Copyright 2001 Houghton Mifflin Company. All rights reserved.

Chapter 12
Designing Strategic Control Systems
Strategic Charles W. L. Hill
Management Gareth R. Jones
Fifth Edition
PowerPoint Presentation
by Charlie Cook
An Integrated Approach
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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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FIGURE 12.1
A Balanced Scorecard Approach
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FIGURE 12.2
Strategic Control Systems
Steps in designing an
effective control
system
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FIGURE 12.3
Strategic Control Systems
Levels of organizational
control
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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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FIGURE 12.4
Organizational Culture
Ways of transmitting organizational culture:
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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