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Chapter 10

Chapter 10

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York University
Administrative Studies
ADMS 4900
Kelly Thomson

Feb.06/2014 Lecture 5 Chapter 10—Strategic Control and Corporate Governance Feedback Control Systems - traditionally rely on measuring outcomes - managers set targets and devise specific metrics to measure and achieve those targets - establish appropriate time frame - targets can be measured by accounting metrics or follow audit standards - market-based outcomes take form of: sales quotas, customer satisfaction, brand coverage, like - operating targets: production schedules, tolerance levels, waste rates, utilization, productivity - feedback control system placed at end of process that begins with strategy formulation, goal setting, strategy implementation and action, performance measurement, evaluation and feedback formulate implement strategy control strategy strategy - traditional control system, feedback loop most useful when environment is stale and simple, goals can be measured with high certainty, and no need for complex measures of performance - system provides direct link between individual goals and organizational goals ~ track what exactly individual managers are responsible for ~ results can be compared across units and provide basis for corrective action - financial and operating control and feedback control system assumptions: 1. goals can be measured with certainty 2. environment is stable enough and simple enough to move forward with plan 3. clear plan connection between original plan and eventual outcomes Informational Control: Responding Effectively to Environmental Changes - being able to adapt to both internal and external strategy is part of strategy control - main focus is whether or not firm is ‘doing the right things’ ~ main question is do firm’s goals still ‘it’ within the context of current strategic environment? - information control is ongoing process - organization’s assumptions, premises, goals and strategies are continuously monitored, tested and reviewed - benefits of continuous monitoring: ~ shortened time lags ~ changes in competitive analysis detected earlier ~ organization’s ability to respond with speed and flexibility - control system characteristics: 1. focus on constantly changing information that has potential strategic importance 2. information is important enough to demand frequent and regular attention from all levels of organization 3. data and information generated are best interpreted and discussed face-to-face meetings 4. control system is key catalyst for ongoing debate about underlying data, assumptions and action plans formulate implement strategy strategy strategic control ~ corporate governance ~ informational control ~ behavioral control ~ financial control Behavioral Control: Balance Culture, Rewards, and Boundaries - focus on implementation—doing things right - recognize potential costs, lost opportunities and risks associated with withholding intervention until predetermined strategy and its execution do produce outcomes - develop alternatives to feedback system because ~ competitive environment is complex, unpredictable require demand and flexibility ~ called upon to make iterative adjustments in direction ~ alter priorities in the face of new information and developments ~ modify resource allocation during plan’s execution - feedback control systems less useful because individual who set plan and initiated its execution may not be around to witness results and receive feedback in the end - behavioral control: ~ leverage firm’s culture, rewards and incentives ~ guides behavior while strategy is unfolding ~ directs individual efforts toward desirable outcome 1. Building a Strong and Effective Culture - organizational culture shared values (what is important) and be
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