Providing structure in a growing company:

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Master Thesis OMC

Providing structure in a growing company:

The development of a balanced scorecard

for Green Waste

Name: Stéphanie Fleur Siti van der Deen Adress: Pieter van der Doesstraat 35-2 1056 VC Amsterdam The Netherlands Student number: 1470108 Telephone number: +31617326171 Email: stephanie_deen@hotmail.com Rijksuniversiteit Groningen

Faculty of Economics and Business

Master Organizational and Management Control

Rijksuniversiteit Groningen Supervisor: drs. J. Westra - De Jong Green Waste Supervisor: Mr. B. Lourens

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Table of figures

Figure 1: Hofstede‟s cultural dimension for South Africa and world average………...29

Figure 2: Green Waste‟s strategy map…..………..32

Figure 3: Green Waste‟s Balanced Scorecard……….……...33

Figure 4: Results analysis between current and future position……….42

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Abstract

Green Waste is a six year old, fast growing waste management company which is currently facing organizational problems. Green Waste is situated in Cape Town, South Africa and is currently the largest waste management company in their province. As more and more people are nowadays paying attention to the environment in South Africa, recycling is becoming a well-known phenomena and many people participate. Because of the increase in recycling Green Waste‟s business is growing fast and because of that, they are experiencing difficulties maintaining their strategy and their ability to work efficiently. They have insufficient control forms and need more structure in their day to day activities. An analysis of Green Waste‟s current situation has been made and problems are identified. A choice to implement a new Management Control System has been made and based on the outcomes of the case analysis a balanced scorecard and strategy map have been developed. Objectives have been defined in the four different perspectives, which are the targets Green Waste must try to accomplish. An ideal, future situation of Green Waste‟s position and has been sketched and an analysis of the difference between the current and the future position, and the theory will be given. In the following section an overview of the problems, which can and which can‟t be overcome, will be given. The conclusion shows that the balanced scorecard appears to be a good solution and is able to help Green Waste conquering their difficulties.

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1. Introduction to the theme

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environmental pollution needs to be stopped, recycling is increasing. Even the Cape Town City Council has in May 2006 adopted a policy called the City‟s Integrated Waste Management policy. The focus in this policy lays on preventing pollution and reducing the amount of waste. With these current developments in which Green Waste is operating they can expect a continuous growth in their evolving market. Due to Green Waste‟s quick growth so far, this they are experiencing some organizational difficulties. Green Waste currently doesn‟t have a suitable management control system. They have implemented some control drivers but these have merely arisen out of the blue then out of actual well considered considerations. The aim of this paper is to analyze and try to solve the organizational and structural problems Green Waste is currently facing. The concept organizational management control systems will be explained and hereafter the concept balanced scorecard and strategy map will be defined. By conducting a strategy map and a strategic scorecard an effort is done to help overcome their problems. Green Wastes‟ ideal situation is described and the gap between the frameworks and the ideal situation will be analyzed. A recommendation will be done about adjustments which need to be made in order to reach this ideal position.

The main research question which will be answered in this thesis is:

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2. Research approach

2.1 Introduction

In this chapter the research design will be outlined. In section 2.2 the problem statement will be explained and in section 2.3 the research objective is discussed. The research question and the sub questions are discussed in respectively section 2.4 and 2.5. Methods of data collection and research relevance are discussed in the sections thereafter.

2.2 Problem statement

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for companies to have a clear organizational structure. Organizations need an appropriate MCS in order to help them to succeed in achieving their goals. Especially for a company which is still in the start up phase and is growing quickly, it is important to have a clear structure so the growth is manageable. In times of strategic change organizations implement processes and policies that involve acquiring new technologies, skills, and organizational forms that alter patterns of responsibility throughout the organization (Wheelwright and Hayes, 1985; Miller et al., 1992). Green Waste needs to take a minute and start realizing what their actual core business is, how they can improve their efficiency and what they want to achieve in the future.

2.3 Research objective

In the previous section Green Waste‟s main problem was discussed. There is no clear organizational structure, no clear information and communication flow, and there is a lack of formal strategies, procedures and rules. If employees need to make a decision they do what they think is best without considering strategies or procedures. Behavior such as described before can become routine when employees handle their day to day task like this and a consequence can be that these routines become rules. The goal of this research will be to come up with a proposal for an Organizational Management Control System (MCS) which fits the need of Green Waste. In my opinion this proposal for a MCS must provide guidance when making future decisions, help with constructing a clear organizational structure and improve the communication and information flow.

2.4 Research question

A research question is conducted which will give an answer to the problem stated in the research objective. This has led to the following research question:

What are the main current structural problems and their consequences within Green Waste, and is a newly designed organizational management control system a solution to help overcome these problems?

This research question will be answered through a combination of relevant academic literature and empirical research. In the theoretical part an overview and discussion will be given of the available literature on quality management.

2.5 Sub questions

In order to answer the research question several sub questions are provided which will help with answering the research question. The research question can be divided into two parts. The first part consists of a literature study and the second part consists of a case study at Green Waste.

 The first sub question is:

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In order to answer this question several other sub questions are provided:

- Which factors influence the design of a management control system?

- What is an important organizational management control system providedin literature, which fit the needs of Green Waste?

- In what way can a balanced scorecard help Green Waste in providing structure and increase their overall performance?

 The second sub question is:

What is the current situation at Green Wastes head office in terms of organizational structure, strategies, procedures and formalities?

In order to answer this question several other sub questions are provided:

- In what kind of state is the head office of Green Waste currently?

- What kind of problems do Green Wastes main structural difficulties cause?

2.6 Methods of data collection

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In addition to the case study a literature review will be conducted based on the most important literature available, which is congruent with the outcome of the empirical research. This literature will describe available organizational management control systems, their pros and cons, the best way to design them and in this way answer the research question. The goal of the literature search is to find a explanation for Green Wastes current shortcomings and analyze different possibilities to overcome these. The outcome of the literature review will influence the solutions provided and the possible design of a management control system.

