Implementing Management Innovation Successfully - Book Report/Review Example

9.7. Implementing Management Innovation Successfully: Principles of Lasting Change Over the last years organizations have strived and dedicated resources to innovations but most of them have failed in the implementation stages. Implementation of innovations is only successful when the managers and the employees alter their responsibilities to be in line with the new innovation. There 8 principles of implementation that are vital for an innovation to be successful. They: include: 1. Understanding the organization’s culture as some cultures are responsive to change while others are not. 2. Adopting innovations which are consistent with the current corporate strategies of the organization since they are the ones that employees will be willing to adopt. 3. Avoiding innovations if the company is downsizing as the employees will not adopt them as the company is not committed to them. 4. Spending enough time and resources managing both the technical and the human side of innovation since the two are of equal .Successful change requires managing the human side so that it can embrace the change. 5. Educating the employees at all levels on the purpose and the benefits of the innovations so that it can be embraced by the entire organization. 6. Using long term and short term measures to gauge the success of the innovation. This can be done using attitudinal surveys and observations. 7. Developing useful reports that illustrate the changes that have been brought about by innovation. The reports should also be understandable. 8. There is the need to make an implicit agreement on when to switch from the old systems to the new system. When this is not done, those involved will be looking at information from both the old and the new systems. This results in confusion. 10.1: Continuous Budgeting at HON Company The current business environment is very much competitive and it has forced companies to strive to be revolutionary and innovative Being innovative in order to gain competitive advantage requires proper budgeting by the involved company. However, the standard cost accounting methods do not provide a good avenue that can be used to achieve the needed success. The reason why this is the case is because the conditions that are taken into account when budgeting annually are not exactly the ones that are experienced. HON which is a manufacture of mid priced office furniture in USA and Canada has relied on quarterly budget to be able to tackle the obstacles associated with the standard cost accounting systems. The three month budget cycle serve two purposes which are a. Facilitating the development of new and innovative products b. Facilitating continuous improvement The furniture manufacturing industry is very much volatile and therefore requires proper budget planning .This ensure that the production capacities are fully utilized and the unit cost are reduced or maintained. At HON Company, the quarterly budget that is used to ensure continuous improved is prepared in five stages as indicated below. 1. The developing of the sales budgets by the product line. This normally takes two weeks. 2. Converting the sales budget into plant production and shipping schedules of the company 3. Preparing the cost / expense budget for the production and distribution. This involves the preparation of separate budget for customer service, distribution, production and well as research and development. 4. Consolidation of the budget. This occurs after the individual budgets are prepared. They are then sent o the headquarters for consolidation. 5. Preparation of the complete budget for the parent company 11.2 What is EVA and how can it HELP Your Company Economic Value Added refers to a financial measure of the performance of a company that combines the familiar concepts of residual income and the modern principles if corporate finance. It is the operating profits of a company less the capital charge and the NOPAT. EVA gives a true value to the shareholders of a company. The companies that are normally generating high values of Eva are those that can be said to be high performers. Market Value Added refers to the measure of the wealth that a particular company has created to the Both EVA and MVA have been critizede by those who opes theiruse as metric for measuinr the preomabec of a comaloany. One major prpoblem of EVA is that it deos not take into consideration the growth opportunities that are inherent in various invenstment decisions.This therefore implies that using it to measure the performance of a company is only effceteive when dealing with firms having fewer inevstment decisions. The major benefit of EVA when used in an organization is that it is a very powerful tool that aligns the interest of the empleoeyss with those of the shareholders or the investors. EVA is a financial tool that can be adopted by managers in several situations. This is because it focuses on generating value for the investors When EVA is used, the managers and the employees are able to focus on how capital is used and how cash flow is generated from it. Transitioning to the use of EVA is a very extensive process that requires the participation of employees at all levels. This ensures that the implementation is effectively and sucessfully done 11.3: Greening With EVA Companies are today spending a lot of money on operating costs and investments that are environmentally related. In most of the cases the costing and the accounting principles do not clearly identify and measure these environmental costs Economic Value Added has been effectively used to improve corporate decision making in order to improve both environmental and capital investment management. EVA is innovative in three major ways which include 1. It is not bound by any GAAP and therefore its user are willing to make adjustments where needed 2. EVA has been brought down to lower levels and this as ensured that all the employees of the company are involved in the decisions and the changes that are required to improve the performance of the business or organization. 3. EVA provides a very important means of measuring performance which can be used in the capital markets. In order to be able to improve the quality of capital investment decisions in a company, careful consideration need to be taken on the impact of such decisions on the products, services and the activities of the business. There are companies that make capital investments decisions on both the environmental issues and the capital investments without consideration of the broader lifecycle effect. This affects the operation and the success of the business. The successful implementation of EVA requires three issues to be considered. 