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Designing Strategic Control Systems

Fifth Edition
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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 evaluate strategic 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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A Balanced Scorecard Approach

FIGURE 12.1
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Strategic Control Systems


Steps in designing an effective control system

FIGURE 12.2
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Strategic Control Systems


Levels of organizational control

FIGURE 12.3
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Strategic Control Systems


Types of control systems
Financial Controls
Stock price

Output Controls
Divisional goals Functional goals Individual goals

Behavior Controls
Budgets Standardization Rules and procedures

Organizational Culture
Values Norms Socialization

ROI

TABLE 12.1
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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.

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Behavior Controls
Operating Budgets
A 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.

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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.

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Organizational Culture
Ways of transmitting organizational culture:

FIGURE 12.4
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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.

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Adaptive and Inert Cultures


Adaptive cultures
Are 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.

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The Composition of the Top-Management Team


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.
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Traits of Strong and Adaptive Cultures


A bias for action
Have values that promote

autonomy and entrepreneurship.

Nature of the organizations mission


Sticks to its knitting

How to operate the organization


Create an organizational

design that motivates employees to do their best.

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Strategic Reward Systems


Individual reward systems
Piecework plans Commission systems Bonus plans Promotion

Group and organizational reward 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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