When a team of individuals produce a single output the problem arises on how to contribute the reward so that every individual is equally rewarded. This article examines three different mechanisms to deal with this issue:
Markets deals with the control problem through precise measurement and reward of individual contributions.
Bureaucrats rely on a mixture of close evaluation with socialized acceptance of common objectives.
Clans rely on a relatively complete socialization process which effectively eliminates goal incongruence between individuals.
Controls (by Tannenbaum)=sum of interpersonal influence relations in an organization Controls (Ezioni)= control is equivalent to power
Controls (Weber)= a problem in creating and monitoring rules through a hierarchical authority system
Main questions in article:
1) What are the mechanisms through which an organization can be managed so that it moves towards its objectives? 2) How can the design of these mechanisms be improved, what are the limits of each design?
An example: The parts supply division
Purchasing department: buys 100.000 items (p.a.) from 3.000 suppliers purchased by 22 employees on 3 management levels. •Purchasing officer
- send out request to 3 manufacturers and adds information on reliability,... and the order •Supervisor
- Consults agents if they need help and reminds workers that they are not allowed to accept presents Warehousing operations: 1.400 employees (incl. 150 manager)
•Pickers and packers (worker)
- Formal authority (written rules)
- Informal authority (personality)
1.Market mechanism --> purchasing function
Agents and supervisory employ market mechanism: to minimize cost for the company by picking the best price on the markets. In a market prices convey all of the information necessary for efficient decision-making. Frictionless market: Prices represent exactly the value of good or service. Therefore reward can be contributed in direct proportion to contribution of employee!
Agents and supervisory are subject to bureaucratic mechanisms: Their work is controlled by a set of bureaucratic surveillance controls (performance evaluation, hierarchical oder-giving)
2.Bureaucratic mechanism --> warehousing function
Warehousing is subject to routines of monitoring and directing. This is done by close personal surveillance and direction of subordinates by superiors, based on a set of rules.
Rules vs. price: Rules are arbitrary (beliebige) standards without comparison, based on assigned values of (successful) actions. Prices imply that a comparison has already taken place. Prices are far more efficient means of controlling transactions than are rules. However, the conditions necessary for frictionless prices can rarely be met, and in such conditions the bureaucratic form, despite its inadequacies, is preferred.
3.Informal social / clan mechanism
Supervisors can rely on bureaucratic mechanisms but this requires surveillance which is associated with costs. But when the supervisor knows that his workers achieve the "right" objectives, he can eliminate many of the costly forms of audition and surveillance.
Social and informational prerequisites of control
The three models can be arranged along two dimensions:
=prerequisite to successful operation
= Set of agreements between people, as a bare minimum, is basis for control
Type of controlSocial requirementsInformational requirements MarketsNorm of Reciprocity (Wechselwirkung)Prices
BureaucracyNorm of Reciprocity
ClanNorm of Reciprocity
Shared values, beliefsTraditions
The informational prerequisite of control:
While a Clan is the most...