12-1
Chapter 12: Designing
Strategic Control Systems
Text by
Charles W. L. Hill
Gareth R. Jones
Multimedia Slides by
Milton M. Pressley
Univ. of New Orleans
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-2
Preview
What Is Strategic Control?
Strategic Control Systems
Organizational Culture
Strategic Reward Systems
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-3
What Is Strategic Control?
• Strategic Control Defined
– Selection of Organizational
Strategy and Structure
– Creation of Control Systems
to Monitor and Evaluate
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-4
What Is Strategic Control?
The Importance of Strategic Control
•
•
•
•
Control and Efficiency
Control and Quality
Control and Innovation
Control and
Responsiveness
to Customers
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-5
Balanced Scorecard
Approach to Strategic Control
• The Balanced Scorecard Model
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
Figure 12.1: A Balanced Scorecard
Approach
Establish Company
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Mission and Goals
Develop a Strategy
and Structure
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
Figure 12.1: A Balanced Scorecard
Approach
Establish Company
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Mission and Goals
Develop a Strategy
and Structure
Create Strategic Control
Systems that Measure:
Efficiency
Quality
Innovation
Customer Response
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
Figure 12.1: A Balanced Scorecard
Approach
Establish Company
12-8
Mission and Goals
Develop a Strategy
and Structure
•
•
•
•
Create Strategic Control
Systems that Measure:
Efficiency
Quality
Innovation
Customer Response
Measure Financial
Performance
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
Figure 12.1: A Balanced Scorecard
Approach
Establish Company
12-9
Mission and Goals
Develop a Strategy
and Structure
•
•
•
•
Create Strategic Control
Systems that Measure:
Efficiency
Quality
Innovation
Customer Response
Measure Financial
Performance
Take Corrective Action to Solve
Problems or Exploit New Opportunities
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-10
Strategic Control Systems
• Strategic Control Systems Defined
• Steps in Designing Control Systems
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-11
Figure 12.2: Steps in Designing
an Effective Control
Establish Standards
System
and Targets
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-12
Figure 12.2: Steps in Designing
an Effective Control
Establish Standards
System
and Targets
Create Measuring and
Monitoring Systems
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-13
Figure 12.2: Steps in Designing
an Effective Control
Establish Standards
System
and Targets
Create Measuring and
Monitoring Systems
Compare Actual
Performance Against
the Established Targets
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-14
Figure 12.2: Steps in Designing
an Effective Control
Establish Standards
System
and Targets
Create Measuring and
Monitoring Systems
Compare Actual
Performance Against
the Established Targets
Evaluate Result
and Take Action
If Necessary
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-15
Strategic Control Systems
(Continued)
Corporate-Level
Managers (Set Controls
Which Provide Context For)
Figure 12.3: Levels of
Organizational
Control
Divisional-Level
Managers (Set Controls
Which Provide Context For)
Functional-Level
Managers (Set Controls
Which Provide Context For)
First
Level
Managers
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-16
Strategic Control Systems
(Continued)
Table 12.1: Types of Control Systems
Financial
Control
Output
Control
Behavior
Control
Organizational Culture
Stock Price
Divisional
Goals
Budgets
Values
ROI
Functional
Goals
Standardization
Norms
Transfer
Pricing
Individual
Goals
Rules and
Procedures
Socialization
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-17
Strategic Control Systems
(Continued)
• Financial Controls
–
–
–
–
Stock Market Price
Return on Investment (ROI)
Market Share
Cash Flow
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-18
Strategic Control Systems
(Continued)
• Output Controls
– Divisional Goals
– Functional and Individual
Goals
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12-19
Strategic Control Systems
(Continued)
Management by Objectives (MBO)
• Establish Specific Goals at
Each Organizational Level
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12-20
Strategic Control Systems
(Continued)
Management by Objectives (MBO)
• Goal Setting is Participatory
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-21
Strategic Control Systems
(Continued)
Management by Objectives (MBO)
• Periodic Review of Progress
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12-22
Behavior Control
• Operating Budgets
• Standardization
– Standardization of Inputs
– Standardization of
Conversion Activities
– Standardization of
Outputs
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-23
Organizational Culture
•
•
•
•
Organizational Culture Defined
Organizational Values
Organizational Norms
Socialization
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-24
Figure 12.4: Ways of
Transmitting Culture
Socialization
Tactics
Signs,
Symbols,
and Stories
Norms
and
Values
Rites
and Ceremonies
Organizational
Rewards
Organizational
Culture
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-25
Organizational Culture
(Continued)
Culture and Strategic Leadership
• The Influence of the
Founder
• Organizational
Structure
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-26
Organizational Culture
(Continued)
Adaptive and Inert Cultures
• Adaptive Cultures
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-27
Organizational Culture
(Continued)
Adaptive and Inert Cultures
• Adaptive Cultures
• Inert Cultures
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-28
Organizational Culture
(Continued)
Composition of the
Top Management Team
• Helps Determine the Company’s
Strategic Direction
• Establishes the Values and Norms
That Lower-Level Managers Will
Follow
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-29
Organizational Culture
(Continued)
Traits of Strong and
Adaptive Corporate Cultures
• Bias for Action
• Nature of the Organization’s
Mission
• How to Operate the
Organization
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-30
Strategic Reward Systems
Individual Reward Systems
•
•
•
•
Piecework Plans
Commission Systems
Bonus Plans
Promotion
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-31
Strategic Reward Systems
(Continued)
Group and Organizational
Reward Systems
• Group-Based Bonus
Systems
• Profit-Sharing Systems
• Employee Stock Option
Systems
• Organization Bonus
Systems
Copyright  1998 by Houghton Mifflin Company. All rights reserved.
12-32
Copyright  1998 by Houghton Mifflin Company. All rights reserved.