Chapter 14 Notes

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University of Toronto Scarborough
Financial Accounting
Prof.Jan Klakurka

Chapter 14 Levers of Control for Implementing Strategy - Summarize the performance measurement and control system tools that are available to managers as they work to achieve their profit goal and strategies LEVERS OF CONTROLS - Control of business strategy is achieved by integrating the four levers of beliefs systems, boundary systems, diagnostic control systems, and interactive control systems. The power of these levers complement each other when used together Using the Levers of Control to Guide Strategy - Intended strategies are the plans that managers attempt to implement in a specific product market based on analysis of competitive dynamics and current capabilities. Managers want to achieve these - Emergent strategies are strategies that emerge spontaneously in the organization as employees respond to unpredictable threats and opportunities through experimentation and trial and error. - Realized strategies are the outcome of both streams (what actually happened) Dynamic Interplay of Forces - Strategic control is not achieved through new and unique performance measurement and control systems, but through beliefs systems, boundary systems, diagnostic control systems, and interactive control systems. - Belief systems and interactive control systems motivate organizational participants to search creatively and expand opportunity space. They create intrinsic motivation by creating a positive informational environment that encourages information sharing and learning. - Boundary and diagnostic control systems are used to constrain search behaviour and allocate scarce attention. These systems rely on extrinsic motivation by providing explicit goals, formula based rewards, and clear limits to opportunity seeking. (Negative) - Diagnostic control systems conserve management attention, interactive systems amplify management attention. - Beliefs and boundary systems ensure that core values and rules of the game are understood by everyone in the organization - Strategic control is achieved when the tension between creative innovation and predictable goal achievement is transformed into profitable growth. Mangers must know how to achieve both high degrees of learning and control. Control System Purpose Communicates Control of strategy
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