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Planning and Control Systems

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Reliance on planning and control systems—forecasting and measuring—has mushroomed since the dawn of the computer era. Retailers, for example, want to know what's selling and what isn't. Networked point‐of‐sale terminals now yield that information instantly. Data flow freely up and down the hierarchy, greatly enhancing management's ability to oversee performance and respond in real time.

Mintzberg (1979) distinguishes two major approaches to control and planning: performance control and action planning. Performance control specifies results (e.g. “increase sales by 10 percent this year”) without specifying how to achieve them. Performance control measures and motivates individual efforts, particularly when targets are reasonably clear and calculable. Locke and Latham (2002) make the case that clear and challenging goals are a powerful incentive to high performance. Performance control is less successful when goals are ambiguous, hard to measure, or of dubious relevance. A notorious example was the use of enemy body counts by the U.S. military to measure combat effectiveness in Vietnam. Field commanders became obsessed with “getting the numbers up,” and were often successful. The numbers painted a picture of progress, even as the war was being lost. Meanwhile, as an unintended consequence, American troops had an incentive to kill unarmed civilians in order to raise the count (Turse, 2013).

Action planning specifies how to do something—methods and time frames as in “increase this month's sales by using a companywide sales pitch” (Mintzberg, 1979, pp. 153–154). Action planning works best when it is easier to assess methods than outcomes. This is often true of service jobs. McDonald's has clear specifications for how counter employees are to greet customers (e.g., with a smile and a cheerful welcome). United Parcel Service has a detailed policy manual that specifies how a package should be delivered. The objective is customer satisfaction, but it is easier to monitor employees' behavior than customers' reactions. An inevitable risk in action planning is that the link between action and outcome may fail. When that happens, employees may get bad results by doing just what they're supposed to do. Unions sometimes use this as a bargaining chip by instructing employees to “work to rule”—scrupulously observing every detail in every procedure—because it is often an effective way to slow work down to a crawl.

Reframing Organizations

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