2.7 Research relevance

This section discusses the scientific and practical relevance of the outcome of this thesis. From a scientific relevance point of view, the main points of interest are to which degree and in which way the research is relevant from a theoretical perspective. It concerns whether a scientific problem is solved, or whether a new way of formulating a scientific problem is used („t Hart, Boeije and Hox, 2005). The practical relevance of a research subject relates to the extent to which the outcome of this research can be used in a professional context. In this thesis a case study has been researched and based on the outcomes, literature has been provided in order to analyze the findings. The balanced scorecard has been suggested as a possible solution to overcome Green Wastes problems. Green Waste is a reasonable young firm which needs extra research and support to find their path in achieving their future goals. By means of a case and a complementing literature study, Green Waste receives guidance and knowledge and therefore will be better able to handle their problems.

2.8 Thesis outline

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3. Theoretical Framework

3.1 Introduction

The aim of this research is to analyze current problems at Green Waste and, according to these problems and current status, provide a solution which can help overcome the gap between the current status and the perfect-fit status which they are aiming for. This chapter will answer the question: How

can theory help in creating value for Green Waste by analyzing the current situation and possibly conducting a management control system? This chapter will begin with an introduction to the concept

of the management control systems (MCS). In the following section the key success factors will be outlined. Following the concept of the balanced scorecard, strategy map and strategic scorecard will be outlined. The balanced scorecard will be defined in section 3.3.1. And in section 3.3.2 the concept of strategy map and strategic scorecard will be outlined. The advantages and disadvantages of the balanced scorecard will be shown in section 3.3.3.

3.2 Introduction to MCS

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should add value to the organization through increasing the efficiency level and should fit to the external environment of the organization, such as for example the legislation.

3.2.1 Key success factors of MCSs

Key variables such as control, strategy, structure, culture and tightness have been confirmed as descriptors of fundamental, generic elements of context when designing a MCS. In order to understand the different key success factors which involve the design of a MCS, a description of them will be provided in this section. The supporting sub question will therefore be answered in this section: Which

factors influence the design of a management control system?

3.2.1.1 Control

Management control systems can have different kind of focuses, according to Merchant and Van der Stede (2007) a distinction can be made between four type of controls, namely result, action, personnel and cultural controls. Merchant and Van der Stede (2007) define them as follows:

- Result controls influences actions because they cause employees to be concerned about the consequences of the actions they take; employees are empowered to take those actions they believe will best produce the desired results.

- Action controls involves ensuring that employees perform (do not perform) certain actions known to be beneficial (harmful) to the organization. They take any four basic forms: Behavioral constraints, preaction reviews, action accountability and redundancy.

- Personnel controls are designed to make it more likely that employees will perform the desired tasks satisfactorily on their own because, for example, the employees are experienced, honest and hard working.

- Cultural controls exist to shape organizational behavioral norms and to encourage employees to monitor and influence each other‟s behaviors.

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tasks necessary for successful accomplishing an important task. Action controls serve both to prevent or to detect undesirable behavior. According to Merchant and van der Stede (2007) are action controls, controls which prevent the undesired errors and irregularities from occurring are, when they are effective, the most powerful form of control because none of the costs of the undesirable behaviors will be incurred. There are two constraints which make it difficult for action controls to be effective, when; - organizations don‟t know what actions are desirable; - when organizations aren‟t able to ensure that the desirable actions occur. The third control form, personnel controls, builds on employees‟ natural tendencies to control and/or motivate themselves (Merchant and Van der Stede, 2007). Their purposes are to: -Explain stated targets or expectations; -ensure employees are able to perform well; -increase the possibility that employees will be naturally committed to the organization‟s goals (self-monitoring). Cultural controls are most effective when group members are emotionally tied to each other because these controls are developed to encourage monitoring one another. These controls are built on shared traditions, norms, beliefs, ideologies, values, attitudes and ways of behaving. The culture within an organization is shaped by both written and unwritten rules like mission, vision, management philosophy and codes of ethics but also through setting an example or group rewards. The distinction between culture and cultural control is that the latter considers the means of shaping culture and the former the outcome that affects organizational behaviors (Sanderling, 2008). With regards to cultural control, management can shape culture by setting the proper tone at the top (Merchant and Van der Stede, 2007). Managers serve as role models and are often cited as a determining factor in creating a culture of integrity in their organizations.

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3.2.1.2 Structure

Skivington and Daft (1991) state that: Organization structure is usually understood to imply an enduring configuration of tasks and activities. Within this general definition, organization structure has been defined to include two dimensions. One dimension of structure is the formal configuration of roles and procedures, which is the 'framework' of the organization. The framework aspect of organization structure includes rules, prescriptions of authority, division of labor, and hierarchy of authority. The second dimension of structure is the pattern of interaction 'processes' among members which is the informal structure of the organization. Mintzberg (1980) distinguishes five basic parts within an organizational structure - the operating core, strategic apex, middle line, technostructure, and support staff. The operating core consists of all employees who work on the development of basic products. The strategic apex includes the top general managers and their staff. The middle line comprises those managers who sit in a direct line of formal authority between the people of the strategic apex and of the operating core. The technostructure consists of those analysts, out of the formal „line‟ structure, who apply analytic techniques to the design and maintenance of the structure and to the adaptation of the organization to its environment (e.g. accountants and work schedulers). Further on a distinction can also be made with respect five basic mechanisms of coordination, namely mutual adjustment, direct supervision, and the standardization of work processes, outputs, and skills. A very common organizational structure is the division structure, here the organization consists of management and staff and below the organization is build up from the different divisions. Another common organizational structure is the business unit structure, here the divisions are in fact independent organizations with their own staff. A special variant is the matrix structure where the day-to-day tasks takes place in the regular departments but for special temporary projects new teams or task forces are being established which can run straight through other departments. Organizations can have a decentralized organizational structure. A horizontal decentralization means that the power is shared amongst nonmanagers, on the other hand is the vertical decentralization which means that tasks and responsibility is delegated to line managers.

