Chapter 8Chapter 8

Strategic ControlStrategic Controland Restructuringand Restructuring

Chapter 8Chapter 8

Strategic ControlStrategic Controland Restructuringand Restructuring

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Learning ObjectivesLearning Objectives

To understand:To understand: feedback, concurrent, feedforward and feedback, concurrent, feedforward and

comprehensive strategic control systemscomprehensive strategic control systems the implications of national cultures for the design the implications of national cultures for the design

of control systemsof control systems characteristics of the most common restructuring characteristics of the most common restructuring

tacticstactics the concept of business cycle orientation and how it the concept of business cycle orientation and how it

is useful in helping firms deal with economic cyclesis useful in helping firms deal with economic cycles

To understand:To understand: feedback, concurrent, feedforward and feedback, concurrent, feedforward and

comprehensive strategic control systemscomprehensive strategic control systems the implications of national cultures for the design the implications of national cultures for the design

of control systemsof control systems characteristics of the most common restructuring characteristics of the most common restructuring

tacticstactics the concept of business cycle orientation and how it the concept of business cycle orientation and how it

is useful in helping firms deal with economic cyclesis useful in helping firms deal with economic cycles

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StrategicStrategicDirectionDirection

Strategy FormulationStrategy Formulation(corporate and (corporate and business level)business level)

Strategy ImplementationStrategy Implementationand Controland Control

Strategic RestructuringStrategic Restructuring

External and Internal External and Internal AnalysisAnalysis

Strategic Management ProcessStrategic Management Process

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Strategic Control SystemStrategic Control System

A system to support managers in A system to support managers in

- assessing whether the organization’s - assessing whether the organization’s strategy is accomplishing goals as intendedstrategy is accomplishing goals as intended

- identifying areas needing attention- identifying areas needing attention

A system to support managers in A system to support managers in

- assessing whether the organization’s - assessing whether the organization’s strategy is accomplishing goals as intendedstrategy is accomplishing goals as intended

- identifying areas needing attention- identifying areas needing attention

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Types of ControlTypes of Control

• Feedback - Feedback - Provides managers with performance Provides managers with performance

information so that they can make adjustments if information so that they can make adjustments if

necessarynecessary

• Concurrent - Concurrent - Provides real-time information used Provides real-time information used

to control organizational processesto control organizational processes

• Feedforward – Feedforward – Monitoring systems that help Monitoring systems that help

managers anticipate changes in their external and managers anticipate changes in their external and

internal environmentsinternal environments

• Feedback - Feedback - Provides managers with performance Provides managers with performance

information so that they can make adjustments if information so that they can make adjustments if

necessarynecessary

• Concurrent - Concurrent - Provides real-time information used Provides real-time information used

to control organizational processesto control organizational processes

• Feedforward – Feedforward – Monitoring systems that help Monitoring systems that help

managers anticipate changes in their external and managers anticipate changes in their external and

internal environmentsinternal environments

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Stakeholders andEnvironment

Missions and Goals

StrategiesImplementation(including targets & concurrentconcurrent controlscontrols)

Performance

Comparisonof Performance with Targets

Assessmentof Cause and Effect

FEEDFORWARD CONTROL FEEDFORWARD CONTROL

FEEDBACK CONTROLFEEDBACK CONTROL

time

Feedback that guides impressions & expectationsFeedback that guides impressions & expectations

Feedback used to alter plans and strategiesFeedback used to alter plans and strategies

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Feedback ControlsFeedback Controls

Functions of feedback controls in organizations:

•Creating specific objectives or targets ensures that managers understand the plans and strategies that guide firm decisions

•Motivate managers to pursue organizational interests

•Help managers decide when and how to intervene to make corrections

Functions of feedback controls in organizations:

•Creating specific objectives or targets ensures that managers understand the plans and strategies that guide firm decisions

•Motivate managers to pursue organizational interests

•Help managers decide when and how to intervene to make corrections

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Elements in a Feedback Control System

Elements in a Feedback Control System

Establish Broad Goals

Based on Mission, Vision,

and Purpose

Identify Key Result Areas

for Each of the Broad Goals

Establish Targets for Each

Result Area and a Time

Frame for Accomplishment

Make a Specific Manager

Responsible

for Each Target

Develop an Action Plan for

Accomplishing

Each Target

Follow Up

With

Each Manager

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Characteristics of Effective Objectives or Targets

Characteristics of Effective Objectives or Targets

• High enough to be motivating

• Realistic

• Specific

• Measurable

• Understood by all affected managers & employees

• Set through participative processes

• Use feedback on performance

• Cover specific time frame

• High enough to be motivating

• Realistic

• Specific

• Measurable

• Understood by all affected managers & employees

• Set through participative processes

• Use feedback on performance

• Cover specific time frame

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Concurrent ControlsConcurrent Controls

Process Controls• Statistical Process Control

• Real-time Inventory Control

Behavioral Controls• Bureaucratic Controls

• Rules and Procedures

• Policies – general guides to action

• Clan Control

• Socialization processes that dictate appropriate behavior• