STRATEGIC CONTROL Chapter 8

STRATEGIC CONTROL SYSTEMS A strategic control system is a system to support managers in assessing the relevance of the organization’s strategy to its progress in the accomplishment of its goals, and when discrepancies exist, to support areas needing attention. Types of control: Feedback controls – budgets, ratio analysis, audits, goals and objectives Concurrent controls – real-time controls such as statistical process controls and behavioral controls Feedforward controls – surveillance and tracking systems, premise control

ESTABLISHING A FEEDBACK CONTROL SYSTEM Establish broad goals based on mission, vision and purpose Identify key result areas for each of the broad goals; key result areas could coincide with industry KSF’s Establish specific targets for each key result area and a time frame for accomplishment Make a specific manager responsible for each target Develop an action plan for accomplishing each target Follow up with each manager

CHARACTERISTICS OF EFFECTIVE GOALS OR TARGETS (PERFORMANCE METRICS) 1.They are high enough to be motivating. 2.They are realistic. 3.They are specific. 4.They are measurable. 5.They are understood by all affected managers and employees. 6.They are set through participative processes. 7.Feedback on performance is a part of the process. 8.They cover a specific time frame.

BEHAVIORAL CONTROLS Bureaucratic controls: rules, procedures and policies Differentiation strategy Less formalization Greater decentralization Low-cost Leadership strategy  More formalization  Greater centralization Clan controls: socialization processes Differentiation strategy Greater stress on entrepreneurship and risk-taking Low-cost Leadership strategy  Greater focus on analysis and direction

CHARACTERISTICS OF EFFECTIVE CONTROL SYSTEMS Information generated by the control systems should be an important and recurring item to be addressed by the highest levels of management. The control process should also be given frequent and regular attention from operating managers at all levels of the organization. Data from the system should be interpreted and discussed in face-to-face meetings among superiors and subordinates. The success of the control process relies on the continual challenge and debate of underlying data, assumptions, and strategies.