Chapter 12
Designing Strategic Control Systems
Strategic
Management
An Integrated Approach
Charles W. L. Hill
Gareth R. Jones
PowerPoint Presentation
by Charlie Cook
Fifth Edition
Copyright © 2001 Houghton Mifflin Company. All rights reserved.
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
Output
Controls
Behavior
Controls
Organizational
Culture
Stock price
Divisional goals
Budgets
Values
ROI
Functional goals
Standardization
Norms
Individual goals
Rules and
procedures
Socialization
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
organization’s 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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