l is a method of managing the execution of a strategic plan

Two central aspects of strategic control

ability to respond effectively to environmental change).primarily concerned with whether or not the organization is ‘doing the right things’.

the appropriate balance and alignment among a firms culture, rewards, and boundaries . Asks if the organization is ‘doing things right’ in t

approaches to informational control. Although both have the same purpose — using information to select, monitor, and implement effective strategies —

Two Types of Control Sysytem

1) strategies are formulated and top management sets goals. 2) strategies are implemented. 3) performance is measured against the predetermined goal set Adapting to and anticipating both internal and external environmental change is an integral part of strategic control

Involves informational control and behavioral control

goals and objectives are set, strategies are implemented, and performance is compared to the desired standards.

Because business conditions typically change rapidly, information controls are needed that can quickly adjust

an organization’s assumptions, goals, and strategies are continuously monitored, tested, and reviewed. Thus, anticipating and adapting to change is built into the control process.

an approach to implementing strategy that relies on three behavioral forces or “levers”culture; rewards and incentives; and, boundaries.

refers to the shared values, unspoken understandings, and sense of purpose within organizations

Point out that a company’s culture is often what makes it unique compared to other firms in an industry.

Companies use many different techniques to foster a positive culture and create an environment that is fun and motivating.

specify who gets rewarded and why

need to be closely linked to culture since they “put the money where the mouth is” of the organization

Emphasize that one of the challenges for strategic managers is to design and implement reward systems in which what is best for the “rational” individual is also best for the organization.

Another challenge for strategic managers is to create reward and incentive programs that are effective across all parts of the organization

This section discusses how rules and regulations, as well as aspiration levels and goals, can provide effective forms of organizational control

Used properly they can:

Vision, mission, and strategic objectives are a type of boundary that was introduced in Lecture 1.

Strategic objectives and actions plans may have a more direct impact on the behavior of an organization’s employees.

Discuss the attributes of short-term objectives that need to be present for them to be effective. They must:

must provide proper direction but also be flexible enough to keep pace with changing conditions and unexpected circumstances

Rules-based controls are most appropriate in organizations where: 1. Environments are stable and predictable. 2. Employees are largely unskilled and interchangeable. 3. Consistency in product and service is critical. 4. The risk of malfeasance is extremely high (as in banking or casino operations), and controls must be implemented to guard against improper conduct.

Rules and guidelines are often used to control commercial practices such as bribes, kickbacks, and other forms of payment that may be illegal.

In this section, we take a contingency approach to behavioral control. That is, the effective use of rewards/incentives, culture, and boundaries are dependent on a variety of internal and external factors

In general, the use of culture and reward systems provides a more favorable “internalized” control system than a set of rules and regulations

In this section, we focus on the need for both shareholders (the owners of the corporation) and their elected representatives – the board of directors

Three key governance mechanisms are addressed in this section. The first two address the primary means by which the behavior of managers can be monitored:

address some of the implications for the separation of ownership and management in the modern corporation.

Agency theory is concerned with resolving two problems that can occur in agency relationships:

the board of directors is the “middlemen” or “middle women” who provide a balance between a small group of key managers in the firm and a vast group of shareholders.

practical matter, individual shareholders hold relatively little influence, they do —acting collectively — have power to bring about shareholder action suits and demand that key issues be brought up for proxy votes at annual board meetings.

From a corporate governance perspective, one of the most critical roles of the board of directors is to create incentives that align the interests of the CEO and top executives with the interests of the owners of the corporations.

If a company’s internal control mechanisms are failing — that is, the board is not effectively monitoring managers and shareholders are largely indifferent,

one external mechanism that provides a potential solution to the problems above

Despite stringent disclosure requirements, there is no guarantee that the information disclosed by a firm will be accurate.

Financial institutions and stock analysts are two external groups that monitor publicly held firms

All corporations are subject to some regulation by the government and the extent of regulation is largely a function of the industry within which they compete.

Although the press is not typically recognized as an external control mechanism in the corporate governance literature, it would be hard not to argue that the financial press and media play an important role in monitoring the management of public corporations.

is any effort by shareholder to communicate a need for change in company’s policy or management.

Individual or organization that owns part of a corporation through shares of its stock

Because most organizations are very small, they need only a ________ are usually highly centralized because the founder or a top executive makes nearly all of the decisions.

As firms grow, excessive demands may be placed on the owner-manager in order to process all the information necessary to run the business. Specialists are needed in various functional areas

As firms grow, excessive demands may be placed on the owner-manager in order to process all the information necessary to run the business. Specialists are needed in various functional areas

The divisional structure is organized around products, projects, or markets. Each division has its own functional specialists organized into departments.

is, in essence, a combination of a divisional and functional structure

Four types of boundaries

Traditional Forms of Organizational Structure

involve removing internal boundaries to encourage teamwork and widespread sharing of information.

are used to make external relations more permeable and create seamless knowledge systems across organizations.

a firm to bridge differences in culture, function, and goals to find common ground that facilitates information sharing and cooperation.

Emphasize that barrier-free relationships must also extend to other divisions of a corporation and to external stakeholders. T

Not all efforts to create barrier-free structures have been successful.

Mississippi identified 5 reasons for failure:

type is actually a central hub surrounded by networks of outside suppliers and specialists that perform non-vital functions

Strategic Risks of Outsourcing Potential disadvantages of the modular form include

is an evolving network of independent companies – suppliers, customers, even competitors — linked together to share skills, costs, and access to one another’s markets. B

Many times, the most effective way to design an organization is by using a combination of organizational types.

next five subsections address factors that must be considered in any transition from traditional to boundaryless organization forms.

In this section we address the challenge that organizations face in rapidly changing and complex competitive environments: e

exploring for new opportunities (

effectively exploiting the value of their existing assets and competencies