3.2.1.3 Strategy

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„an organizations corporate strategy determines what business it wants to be in and how resources should be allocated among those businesses‟. And „business strategy defines how a firm or entity within the firm chooses to compete in its industry and tries to achieve a competitive advantage relative to its competitors‟.

In 1978 Miles & Snow conducted a model which defined four different types of strategic organizational types. These four different strategic types are:

1) Defender: Has a stable environment, has a limited product range, competes through low cost or high quality, efficiency is paramount and has a centralized structure.

2) Prospector: Is always seeking new product and market opportunities, has an uncertain environment and has a flexible structure.

3) Analyzer: Is hybrid, has a core of traditional products, enters new markets after viability is established and has a matrix structure.

4) Reactor: Lacks coherent strategy, the structure is inappropriate for to purpose, misses opportunities and is unsuccessful.

Another well known distinction between three different strategic archetypes is developed by Mintzberg (1973):

1) Entrepreneurial organization: Is opportunity seeking, has a founding CEO, makes bold decisions, is growth oriented and has a high uncertainty.

2) Adaptive organization: Behaves reactive, has incremental goal setting and has relative certainty on decision-making.

3) Planning mode organization: Uses analysis to dominate decisions, has integrated strategies and has a placid environment.

Even though strategy was formerly not used explicitly as a variable in MCS research until the 1980s (Langfield-Smith, 1997), nowadays MCS research has recognized that the role of strategy is important as it addresses the criticism that contingency based research assumes that an organization‟s MCS is determined by context and that managers are captured by their operating situation (Chenhall, 2003). When for instance an organization is operating as a cost leader, it is suitable for them to use formal controls while they encourage them to stay on course and follow the same path. On the other hand, when an organization is a differentiator it would be more effective to use informal controls as there is more space for flexibility and hence will adapt to the strategy.

3.2.1.4 Culture

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and the ways in which management would like the organization to function (Merchant and Van der Stede, 2007).

Next to organizational culture there is also the national culture in which an organization is operating, which needs to be considered. National culture differences can cause problems with the transfer of corporate management control systems within multinationals and also cause problems with the interpretations of management control problems. For example when comparing Chinese organizational cultural aspects with western organizational culture aspects, Williamson (2005) has found that China focuses more on results whereas the west focuses more on plans, also China focuses more on control through people while the west focuses more on control through systems. There are also differences on hierarchical thinking, trust, individual versus group orientation, meaning of relationship, information sharing, loyalty, certainty and transparency.

3.2.1.5 Tightness

The benefit of any MCS is inferred from the increase in the likelihood that the organizational objectives will be achieved relative to what could be expected if the MCS were not in place. This benefit can be described in terms of tightness because tighter MCSs should provide a higher degree of certainty that employees will act as the organization wishes (Merchant and Van der Stede, 2007). Often multiple forms of control are applied when managers are trying to achieve a tighter control form. These controls can reinforce each other but also overlap, so that they fill up gaps and provide tight control over all measured critical factors. While tight control can also be applied in cultural and personnel control it is mostly used in result and action control. For tight result controls to be successful they must be in line with the actual organizational objectives. As Merchant and Van der Stede (2007) state: “The performance targets must be specific; with feedback in short time increments; the desired result must be effectively communicated and internalized by those whose behaviors are being controlled; and if result controls are used exclusively in a given performance area, the measures must be complete”. When action controls are applied tightly there are several ways in which it can be implemented. Behavioral constraints can be used, by means of physical as well as administrative. But the organization can also apply controls by action reinforcement, thus after the action has been taken. This often comes in the form of punishment for breaking rules or not following instructions. It is important to consider how tight controls should be as tight action controls for example can take up a lot of top-management time. Another critical point may be that managers only focus on the measured tasks and overlook other important tasks which aren‟t measured.

3.3 MCSs provided in literature

This section will expatiate on one particular MCS provided in literature. It will answer the supporting sub question: What is an important organizational management control system provided in literature,

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explained, followed by an explanation on the supporting tools the strategy map and the scorecard itself. After which the advantages and the disadvantages of a balanced scorecard are provided.

3.3.1 Balanced Scorecard (BSC)

During the last decade there has been a rise in the nonfinancial performance measures. Academia have proposed several methods to capture long-term effects of managerial activities, especially with regards to the dynamic environment in which organizations are active nowadays. The balanced scorecard, which is the most prominent of these new concepts, provides a framework in which both financial and nonfinancial success measures are linked by the firm‟s strategy (Budde, 2007). Professor Kaplan and management consultant Norton have worked since 1992 on the concept of the balanced scorecard. During the last decade the balanced scorecard has been widely discussed in academia and has been applied in many organizations. The balanced scorecard is an all round MCS tool which can be designed in such a way that it fits perfect to personal organizational needs. It is a strategic planning and management system used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organizational performance against strategic goals. Wiersma (2009) has found in his study that managers use the BSC mostly for; decision-making and decision-rationalizing; coordination; and self-monitoring. According to Kaplan and Norton (1996) the balanced scorecard can help on four different levels. It helps in clarifying and translating the vision and strategy and hereby gaining consensus. Next it helps in communicating, setting and educating goals and also linking rewards to performance measures. The third supporting function is planning and target setting by aligning strategic initiatives, allocating resources and establishing milestones. Fourth focus is on strategic feedback and learning by articulating the shared vision, supplying strategic feedback and facilitating strategy review and learning. The BSC is generally implemented at the corporate, business unit and individual level.

Kaplan and Norton (1996) state that when using the balanced scorecard as a new strategic management system; „the scorecard addresses a serious deficiency in traditional management systems: Their inability to link a company‟s long-term strategy with its short-term actions‟. Currently a lot of companies place their MCS emphasis on short-term financial measures which leaves a gap between the development of a strategy and its implementation. This is caused by the fact that most of these MCSs are built around financial measures which have little to do with achieving the company‟s long-term strategic objectives. In order to try to prevent this, it is important to set the right long-long-term strategic objectives for the development of a future strategic scorecard for Green Waste. The developed scorecard should be translated from a generic vision into a strategy that is understood and can be communicated.

