9-4-1 Bureaucratic Controls

hired at a plant it is opening in a new country to Japan for months of training in the special “Toyota way” of auto manufacturing. Today, though, web videos and other Internetbased training tools make such an expensive approach to knowledge transfer less necessary. Moreover, if someone at the Toyota plant outside Huntsville, Alabama has a question to ask of someone in Japan with respect to the Toyota approach to things, they are literally just an e-mail away! In short, new technologies have made it much easier for Toyota and other global companies to transmit relevant tacit knowledge around the world and, where appropriate, to transform it into more explicit knowledge.

Finally, new technologies, such as the Internet, have arguably aided global businesses with respect to their absorptive capacity, which is the ability to recognize the value of new knowledge, as well as to assimilate and apply it. This is particularly relevant to corporate research and development (R&D) efforts. Traditionally, an R&D discovery in one part of the company has not necessarily meant that it would be openly “absorbed” (i.e., used) by another part of the company, especially if the different parts of the company (e.g., subsidiaries) were in different countries. The ability to exchange new knowledge and information over the Internet and via other new technologies has somewhat ameliorated such situations. R&D discoveries in the U.S. operations of Anadarko Petroleum Corporation can, for example, be fairly easily communicated to and, indeed, absorbed by the Anadarko operations in Ghana.

Reality Che C k lo-3

What’s an example of some tacit knowledge you’ve learned on a job you’ve held? How would you communicate this knowledge to a newcomer?

LO-4

Discuss and analyze various types of control systems utilized by global business including, bureaucratic controls, interpersonal controls, and output controls, and measurement systems like six sigma initiatives.

absorptive capacity

the ability of organizations to recognize, assimilate, and apply new knowledge

bureaucratic controls

systems of rules and regulations promulgated within a global business

9-4 Control Systems

To coordinate or control their operations, businesses rely on any of several kinds of control systems. These include bureaucratic controls, interpersonal controls, and output controls and measurement. For example, a company might have specific financial or other goals it wishes to achieve and systems for carefully monitoring/controlling the achievement of those goals.

9-4-1 Bureaucratic Controls

Bureaucratic controls are systems of rules and regulations that are promulgated within a global business. Such controls are often implemented to help maintain consistent procedures within an organization. For example, a rule that all employees in the organization (including the CEO!) must fly coach when they travel on commercial airlines represents a consistent bureaucratic control within an organization. A company may also have a rule that employees can spend no more than $50 per person for a business, company reimbursed, and dinner. Similarly, a company may have rules regarding personal usage of company telephones.

Bureaucratic controls can play an important role with respect to organizational risk management. A bank, for instance, may have a firm rule than any loans made above the amount of $50,000 must be approved by at least two bank officers and that one of the approving officers must hold the rank of vice president or above. Such a bureaucratic control is designed to ensure that larger financial risks (i.e., loans over $50,000) are taken only with appropriate scrutiny. While it is possible that two bank officers could—intentionally or unintentionally— approve a loan whose borrower is insufficiently qualified, the likelihood of this happening is much less than it would be if only one officer’s approval were needed.