
Theory
Humanist/attributionist argument that
salient extrinsic reward diminishes
intrinsic motivation should be used
cautiously outside of the experimental
laboratory.
Empirical
Discussion
Conclusion
 Responsibility need not match
controllability.
Job Design----Simple and Routine job
Introduction
 Invest in information System
Theory
Empirical
Outcomes based control---Simple
evaluation scheme, a flexible job content
Discussion
Conclusion
Employ people whose preference coincide
with those of management----selection,
training and socialization
Company
LOGO