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and services, and how can we improve our efficiency?"

- Customer: "How well are we meeting the needs of our customers, and how can we make them more satisfied?"

- Financial: "How well are our finances managed to achieve our mission?"

The first perspective, Learning & Growth, includes employee training and corporate cultural attitudes related to both individual and corporate self improvement. According to Kaplan and Norton (1996) provide the objectives in the Learning and Growth perspective the infrastructure to enable ambitious objectives in the other three perspectives to be achieved. An important aspect of this perspective is that some managers find it difficult to solely being evaluated on short term financial performance and still enhancing the capability of their people, systems and organizational processes. And through the Learning & Growth perspective attention is also given to these factors.

The second perspective, Internal Business Processes, refers to the well being of the internal processes of the firm. This perspective is linking the Learning & Growth to the Customer and Financial perspective. By focusing on innovation, operations and post-sale services the internal processes of the organization are trying to make them operate more optimal. Metrics based on this perspective allow managers to know whether its products and services conform to customer requirements.

The Customer perspective identifies the customer and market segments in which the organization has chosen to compete. These segments represent the sources that will deliver the revenue component of the company‟s financial objectives (Kaplan and Norton, 1996).This perspective has become more important as organizations realize that customer satisfaction and customer focus are crucial for success. These are leading indicators; if customers are not satisfied they will eventually find other suppliers that will meet their needs.

The Financial perspective recognizes the need for financial data. Precise and up-to-date financial data will always be a priority and managers will ensure that they will be provided. By stating financial goals the organization is ensuring that the goals which are most important in the end, are not let out of sight.

3.3.2 Strategy map and strategic scorecard

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business strategies and are typically achieved after a number of highly intensive brainstorming sessions in which key business heads representing all functions and processes are required to participate. They help in converting intangible assets into tangible outcomes. Measures and targets are often chosen by management and conveyed to the employees. Getting employees involved in picking measures and setting targets, can help them to be more committed to reaching the goals (Debusk and Crabtree, 2006). The strategic objectives on the map are linked by arrows and defined in a row-aligned flow chart environment. Each row corresponds to a perspective which are the view-port containers for holding all objectives. The maps mostly have their arrows pointing up as this implies success stability and growth. Generally speaking, improving performance in the objectives found in the Learning & Growth perspective enables the organization to improve its Internal Business Process objectives, which in turn enables the organization to create desirable results in the Customer and Financial perspectives. Strategy maps may have according to some (Nørreklit, 2000 and Buytendijk, 2008) possible shortcomings, such as seen from a stake-holder management point of view, the development of strategy maps could be criticized as too much of an inward-looking exercise.

When a strategy map is developed, the strategic scorecard can be constructed which summarizes the strategic themes and their associated objectives, it translates the objectives into measures and targets. For each objective is at least one measure. There are two types of measures namely lag indicators, which indicate success once it has been achieved and lead indicators which monitor the progress or sense in the environment. Each objective also has a target which needs to be reached by the measure by the end of the time horizon. Strategic initiatives can be seen as action programs set up to achieve specific objectives. It is crucial that these initiatives are launched because these initiatives ensure that targets are being reached and thus create results.

3.3.3 Advantages and disadvantages of the Balanced Scorecard

The BSC complements the financial measures with operational measures on customer satisfaction, internal processes, and the firm‟s innovation and improvement activities ensuring a balanced, all round view of the organization. A positive aspect of the balanced scorecard method is that it is tactical and concrete. While strategic planning documents often tend to be passive, they only say what should be accomplished but do not say how and do not say how it will be measured, balanced scorecard attempts to be active. Also the short, medium and long-term views are managed in an ongoing, cohesive manner which displays their interdependent relations. Top-level strategy and middle-management level actions are clearly connected and appropriately focused. Therefore also understandable for employees on all levels. Because the organization‟s performance reporting system is much more likely to be focusing on the things necessary to stay competitive in the long term and realize value for its stakeholders.

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4. Case study at Green Waste

4.1 Green Waste

The upcoming section will give an overview of the organization which is being studied, Green Waste. This chapter will answer the sub question: „What is the current situation at Green Wastes head office

in terms of organizational structure, strategies, procedures and formalities, and what can be improved?’. Section 4.1.1 describes the control forms Green Waste is currently using whereas section

4.1.2 describes the organizational structure and section 4.1.3 describes the strategy of Green Waste. The culture at Green Waste is described in section 4.1.4 and in addition to that the national culture of South Africa is described in section 4.1.4.1. The competitive environment of Green Waste is described in section 4.1.5 and the main problems Green Waste is facing are described in section 4.2.

4.1.1 Control

Management control is a critical function in organizations. When not perfectly being put into practice it can lead to large financial losses, reputation damage and possibly even to organizational failure. Management controls focus in common use on encouraging, enabling, or, sometimes, forcing employees to act in the organization‟s best interest (Merchant and Van der Stede, 2007). Green Waste is currently mainly controlled through the supervisory abilities of the founding leader, who has organized a staff of loyal employees around him. Most key decisions are centralized and should all be approved by the managing director and, when considering financial issues, also by the financial director. This sort of control can be classified as pre action review. Green Waste makes use of bureaucratic controls in the form of policies and operating procedures, although this is on a small base. They have for example an employee guidebook which states different rules. At their waste sites are often teams working, with one employee appointed as supervisor of the site. This position brings responsibility with it and indicates that there are informal team rules applicable, which can be classified as normative controls. Green Waste has some task defined training for their employees which can be classified as personnel controls. Green Waste management feels it is important that managers receive sufficient training as „skilled workers allow organizations to develop and implement value-adding strategies aimed at improving productive behavior and concomitant superior performance of organizations‟ (Le Roux and Oosthuizen, 2010). Green Waste does not only want their employees, but also their activities to live up to certain standards. Therefore Green Waste makes use of quality control. Their waste activities are in compliance with several national environmental legislation, for example by using safe disposal certificates for hazardous waste.

