Introduction
The theory of corporate control is based on the proposition that where agents have specific human capital investments in the firm, their firm-specific wealth is threatened by a hostile acquisition of the firm which may bring in a new management team. The threat of take-over is itself sufficient to induce managers to co-ordinate their strategic actions to meet the interests of the residual risk-bearers. However, the empirical evidence on the market for corporate control is contradictory, and contains many ambiguities (Dixon 2003). Privatization entails a shift in the objectives of the principal, since the ownership changes now link rewards to the share price. Thus, like the market for corporate control, the new ownership arrangements must consider the type of managerial governance structures which will induce performance in a new regulatory and competitive environment. This provides a perspective on the policy issues debated in key areas such as communications and utilities. Disciplining of inefficient management is best handled by an outside take-over by shareholders; hence, the stock-market operates as an external monitor of management, in that the share value of the firm reflects the relative efficiency of the management. Thus, the market for corporate control operates to discipline managements which fail to act in the interests of shareholders (McCahery, Picciotto & Scott 1994). Controlling a firm would require various strategies to ensure that the result would benefit the firm. Controlling a firm would require the use of control mechanism to organize the control process and make sure that the firm would maintain its goals as it is being controlled. One kind of control mechanism is the clan control. This paper intends to discuss how effective is clan control as a control mechanism.
Converse shoes and control
During a time when athletic shoes were dominated by Nike hyping technology in their shoes and Reebok focusing on fashion aspects, Converse languished but hung onto market share with such equities as the official NBA shoe and nostalgia among middle-age consumers who wore the brand when growing up. Converse was able to increase consumer associations with both of these ideas to gain share. Converse shoes can be linked to older male consumers' fond memories of their childhood days due to the brand's virtual dominance of the sport shoe market until the 1970s.With the emergence of the legal form of the joint stock company, the corporation itself is the owner of its assets. It is this that makes the question of who is able to control the corporation and to determine its behavior all-important (Scott 1997). Control, in the strict sense, designates a structural relation in which particular individual or collective actors have the de facto capacity to mobilize the powers that are legally vested in the corporation. As such, it constitutes a power potential. Corporate control involves the regulation of an extensive system of tasks, ranging from long-term structural matters to the everyday monitoring and disciplining of labor from top-level financial direction to shop-floor supervision. It is strategic control that is crucial with respect to the mobilization and accumulation of capital; and that he’s at the centre of the theoretical concerns of managerialists (Haven 2006).
The growth of corporate and institutional shareholdings is the basis of a transition from indirect personal possession to impersonal possession, though this does not mean that individuals are no longer essential elements in corporate control. Collective agents, for all their undisputed autonomy, manifest their actions through the actions of individuals, and these individuals most active in shaping the 'calculations' of an enterprise is an important matter; corporate behavior is not totally determined by market constraints (Olmstead 2002). Possession and control rest not on legal forms per se, but on the social context of legal relations, and they saw a transition occurring from those situations where strategic control rests upon the legal right to vote a majority of the shares, to those in which there are dispersed shareholdings and management control. Between these two extremes were various intermediate cases where groups of shareholders have less than a majority of the shares but are able to supplement their shareholdings with other means of control. Control through a constellation of interests is just one of the forms taken by corporate control when inter corporate shareholdings are formed into structures of impersonal possession. An enterprise subject to immediate minority control by an enterprise that was itself management-controlled was to be regarded as subject to ultimate management control. This distinction between immediate and ultimate control does, of course, bring out some important features of corporate control, but it tends to overstate the significance of management control and can lead to unwarranted conclusions about the autonomy of the internal management of enterprises controlled through legal devices (Hopkins, Kontnik & Turnage 2004). Converse is a shoe company that has a rich history and has maintained its stay in the industry amidst the different problems it encountered. This company filed for bankruptcy in 2001 and it is now owned by its former rival Nike. Like other companies, converse made sure that it controls its operations and the management of its processes. One control mechanism that Converse can look at is clan control.
