Chapter 12

Designing Strategic Control Systems

Strategic Charles W. L. Hill

Management Gareth R. Jones

PowerPoint Presentation by
An Integrated Approach Charlie Cook

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 Output Behavior Organizational
Controls Controls Controls Culture

Stock price Divisional goals Budgets Values

ROI Functional goals Standardization Norms

Individual goals Rules and Socialization

procedures

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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