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call for a disciplinary hearing1 in which he or she can proof his or her innocence. When an employee has received three warnings he or she gets fired. Green Waste has, next to their hourly wage, a reward system. There is a quarterly reward for the best waste sorter who will receive R5002 cash and an award for being the best sorter of the quarter. This can be classified as a form of result control. One has to keep in mind when implementing an incentive system can cause hostility within the workforce (Chenhall, Langfield-Smith, 2003). But overall group rewards encourages cultural control (Merchant and Van der Stede, 2007).

4.1.2 Organizational structure

In this section a visual overview of Green Wastes main departments and organizational structure will be provided, see figure 5 in appendix A. The organogram is constructed in such a way that the highest level is the person with the most authority and the lines between the functions indicate who has to report to whom. Green Waste has a functional structure as it groups employees together, based upon the functions of specific jobs within the organization.

Green Waste has one owner who is also the managing director. The managing director has overall responsibility over the company and has a personal assistant. The managing director is occupied with many structural decisions and activities and is less preoccupied with operational issues. The personal assistant of the managing director, who is the sister of the managing director, is, among other things, preoccupied with assisting activities, deputizing for managing director, making decisions and delegating work to others when the managing director is absent. The mother of the managing director is the financial director. The financial director does not need to report to anyone but cooperates with the managing director. She makes all the financial decisions and when large investments are needed, she is the one who has to allocate the funds, in accordance with the approval of the managing director. The financial director pays the invoices and the employees‟ wages and declarations. The financial manager has a financial assistant, who is responsible for financial data entry and filing the data. The person who is reporting to the managing director is the general manager. When the managing director is not available, the general manager is the one who replaces him and makes the decisions. There are currently no formal registered limitations to his authority but when important decisions need to be made, he always needs to comply with the managing director. The general manager is responsible for communicating all important events to the managing director.

On the level below the general manager one can find the operations manager. The operations manager has an important function within Green Waste, because he is responsible for all operational activities,

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A disciplinary hearing occurs when an employee has done something wrong. This employee has to show up in a disciplinary hearing to tell his side of the story and to, if necessary, receive a punishment.

2

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including receiving reports from the contract managers, the collection and transport manager, the factory manager, the site inspector and the plant supervisors. All operational problems and exceptionalities should be reported to him and all major operational decisions should be approved by the operational manager. There is one human resource manager who is responsible for all human resource related activities such as hiring new employees, firing them, and in case of disobedience, supervising the disciplinary hearing. The HR manager has two assistants; one „relations‟ assistant who takes care of the communication with the informal collectors3. The other HR assistant is responsible for the administration of the human resource department. There is also a PR and skills development manager who is responsible for the training of all the employees and for the promotional activities. For keeping up to date on developments on environmental changes Green Waste has an environmental research manager who briefs the current affairs to the general manager. The main activities of a contract manager is to keep in contact with his appointed clients while making sure the service provided is sufficient and the clients are content. Green Waste is also focusing on future clients, for which they have two managers. The collection and transport manager is responsible for all the collections being done and other logistical issues. The site inspector checks every site twice a month and ensures everything is in order. The factory manager is in charge of supervising the plant supervisor of the plant at Maitland. The plant supervisors are in charge of managing the activities of the plant and reporting back to their superiors.

According to the classification by Mintzberg (1980) in section 3.1.1.2, the managing director, financial director, general manager, operations manager and their support staff can be classified as the strategic apex; the plant and transport supervisors, sorters, drivers and runners at the plant can be classified as the operating core; and the other remaining Green Waste managers can be classified as the middle line. 4.1.3 Strategy

Traditionally, the relationship between MCSs and strategy has been viewed as a passive one, suggesting that the MCS is an outcome of organizational strategy. But according to Kober, Juliana and Byron (2007) there is a two-way relationship between the two variables. That is, MCS shapes, and is shaped by, strategy. As Perrow (1961) stated: An understanding of organizational behavior requires close examination of the goals of the organization reflected in operating policies. Green Wastes goals can be classified into two types: Officials goals and operative goals. The difference between the two is that the official goal is an outcome that an organization is trying to achieve, it is often more vague and its purpose creates legitimacy, where an operative goal is an end sought through the actual operating procedures of the organization, which is more concrete, short term and describes what the organization is actually trying to accomplish.

3_{Informal collectors are homeless persons who collect recyclable waste from the street and receive money for}

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The official Green Waste goals can be defined by the next five statements: - Increase revenue;

- increase overall recycling of their clients; - to reduce the total amount of waste;

- to reduce landfill by decreasing the actual size of the waste; - increase the customer satisfactory level.

The operative Green Waste goals can be defined as: - Decrease the operating and manufacturing expenses; - increase the productivity within the plants;

- increase the efficiency of the residential waste pick-up; - increase the amount of customers;

- increase the total amount of residential waste collected.

Green Waste is not in a market in which it can make spectacular returns on a small base. Green Waste wants to distinguish itself from its competitors by making sure the service they provide is of high quality and the cost of the service they provide is low. The product they deal with, separated waste, is a standardized product and it‟s difficult to increase the quality of this product. Green Waste can only make sure that the collected waste is correctly separated according to waste type. Green Waste‟s slogan is: “If we cannot save you money, we don‟t get involved”. Which indicates a low-cost leadership strategy according to Porter‟s definitions (1980). By asking a low price for their services and handling the collected waste efficiently, Green Waste tries to decrease their operational costs. When analyzing the four different strategies provided by Miles & Snow, explained in section 3.2.1.3, Green Waste has the best fit with the prospector strategy. Green Waste is constantly looking for new clients, both in Cape Town and Johannesburg. They regularly experiment with potential responses to emerging environmental trends such as the distribution of „worm farms‟ which turn organic waste into compost and, the collection and disposal of e-waste. When comparing Green Waste‟s organizational features with the distinct features of the different strategic archetypes of Mintzberg (1973), described in section 3.2.1.3, one can see that there is a perfect fit with the „entrepreneurial organization‟- archetype. A young company which is tightly controlled by its owner is the most common example of this type of organization. Green Waste is opportunity seeking, is growth oriented and has a founding managing director.

