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06 June 2008

Perspective Management_6

Techniques for initiating change

• Organizations may be in state of equilibrium, with forces pushing for change on the one hand and forces resisting change by attempting to maintain the status quo on the other.

• Field force theory: which suggests that an equilibrium is maintained by driving force and restraining forces.

• In initiating change, the tendency is to increase the driving forces, this may indeed produce some movement, but it usually also increases resistance by strengthening the restraining forces.

• Another approach, one that is usually more effective, is to reduce or eliminate the restraining forces and then move to a new level of equilibrium.

• The change process involves three steps:
• Unfreezing: it is the first stage unfreezing creates the motivation for change. If people uncomfortable with the present situation they may see the need for change.
• Moving or changing: second stage is the change itself. This change may occur through assimilation of new information, exposure to new concepts, or development of a different perspective.
• Refreezing: it stabilizes the change, change to be effective has to be congruent with a person’s self concept and values.
• If the change is incongruent with the attitude and behaviours of others in the organization, chances are that the person will revert to the old behaviour. Thus reinforcement of the new behaviour has to applied.

Control techniques
• The budget as a control device:
• Budgeting: The formulation of plans for a given future period in numerical terms.
• Budgets are statements of anticipated results, either in financial terms as in revenue and expense as well as capital budgets, or in non-financial terms, as in budgets of direct labour hours materials, physical sales volume or units of production.
• Dangers in budgeting: some budgetary control programs are so complete and detailed that they become cumbersome, meaningless, and unduly expensive.
• It measure inputs but ignores output such as product quality and customer satisfaction.
• Managers may make unwise decision to meet the budget, especially if the incentive is given for staying within the budget.

• Zero-Base budgeting: Dividing enterprise programs into package composed of goals, activities and needed resources and calculating the costs for each package from the base zero.
• By starting the budget of each package from base zero, budgeters calculate costs afresh for each budget period, thus they avoid the common tendency in budgeting of looking only at changes from a previous period.
• This technique has generally applied to support areas, rather than to actual production areas, on the assumptions that there is a room for discretion in expenditures for most programs in areas such as marketing, finance, R&D, personnel, and planning.
• The principle advantage of this technique is of course the fact that it forces managers to plan each program package a fresh.

Traditional non-budgetary control devices:

• Time-event network Analysis:
• Gantt Charts:
A bar chart that shows the time relationships between the events of a production programme. It was developed by Henry L. Gantt early in 20th century.
• Gantt recognize that the total programme goals should be regarded as a series of interrelated supporting plans (or events) that people can comprehend and follow.
• The important developments of control reflect this simple principle as well as basic principles of control, such as picking out the more critical elements of a plan to watch carefully.


• Milestone budgeting: Milepost or milestone budgeting breaks a project down into controllable pieces and then carefully follows them.
• Even relatively simple project contains a network of supporting plans or projects.
• In this approach to control milestones are defined as identifiable segments. When accomplishment of a given segment occurs, costs or other results can be determined.

Major features of PERT chart
• PERT: A time-event network analysis system in which the various events in a program or project are identified, with a planned time established for each.
• PERT is a variation of Milestone budgeting.
• Each circle in a PERT chart resembles an Event- A supporting plan whose completion can be measured at a given time.
• The circles are numbered in the order in which the events occur.
• Each Arrow represents the activity- the time-consuming element of a program, the effort that must be made between events.
• Activity time: Represented by the numbers beside the arrows, is the time required to accomplish an event.
• In the e.g. Only a single time is shown for each activity, but in the original PERT program there were three time estimates.

• “Optimistic” time an estimate of the time required if every thing goes exceptionally well.
• “Most Likely” time an estimate based on the time the project engineer really believes is necessary for the job.
• “Pessimistic” time, a time estimate based on the assumption that some logically conceivable bad luck, other than major disaster, will be encountered.
• When several estimates are made, they are usually averaged, with special weight given to the most likely estimate, a single estimate is then used for calculations.
• The next step is to compute the “Critical path” which has sequence of events that takes the longest time and that has Zero (or the least) slack time.
• In the diagram the critical path comprises events 1-3-4-8-9-13. over this path, the activity time for this sequence of event is 131.6 weeks. Some of the other paths are almost as long as a critical path. For e.g. the path 1-2-9-13 is 129.4 weeks.

• Although the critical path has a way of changing as key events are delayed in other parts of the program, identifying it at the start makes possible close monitoring of this particular sequence of events to ensure that the whole program is on schedule.
• Typical PERT analysis involve hundreds or thousands of events. Even though smaller PERT analysis can be done manually, estimates indicate that when more than 200 to 300 events are involved it is virtually impossible to handle the calculations without a computer.
Use of Information technology
• The development in information technology greatly facilitate organizational control at a relatively low cost.
• The system model of management shows that the communication is needed for carrying out managerial functions and for linking the organization with its external environment.
• Communication and management information system (MIS) are the linkage that makes managing possible.
• Information technology has promoted the development of MIS.
• Management information system is a formal system of gathering, processing, and dispersing information internal and external to the enterprise in a timely effective, and efficient manner to support managers in their jobs.
• MIS has to be tailored to specific needs and may include routine information, such as monthly reports, information that points out exceptions, especially at critical points, and information necessary to predict the future.
• Electronic equipments permits fast and economical processing of huge amounts of data.
• The computer can, with proper programming process data towards logical conclusions, classify them, and make them readily available to use.

• Expansion of Basic Data:
• The focus of attention on management information, coupled with its improvement processing has led to the reduction of long-known limitations.
• Managers need all kinds of non-accounting information about the external environment, such as social economic, political, and technical developments.
• The information should be qualitative as well as quantitative.

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