Strategic Control System

 Financial Analysis- It is just fitting that certain measurements of financial performance be made
so that whatever deviations from standards are found out, corrective actions may be
introduced.
 Financial Ratio Analysis- is a more elaborate approach used in controlling activities. Under this
method, one account appearing in the financial statement is paired with another to constitute a
ratio. The result will be compared with a required norm which is usually related to what other
companies in the industry have achieved, or what the company has achieved in the past.

3 Types of Strategic Control

Strategic controls are mainly of 3 types:

1. Financial Controls- Financial control systems are concerned with the financial resources of an
organization. Financial resources are regularly flowing into the organization, and are also flowing
out of the organization. Managers use financial control systems to measure a company’s
financial performance. The most popular tools of financial controls are budgetary control,
financial statements, ratio analysis, and financial audits. Budgetary control is implemented by
using a budget, which is a plan expressed in numerical terms.
2. Output Controls- managers forecast performance goals for each unit and employee. They
forecast the actual performance of the units’ end employees. They compare the actual
performance against the goals already set for them.
3. Behavior Controls- refers to a comprehensive system of rules and procedures. These are
prescribed to direct the behavior/actions of employees at each level of the organization. Rules
and procedures standardize the way of reaching the goals.

Two forms of behavior control are;

 operating budgets,
 standardization.

The operating budget includes the allocations of resources that need to be used for achieving goals by
managers. Most commonly, managers at one level allocate to managers at a lower level a specific
number of resources to use to produce goods and services.

Standardization denotes the degree to which a business-unit specifies how decisions are to be made so
that employees’ behavior becomes predictable.
Identifying Control Problems

1. Executive reality check

2. Comprehensive internal audit

3. General checklist of symptoms of inadequate control

Executive Reality Check

Employees at the frontline often complains that management imposes certain requirements that are not
realistic. In a certain state college, for instance, requests for purchase of classroom materials and
supplies take last priority. This is irregular because requests of such kind must be of the highest priority
considering that the organization is an educational institution.

Comprehensive Internal Audit

An internal audit is one undertaken to determine the efficiency and affectivity of the activities of an
organization.

Symptoms of Inadequate Control

If a comprehensive internal audit cannot be availed of for some reason, the use of a checklist for
symptoms of inadequate control may be used.