4.1.4 Culture at Green Waste

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Green Wastes managing director feels loyalty and trust are the main drivers of hiring new employees. There has been made no distinction based on the color of skin color and so people with all kinds of backgrounds can be found at Green waste. In order to increase this level of trust and loyalty the managing director favors friends or relatives of himself or other Green Waste employees when hiring new personnel. If Green Waste has a vacancy for an office position, often an employee makes a suggestion for someone who can fill this position. This tactic is operated through hiring based on positive references and trust. The result of this human resource management strategy is visible within Green Waste: The sister of the managing director is his personal assistant and his mother is the financial director. Also the sister of the general manager is hired to fill in the position of receptionist. And the wife of the quality manager is also employed by Green Waste to work part time on data filing. Also on the factory level are family connections present. All the before described relations are in consonant with the managing directors desire to hire people which are in some way familiar to Green Waste. Hiring family and acquaintances of employees causes a more solid bond between the employees and makes the new employees feel more at home and not afraid to ask questions. Another factor influencing organizational culture is the company dress code. The dress code at the Green Waste office is informal. In order to make the employees feel more unified, dress code is also used through a nontraditional manner. During the World Cup in South Africa, the South Africans were supporting their national soccer team by wearing the team shirt every Friday, also at Green Waste. The managing director is a busy man and is often out of the office because he is out visiting clients. This non-attendance causes a distance between the managing director and the work floor. Because of this the managing director must be up dated frequently by the general manager, who must be aware of what the current issues are and must be in contact with all the remaining managers. The management is collecting information in an informal way by speaking to all employees on the work floor and by receiving emails. Every Monday morning there is a meeting with all staff members where current issues are being discussed. This is a good platform for the staff as it enables them to make decisions and encourages them to discuss new ideas. The formal limit of authority and power of Green Waste managers is not stated on paper in black and white but is implicit. Managers know what kind of authority comes with their function and knows where the limit of their decision making lays. This partial freedom ensures that managers experience more satisfaction when doing their job and increases the efficiency of Green Wastes decisions making process. Just as there is a certain limit of authority and power, there is also a certain hierarchy within Green Waste.

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turnover. Employee dissatisfaction is an issue Green Waste should take into account when making future decisions.

Religion is also a part of the culture within Green Waste. Twice a week, three employees from the head office gather and pray together for the well being of the informal collectors who work for Green Waste. Green Waste has received a lot of complaints about the informal collectors and they feel that by praying, they can help them and increase the quality of their life.

4.1.4.1 National culture

This section will introduce the South African culture, beginning with some facts: - The average life expectancy is 42 years.

- In 2008 almost 22.000 murders and over 50.000 rapes took place. - Over 80% of the population is Christian.

- 23% of the children are undernourished. - 14% of the population is illiterate.

- The population is shrinking by 0,46% per year, due to the effects of aids. - South Africa had a revision of the constitution in 1996.

- In 2009 real GDP growth rate was -1,8%.

- Unemployment rate in fourth quarter of 2009 was 24,3%.

With a history of colonization and immigration, South Africa has a very complex culture. Consisting of 11 different populations and 11 different official languages it is a multi cultural home for its approximately 50 million inhabitants. Many factors have contributed to the realization of the Rainbow nation, as South Africa is being referred to nowadays. In particular one critical period has left its footprints behind, namely Apartheid4. This period has caused a gap between the dark-skinned and white inhabitants which is still visible in current day to day life although it has ended 20 years ago. Currently there is still a difference between the average education level of the white inhabitants and the dark-skinned inhabitants of South Africa, which is respectively higher and lower than the national average. In South Africa the shortage of skilled workers has been identified as a major impediment to the application of optimal business-level strategies and consequently to economic growth and well being of citizens (Jinabhai, 2005). In South African culture, religion plays a big role. According to the last population count more than 80% of the population is Christian, 5 % has a different religion and about 15% are atheists. South Africa has a traditional culture and a vital part of African culture is

4_{Apartheid was a system of legal racial segregation enforced by the National Party government in South Africa}

between 1948 and 1992. According to the United Nations Apartheid means : Any legislative measures and other measures calculated to prevent a racial group or groups from participation in the political, social, economic and cultural life of the country and the deliberate creation of conditions preventing the full development of such a group or groups.

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respect for one‟s ancestors and elders. Traditional living arrangements in South Africa often involves the cohabitation of a large array of family members. Often large black families life together in a shack in a township without the bare necessities of life. In the South African business culture respect is considered important as South Africans like to be treated based on equivalence and attach value to honesty. Business in Africa has struggled with similar challenges as in other emerging economies elsewhere: Extremely poor infrastructure, government involvement in the economy, high transaction costs, opportunism, and uncertainty (Decker, 2010).

An important framework for classifying different cultural factors is the cultural dimension framework developed by Hofstede. Between 1967 and 1973 Hofstede conducted a study in 74 countries, among them also South Africa, about how values in the workplace are influenced by culture. Hofstede (1993) distinguishes five different dimensions, which according to him, do not exist, but rather ‟they are tools for analysis which may or may not clarify the situation‟. The five dimensions will be defined below:

Power distance: The extent to which the less powerful members of institutions and organizations

within a country expect and accept that power is distributed unequally (Hofstede, 1993).

Individualism versus collectivism: The degree to which people in a country prefer to act as individuals

rather than as group members. The opposite of individualism can be called collectivism, so collectivism is low individualism. In individualist societies, a child learns very early to think of itself as "I" instead of "we" (Hofstede, 1993).

