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Chapter 14

Chapter 14 Notes

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Department
Financial Accounting
Course Code
MGAD40H3
Professor
Prof.Jan Klakurka

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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 CON TROLS
-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 er ror.
-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 creat ively and expand oppor tunity space. They create
intrinsic motivation by creating a positive information al 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 opportun ity seeking. (Negative)
-Diagnostic control systems conserve management attention, interactive systems amplify management attention.
-Beliefs and boundary systems ensure that core value s 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 SystemPur poseCommunicatesControl of strategy
as
Beliefs SystemsEmpower and
expand search
activity
Vision Perspective
Boundary SystemsProvide limits of
freedom
Strategic domainCompetitive position
Diagnostic Control
Systems
Coordinate and
monitor the
implementation of
intended strategies
Plans and goalsPlan
Interactive Control
Systems
Stimulate and guide
emergent strategies
Strategic
uncertainties
Pattern of actions
LEVERS OF COTNROL AND HUMA N BEHAVIOUR
Organiza tion ppl
desire to
Organizat ional
blocks
Managerial
solutions
Relevant control
lever
ContributeUnsure of purposeCommunicate core
value and mission
Beliefs system
Do rightPressure or
temptation
Specify and enforce
rules of the game
Boundary systems
AchieveLack of focus or
resources
Build and support
clear targets
Diagnostic control
systems
CreateLack of oppor tunity
or afraid of risk
Open organizational
dialogue to trigger
learning
Interactive control
systems
LEVERS OF CON TROL AND ORGANIZATIONA L LIFE CYCLE
Stage 1: Start-Up
Stage 2: Rapid Growth
Stage 3: Maturi ty
TAKING CHARGE OF A BUSINESS
-A new manager can use levers of control to (1) overcome organizational inertia, (2) communicate the substance of the new agenda, (3) establish
implementation timetables and targets, and (4) ensure continu ing attention through incentives
-In a case of strategic tur naround, managers can use the levers of control to (1) overcome organizational inertia and create a sense of urgency, (2)
communicate the new agenda for strategic renewal, and (3) establish implementation timetables and targets
ACHIEVING PROFIT GOALS AND STRATEGIES
Tensions between:
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Description
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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