13.Strategic Control

Lecture-13

Strategic Control, Learning,

and Continuous Improvements

Learning Objectives:

After studying this Lecture, you should be able to: Discuss the purposes and contributions of strategic

controls. Discuss the different components of the company’s

control system. Discuss the qualities of an effective control system. Discuss design factors that lead to the failure of the

strategic control system. Discuss managerial factors that lead to the failure of the

strategic control system. Discuss managerial misconceptions about the strategic

control system.

What is strategic control ?

Strategic controls are essential for the successful execution of the company's strategy. They promote consistency in action, increase commitment to organizational goals, and identify areas that need man agerial attention or intervention.

The results of strategic controls can help in establishing goals, allocating resources, streamlining operations, and cre ating an environment that encourages learning and continuous improvements.

The Purpose and Contributions of Strategic Controls:

01.Determine the accuracy of the assumptions on which the strategy has been formulated.

02.Ensure that the company is performing according to plans and expectations.

03.It helps executives and members of the board of direc tors appraise the company's ability to achieve its strategic, financial, and social goals.

04.Generate data for evaluating executive performance and making compensa tion decisions.

05.It enhances organizational learning.

Strategic controls allow managers to examine their responses to these issues and distill important lessons for future actions. This can help to improve future strategy formulation and implementation processes and achieve greater realism in these efforts.

The Components of Strategic Control:

A strategic control system provides feedback about the company's operations, strategies, and goal achievement. A strategic control system usually ha; four major components.

01.Strategic Surveillance:

This component aims to quickly detect environmental changes or shifts that are likely to impact the company's strategy.

Strategic surveillance requires:

• Identifying the firm's environmental sectors that should be monitored.

• Collecting and analyzing the data, and interpreting the results.

• Feeding the data into the control process and, later, identifying threats to the company's successful execution of the strategy.

02. Special Alert Control :

This component serves as an early swarming signal of potential crises, which may affect the company or the implementation of the strat egy.

03. Premise Control.

This component helps to validate the assumptions on which the strategy is developed.

Premise controls lead managers to ask three related questions:

(1) Is this premise still valid?

(2) What corrective (preventive) measures should the com pany undertake to make sure that the premise still holds? And

(3) What should the company do if the worst occurs?

04. Implementation Control. This component requires monitoring the

actions undertaken by management to implement the strategy and determine the effect of these actions.

Managers also monitor progress in the company's goal achievements by collect ing data. Finally, executives need to evaluate the results with stated milestones or goals.

Designing Effective Strategic Control Systems:

To some, strategic controls are considered a necessary evil. In truth, however, strategic control systems are often misunderstood and misused. Successful com panies and executives recognize that strategic controls are an integral component of the strategic process.

To ensure the effectiveness of strategic controls, executives should ensure that they have the following criteria:

01.They are future-oriented.

02.They are closely linked to strategy evaluation.

In turn, attention is given to four areas:1. consistency,2. consonance,3. advantage, and4. feasibility.

03.They emphasize both the content and process issues.

04.They balance short-term and long-term demands on the company and its executives.

05.They are designed with a clear focus on the requirements for long-term success.

06.They establish formality without undue bureaucracy.

07.They encourage learning.

Strategic controls should allow managers to reflect on their experiences and determine which actions have been conducive to success.

Why Do Control Systems Fail? Despite careful planning, strategic

control systems sometimes fail to achieve their goals. these failures may stem from

poor system design, ineffective management, and misconceptions about the control

process.

System Design Factors 1. Poorly stated (or vague) goals. 2. Obsession with procedures and

systems. 3. Insufficient or faulty information processing capabilities. 4. Mismatch between the capabilities of

the system and managers' cognitive abilities.

Management-Related Factors

1. Breakdowns in authority- accountability centers.

2. Dysfunctional organizational politics.

Misconceptions about the Strategic Controls

1. Strategic controls are post-hoc activities.

2. Strategic controls are an exercise in "data crunching."

3. The assumption that "one system fits all."

Consequences of Poor Controls:

Poor strategic controls can result in:

01.Inflexibility. 02.Missed opportunities. 03.Loss of motivation and poor morale. 04.Lack of accountability. 05. Stifling creativity, innovation, and

entrepreneurship.

Model Questions

1.Define the following: • Strategic surveillance. • Special alert control. • Premise control. • Implementation control. • Strategy evaluation-feedback controls. 2.Define competitive benchmarking. 3.What is management by negative exception? 4.How does the breakdown in authority-accountability

influence strategic controls? 5.What are three common misconceptions about

strategic control systems? 6.Why do control systems fail?