Clan control
Setting ambition is the first step on the road to solving the most difficult kinds of business problems; it is those problems that require fundamental changes in the ways people work. Technical solutions provided by command-and-control executives are inadequate in these situations. Edicts from on high cannot achieve the increased speed, flexibility, mutual support, and trust across functions that are needed to gain greater customer responsiveness. This solution must be discovered by individuals and groups throughout the organization (Slater & Strange 1997). Wise leaders realize that everyone gains when responsibility is distributed appropriately throughout a company. Although insights are exchanged up and down the corporate Ladder, frontline employees' antennae often detect market changes and growth opportunities long before these subtleties reach the stratosphere of the chief executive. This is an advantage of being close: to the customers. Leaders who have grown beyond the old command-and-control stratagems of managing and who encourage their employees to take responsibility will reap rewards. Their employees, motivated to do their best, will do so, learning to voice ideas and use their initiative. Deeply held values can block one's ability to find the right answer (Laurie 2000).
The silo mentality may be so deeply established and supported by the levers of control that operate within an organization that leaders cannot imagine any other way of conducting business or defining the work that people in the organization do. In recent years, there have been signs that a new kind of social contract may be in its infancy. Corporate leaders are beginning to understand that workers' loyalty to one another as well as to their companies determines the level of effectiveness of collective action and ultimately the company's performance. That is particularly true for those who are phasing out a command-and-control organizational structure to implement a system featuring greater employee responsibility. Typically, in a command-and-control organization, the leader, who is responsible for all of the problem solving, views employees as nothing more than those who implement strategy (Callow & Goodchild 2001). The central values of the company culture are obedience and conformity. A company where wide and common socialization processes among managers from different backgrounds are emphasized is classified as a professional clan control company. While a company where the socialization processes are narrow and where a single clan mostly a family monopolizes important positions in the company is classified as a family clan control company. When a company is operating in an industry like electronics which requires strong global integration, it should strengthen the unified and formalized rules to integrate the global operations. Therefore, bureaucratic control, either narrow or broad, seems a suitable style. On the other hand, when the need for local responsiveness is strong, the formalized rules may be limited in their ability to control the subsidiary. Thus, clan control, either family clan or professional, should be a better control style (Manning 2002). Clan control makes use of psychological and social mechanisms to control the firm. Clan control can come in the form of family clan control and professional clan control. A family clan control focuses on having family members as those who will manage and control the firm. A professional clan control allows for different individuals to control and manage the firm. The individuals in the professional clan control are from different groups and have different values of management.
Strength of clan control
Current conventional wisdom sees the market for corporate control as essentially the ultimate constraint on management, forcing it to operate efficiently or be displaced. On the one hand, the emergence of a market for corporate control restored shareholder influence that had been in eclipse for decades. On the other hand, corporate management has even greater obligations to other stakeholders in the corporation, having taken on social responsibilities that none of the pioneers of big business in the past century could have foreseen. And the emergence of new and highly focused interest-group coalitions, cutting across private and public sectors of the economy, constrains corporate choices affecting both market and nonmarket arenas (Pfeffer 2004). Today the pluralistic and often contradictory character of the nation's political and legal process has come to weigh more heavily than ever on corporate management. These conflicting pressures on the managements of corporations are related to the question of whether or to what degree corporate managers should seek to transcend their obligations to their owners to serve the public welfare. The changing environment for corporate control, changing size distributions of firms, changing wage dispersion within organizations, and the profound changes in the governance of the employment relation have not to this point played a large role in affecting the research agenda of organization studies (Kaysen 1996).