1. Full commitment from the top management of the company 2. Making decision on any needed changes that will ensure that balancing is done to increase precision 3. Careful consideration of the associated transfer of pricing as well overhead allocation policies.This is in addition to considering the imapact of this transfer. 9.1 control function of management Control ensures that all functions as set out by management are followed to the latter, and all people perform their duties. Importance of control Guard against personal limitations by ensuring people do as they are supposed It tries to prevent interference of organizational goals by personal goals due to lack of goal congruence Good control ensures plans are adhered to reasonably without unpleasant surprises expected. It should focus on the future, be multidimensional and within defined objectives. Good control is subjective with performance measured against expectations for the future. It should be economically desirable. Good control can be achieved through Avoiding control problems; avoiding opportunities for improper behavior eg though automation, centralization of decision making, sharing risks eg through insurance, elimination eg through subcontracting, Control categories; can be through specific actions control like behavioral constrains using locks and user names, ensuring accountability, and review of pre-action through observation of others’ works. Control of results requires accountability defined by dimensions that are measurable and can be rewarded Personnel control can through improved communication, encouraging peer groups and through upgrading capabilities. Feasibility of control is dependent on various organizations The type of control depends on what is to be controlled and various options can be used interchangeably. Being the same in almost all levels of the organization, situations should be observed independently Control tools that are applicable are summarized below 10.5 beyond budgeting This model focusses on best practices from design of the organization, devolving authority, planning as well as perfomance management. It ensures competition in the new economic era. Organizational design/devolution: - this leads to delegating controld of the organization, and within budget limits.can be through reengineered processes, removing hierarchies and team working. It consists of varous features as shared values for governance, autonomous profit centers creations, open information networks for front line managers, freedom of action for managers with result delivery in mind and giving managers the right tools to ensure that they accompish their actions rightly and decisively. Perfomance management: - performance management goals are built towards achieveing strategic management. Features include setting targets relative to competition, effective management systems that ensure adjustment to strategy, a dynamic strategic process devolved to teams that operate within limits and a process for investment management. Distributed control of functions and a reward system are also essnetial parts of perfomance management. Beyond budgeting goes beyond summation of the budgeting actions as utlibed in the figures below 10.6 games managers play at budget time There are various bad behaviors’ archetypes from managers in the budgeting process that subvert standards for decision making and win resources. 1. Sandbagger: managers use a below per business plan. They think the market is tough and can only slightly improve. Leads to wasted time and resources in arguments and overpayments for little improvements. 2. Magician: these focus on the positive business aspects and leave out the negatives in budget time. The reality should be used instead on focusing on such a trend 3. Lone agent: they subscribe to different standards that undermine teamwork, and are not conformance to certain norms making management very hard. They have a ‘But’ in every situation 4. The visionary: they float on clouds and depend on non-factual future. They tend to have an excuse for poor short term performance with a blindfolding visionary approach of a bright future. 5. Hostage taker: these managers beg for big investments for improvement of performance. They bet of a certain exposed opportunity at the expense of the company. Managers play games due to lack of skills, lack of focus, lack of knowledge or clarity of the organizational goals, and in response to environmental issues such as corporate culture. Dealing with the managerial games Acknowledge the facts that such issues as games and twisting of facts exists at the start of the meeting Create an ideal picture that ought to be exhibited by managers while presenting facts Deal with disruptions positively in meeting time through neutralizing Ensure peer pressure through enhanced question answer channels and presence in key reviews of the business Neutralizing behavior 10.2 budgeting gamesmanship Budgets are used to influence managerial performance. Budgets should be roted in reality. Due to the probleatic nature of non factual budgets, it is essential to have budgets that have less gamesmanship. Most companies, through research are found to have their managers playing budget games. This is mainly triggered by expectations in the upcoming years of good profits leading to misleading figures. Market uncertainty is also an issue. A drive to achieve profit targets seals the gamesmanship deal. There are various games that are played by managers depending on the organization. Performance evaluation teds to reduce the budget gamesmanship in as the same way as an informal reward system. A firm’s reward system should have greater control over the managers in order to be termed as effective Most of the games played are not really bad manners but can be a tactical mode of survival for the business. 10.3 budgeting made easy Benefits of e budgeting are reduction of administrative costs, increase of service levels, and freeing the department of finance to strategize Pitfalls of traditional budgeting; Use of varying software for analysis in different departments might bring in confusions, Lack of specific knowledge about the software in use, The process is long as the responsible parties must take care of all time lags and it is impossible to access historical data Inability to access historical data An e budgeting solution automates a budget process and the forecasting works. 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