Masculinity versus femininity: The degree to which tough values like assertiveness, success and

competition, which in nearly all societies are associated with the role of men, prevail over tender values like the quality of life, maintaining warm personal relationships, service, care for the weak, and solidarity, which in nearly all societies are more associated with women's roles (Hofstede, 1993).

Uncertainty avoidance: The degree to which people in a country prefer structured over unstructured

situations. Structured situations are those in which there are clear rules as to how one should behave. In countries which score high on uncertainty avoidance, people tend to show more nervous energy, while in countries which score low, people are more easy-going (Hofstede, 1993).

Long-term versus short-term orientation: On the long-term side one finds values oriented towards the

future, like thrift (saving) and perseverance. On the short-term side one finds values rather oriented towards the past and present, like respect for tradition, fulfilling social obligations and protecting one‟s „face‟ (Hofstede, 1993).

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taking place in South Africa and the South African economy has suffered a prolonged deterioration in real growth, domestic savings and employment creation because of that. By 1995, the combined outcome of these trends resulted in an economy with very high income inequality, widespread poverty, and high levels of unemployment (May, 1995). South Africa also scores high on masculinity, compared to the global average, which indicates that South Africa experiences a high degree of gender differentiation. Males determinate a significant portion of the society and power structure, with females being controlled by male domination. The power distance is higher in South Africa than the world average, which means that lower ranked employees within organizations expect quicker that the power within an organization is distributed unequally and this also will more easily accept. This can also be partially caused by the Apartheid, as this was the main driving force during these days. For the uncertainty avoidance which is just over 40 in South Africa and 60 on global average can be said that people in South Africa are more easy-going and feel more curious towards changes than distrust.

Figure 1: Hofstede’s cultural dimension for South Africa and world average 4.1.5 Competitive environment

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4.2 Problems at Green Waste

This section will describe what kind of problems Green Waste is facing at the moment and what the consequences are. Interviews conducted during this research reveal that office managers have several problems they cope with on a daily basis.

There are several critical points which could be improved to ensure Green Waste is working more efficiently and will be more profitable. Green Waste current internal situation is mainly characterized by constant employee movement. This can be positive, while intra organizational transfers, or employee rotation, help transmit culture by improving the socialization of employees throughout the organization (Merchant & Van der Stede, 2007). But it can also cause inefficiency because it takes time to get familiar with a new function. Some employees have an own way of doing their tasks which is not in compliance with the way the management wants them to work and therefore it can take a longer time then necessary to get things done. Green Waste is growing fast, which causes a lot of stress on the work floor and that is why some employees feel overworked. Because of this continuous growth it is hard to keep up a perfect communication and information flow. This causes sometimes that employees aren‟t aware of important decisions or that staff feels less called on to ask a colleague for help because they feel a distance. Another issue is that data could be store more structured and that more data should be documented, such as employee files. And there are not enough formalities and procedures for storing documents. When important files are needed it is often hard to track them down or decide if they exist at all. So when crucial decisions need to be made and files cannot be found, valuable time is wasted.

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5. Strategic Framework

Management control problems can be caused by different factors. One of those factors is lack of direction, often caused by unclear objectives. This section will answer the supporting sub question: In

what way can a quality management system help Green Waste in providing structure and increase their overall performance? In order to try to overcome this problem a strategy map and a strategic

scorecard, to fit Green Waste‟s needs, are developed. Both of these frameworks contain strategic objectives and will help Green Waste heading towards the right direction. Because the objectives are straightforward and easy to measure the employees will find them easy to use and will make them better understand the goals and strategy Green Waste is aiming for.

5.1 Strategy Map for Green Waste

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Vision: To be the biggest waste management organization in South Africa by January 2013.

Mission: Provide affordable and high-standard on-site waste management service specialized in recycling

and landfill reduction for households and, medium-sized and large organizations.

Financial manager & Operations General manager F ina ncia l F1 Decreased costs F2 Increased revenue Operations manager Contract managers Cus to mer C1 Increased customer satisfaction C2 Increased nr of clients Contract managers Operations manager Collection & transport manager Environmen-tal researcher Top management/ HR manager Inte rna l I1 Efficient contract handling I2 Safe work environment I3 Logistic efficiency I4 Identify business opportunities I5 Decreased job rotation PR and skills dev. manager Environ- mental researcher Environmentalre searcher HR manager L ea rning & G ro wt h L1 Trained workforce L2 Increase environmental awareness L3 Increase emerging technology awareness L4 Raise employee morale

Figure 2: Green Waste’s strategy map

5.1.1 Cause and effect chain

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objective L1 also supports I2 „safe work environment‟ and I3 „logistic efficiency‟. Objective L3 „increase emerging technology awareness‟ supports objective I4 „identify business opportunities‟. Now the cause and effect chain of Green Waste‟s strategy map has been explained, a better view is provided of the interrelationship of the objectives.

5.1.2 Strategic Scorecard for Green Waste

Based on the strategy map, a strategic scorecard is also developed which matches the strategic objectives and makes them more clear by providing measurable targets and initiatives to help to reach them. The time horizon for all of these objectives is one year, starting in October 2010. The choice for one year and not longer, has been made (i) to ensure that employees do feel pressure to work on the objectives and act accordingly and (ii) to be able to review the framework after one year and make changes if necessary. This framework makes use of leading indicators, which are generally long-term nonfinancial measures, as well as lagging indicators which are generally short-term financial measures. As stated before there are four themes on the strategic scorecard: Learning & Growth, Internal, Customer and Financial. The strategic scorecard, figure 3, can be found below and the associated objectives will be explained afterwards.

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Time horizon is one year, starting in October 2010. Strategic theme Num-ber Strategic map objective

Objective description Measures Actual per- formance Targets5 _Initiatives F in an ci

al F1 Decreased costs The % growth in

expenses should be smaller than the % growth in revenue - Annual revenue - Annual costs Difference of 3% Difference of at least 5 % - More efficient logistics - Less accidents through safe work environment - Buy supplies in bulk F in an ci

al F2 Increased revenue Higher revenue to

indicate growth and financial health - Annual revenue € 3,46 million + 8% - Increased number of clients

- Seize new business opportunities C u st o mer C1 Increased customer satisfaction

Ensure customers are satisfied and stay customers - Score on annual survey 1-10 - Customer retention rate 6,7 out of 10 69% >7,3 out of 10 >80%

- Better service due to correct data filing and project oversight - Quicker service through efficient logistics C u st o mer C2 Increased number of clients

Service more clients in order to ensure Green Waste will grow

- Number of clients (households & organizations) 60.000 households 62 org. Households + 7,5% Organiza-tions + 12% - Implement sales manager - Increase environmental awareness through marketing In te rn al I1 Efficient contract handling

Stability at the head office through correctly filed administration and coordinated contract negotiations - Timeframe between initial contact and contract starting date On average 31 to 40 days

21 days - Intensive contact between contract manager and client -Up-to-date project oversight

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Figure 3: Green Waste’s Balanced Scorecard

Financial

F1 – Decreased costs: Green Waste wants to increase their operating efficiency by decreasing the

manufacturing and operating costs. Through more efficient logistics they believe they can decrease these costs. By ensuring the work environment in the plants and on-site are saver there will be less accidents which will decrease the number of employees who call in sick. Green Waste will also look for new suppliers of safety wear, plastic bags and other supplies and start buying these necessities in bulk. This objective is measured by the difference by the % growth in total costs compared to the %

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General education consists of grade 1 till 9, whereas further education consists of grade 10 till 12, which also includes job-related diplomas and certificates.

In te rn al I2 Safe work environment Increase safety at plants and on-site

- Number of accidents on average per month 8 accidents ≤ 4 accidents monthly - Training on safety wear - Ensure use of safety wear - Safety signage In te rn

al I3 Logistic efficiency Increase efficiency

through better routes and efficient complaint handling - Daily number of drop offs per truck - Average waiting time at plant 4 drop offs Fluctuates from 30 min to 2½ hours ≥ 6 drop offs < 30 minutes - Make use of TomTom for more efficient routes - Provide training for collection/transport manager In te rn al I4 Identify business opportunities

Search for new markets and/or clients

- Number of useful recom-mendations on average per month 3 recommen-dations ≥ 5 recom-mendations - Research conducted by environmental researcher In te rn al I5 Decreased job rotation

Make sure employees are, and stay, on the right place within management positions - Number of employees who changed position within the office 7 changes within the office ≤ 3 changes within the office

- Ensure a perfect fit between education & experience and future job description Le ar n in g & G ro w

th L1 Trained workforce Low and high level _{employees should}

receive suitable training - Number of sorters, runners and drivers who received training - Education should be consistent with office position 61 % of runners, drivers, sorters - Higher managers 90% sufficient - Lower managers 75% sufficient > 90 % - Higher managers at least „further education‟ - Lower managers at least „general‟ education6 - HR manager can review employee‟s education -Provide suited training for all management positions - Provide training for all sorters, drivers and runners

Le ar n in g & G ro w th L2 Increase environmental awareness Market recycling solutions amongst potential clients - % people aware of recycling possibilities in yearly customer survey 45% > 60% - Advertising in papers/magazines/ events - Visit congresses - Continue spread the message in Green Waste marketing Le ar n in g & G ro w

th L3 Increase emerging _technology

awareness

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growth in revenue. Their aim is that the % growth in costs should be at least 5% smaller than the % growth in total expenses. Currently this difference is 3,2% and in the future it should be at least 5%.

F2 – Increased revenue: Green Waste wants to increase their annual revenue, which will fit with their

strategy of growth. By increasing their number of clients and seize new business opportunities they want to achieve this objective. Green Waste wants to increase their total revenue by 8%. Currently their annual revenue is € 3,46 million and the future this should be at least € 3,74 million.

Customer

C1 – Increased customer satisfaction: Green Waste wants to ensure clients are satisfied and continue

making use of their services. They want to increase the quality of their service through being better able to help them by improving their contract handling and having an up-to-date site oversight. They also want to provide a quicker service (and quicker response to complaints about waste not being picked up) through more efficient logistics. Green Waste wants to continue conducting their yearly customer survey in which the clients are asked to grade Green Waste on a scale from 1 to 10. Their aim is to achieve on average a 7,3 where they are currently graded at 6,9. Green Waste will also start with calculating the yearly customer retention rate, with a target percentage of 80%.

C2 – Increased number of clients: Green Waste wants to grow and in order to achieve that they want

to increase their number of clients. They want to implement a sales manager, who will identify business opportunities, approach potential clients and get to know the market. They also hope that their aim for increasing environmental awareness ( objective L2) will encourage potential clients to start recycle. Green Waste currently services about 60.000 households and 62 organizations. Their aim is to increase their residential clients with 7,5% and to increase the number of organizations with 12%. Internal

I1 – Efficient contract handling: Currently the client administration is not perfect organized. The

objective is to reach stability at the head office through correctly filed administration and coordinated contract negotiations. All contract managers should fill in all the necessary forms and pass these on to one office employee who files it at the head office. The aim is to take up to maximum 21 days for the contract to get started; starting at the initial contact till the contract starting date. In order to do this the responsible contract manager should have intensive contact with the potential client.

I2 – Safe work environment: There occur about 8 minor to serious accidents a month at the waste

separation plants and on-site. This can mean someone cutting their hand with glass to someone getting a limb stuck in a waste crush machine. Through training and better information on site (e.g. by the use of safety signage), as well as ensuring employees wear safety wear, Green Waste wants to decrease the number of accidents monthly. The target is a maximum of four accidents a month.

I3 – Logistic efficiency: Green Waste has no global positioning system of the up-to-date whereabouts

Providing structure in a growing company:

Master Thesis OMC