Designing Strategic Control System (3)

8/3/2019 Designing Strategic Control System (3)

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Copyright 2001 Houghton Mifflin Company. All rights reserved.

Designing Strategic Control Systems

Fifth Edition


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Copyright 2001 Houghton Mifflin Company. All rights reserved. 12-2

What Is Strategic Control ?

Strategic control The selection of an organizational strategy and

matching structure for the organization.

Creation of control systems to monitor and evaluatestrategic performance of the organization.

The importance of strategic control

Achieving operational efficiency

Maintaining focus on quality Fostering innovation

Insuring responsiveness to customers


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FIGURE 12.1

A Balanced Scorecard Approach


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FIGURE 12.2

Strategic Control Systems

Steps in designing aneffective control

system


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FIGURE 12.3


Levels of organizationalcontrol


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Types of control systems

FinancialControls

OutputControls

BehaviorControls

OrganizationalCulture

Stock price Divisional goals Budgets Values

ROI Functional goals Standardization Norms

Individual goals Rules andprocedures

Socialization

TABLE 12.1


7/16Copyright 2001 Houghton Mifflin Company. All rights reserved. 12-7

Management by Objectives (MBO)

1. Establish specific goals

and objectives at each

level in the organization.

2. Make goal setting a

participatory process.

3. Conduct a periodic review of progress

toward meeting goals.



Behavior Controls

Operating BudgetsA blueprint for the use of organizational resources.

Standardization

Standardization of inputs Standardization of conversion activities

Standardization of outputs

Rules and procedures

Positive effect: Help control, guide, and limit behaviors.

Negative effect: Rules lead to bureaucratic behaviors.



What Is Organizational Culture?

Culture The collection of values and norms shared by people and

groups in an organization.

Shared values and a common culture increase integration

and improve coordination.Values

Beliefs and ideas about common goals and proper behaviors.

Norms

Act as guidelines or expectations that prescribe acceptable

behavior by organizational members.



FIGURE 12.4

Organizational Culture

Ways of transmitting organizational culture:



Culture and Strategic Leadership

The influence of the founder Initial cultural values and management

style is imprinted on the organization

by its founder.Organizational structure

Structure follows strategy.

Strategic leadership affects

the cultural norms and values

that develop in the organization.



Adaptive and Inert Cultures

Adaptive culturesAre innovative and encourage and

reward initiative by middle and

lower-level managers.Inert cultures

Are cautious and conservative;

do not value and may discourage

by initiative by middle and lower-level managers.



The Composition of the Top-ManagementTeam

Top management

Determines the strategic direction of the company.

Establishes organizational values and norms.

Diversity in top management

Reduces the threat of organizational inertia.

Improves decision making. Helps the culture become adaptive.

Guards against inbreeding and homogeneity.



Traits of Strong and Adaptive Cultures

A bias for action

Have values that promoteautonomy and entrepreneurship.

Nature of the

organizations mission Sticks to its knitting

How to operate the organization

Create an organizationaldesign that motivatesemployees to do their best.


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Strategic Reward Systems

Individual reward systems Piecework plans

Commission systems

Bonus plans

PromotionGroup and organizationalreward systems

Group-based bonus systems

Profit sharing systems Employee stock option systems

Organization bonus systems


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The End


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Designing Strategic Control System (3)