In some ways, this is because the discipline is frequently almost as unconcerned about context and history as other related disciplines, such as economics, that have been deservedly criticized for such theoretical and empirical lacunae. Basically, the simple structure is a non structure where a strong entrepreneur manager holds all of the decision powers, including planning and control. Most organizations, especially small and young ones, pass through the simple structure in their formative years. The entrepreneurial firm fits best in the simple-structure category. It depends on the health and whims of one individual and generally has a sense of its mission. The simple structure, although ideal for small and entrepreneurial firms, may be criticized for being paternalistic, unfashionable in contemporary society, and sometimes autocratic. Firms may opt for vertical integration (Kaen 2003) A strategy of vertical integration is used by firms to increase the economies of scale and efficiency. Each stage of the production process is organized as a separate division that must, however, buy or sell from other separate divisions of the firms. The need to coordinate these transfers requires the use of a system of transfer prices and most often top-level operational control. Top management of the firm keeps a hands-on approach. Vertical integration requires that incentives be based on overall economic performance rather than on objective financial performance criteria and implementation of an internal capital market. Because the investment opportunities affect the whole corporation rather than one or some of the divisions, top management would formulate the investment opportunities. In vertically integrated firms, the corporate strategic control as well as the operational controls keeps a certain dose of centralization in the implementation of the business structure (Riahi-Belkaoui 1995). Clan control makes sure that an organized structure would be used to control the firm. Clan control will help Converse control its operations through a group that doesn’t need to adjust to one another. Clan control will make sure that the group controlling the company would need lesser introductions and focus more on actions.
Limitation of clan control
Order implies knowledge of outcomes and a reduction of risk in the sense of unanticipated outcomes. This requires the development of certain rules of action which constitute the means through which order is achieved. These rules may be explicitly monitored and controlled through specialist bodies which in turn have their own rules of action and resource bases (Clark 1999). Alternatively, the system of regulation may be more loosely coordinated through informal and institutional constraints on action (Kakabadse 2001). In practice, the regulatory process will probably be a mixture of both of these. For example, the existence of a regulatory body with powers of monitoring and control cannot guarantee the acceptance or implementation of certain rules of action; frequently, the central issue in the regulatory process is indeed how far the formal rules have become embodied in the informal and institutional practices of organizations and firms as it is often impossible for the regulators to exercise detailed control over individual firms. Achievement of order is, however, continually threatened by a number of factors, including the intensive reflexivity of modern societies which leads to a continual questioning of the process of regulation, and the complexity and dynamism of market relations which lead to discontinuous and continuous processes of innovation and change at the national and the international levels (Carlson 2001).
At the centre of all these processes are social actors attempting to come to terms with and shape this order. Managers are one of the key groups in that shaping process. Recent organizational research and analysis has indicated that the logic of bureaucratic control may be collapsing under the weight of its own internal contradictions within the intense cumulative pressure exerted by technological, cultural and political change in contemporary capitalism (Engwall & Morgan 1999). Rather than evolutionary or incremental change in which partial modifications to existing regulative structures and technologies of control are gradually absorbed within the established regime as it adapts to altered conditions or bureaucratic implosion or meltdown presupposes a complex and escalating chain of interacting changes that destroys and transforms the core elements of the control regime as a whole (Cooper & Payne 2001). It seems to resonate with the much more intensive, discrete and detailed organizational control technologies and practices that have taken shape over the last two decades as they come to displace, and then subsequently replace, bureaucratic control regimes ill-suited to new times. In particular, the newer control schemes are seen to signal the arrival of a totally integrated circuit of surveillance and control with minimum levels of externally imposed intervention and direct supervision as conventionally enshrined in the structural mechanisms that are situated at the core of the older control model. While bureaucratic control is obtuse, static and rigid, newer controls are sharply focused, mobile and flexible; only the latter is appropriately equipped to provide the simultaneous tight-loose control processes and practices required by the new regime of globalized capitalist accumulation (Salaman 2001). Clan control usually leads to issues with some members of the firm. Clan control would mean that the firm would be controlled by a chosen few and other members of the organization would not have a chance to control the organization. People would not be given a chance to provide insights on what is the best means of controlling the firm at a given time. People would not be able to make decisions that they believe is the best for the firm at a certain time.
Conclusion
Clan control makes use of psychological and social mechanisms to control the firm. Clan control can come in the form of family clan control and professional clan control. Clan control makes sure that an organized structure would be used to control the firm. Clan control will help Converse control its operations through a group that doesn’t need to adjust to one another. Clan control usually leads to issues with some members of the firm. Clan control would mean that the firm would be controlled by a chosen few and other members of the organization would not have a chance to control the organization. People would not be given a chance to provide insights on what is the best means of controlling the firm at a given time.
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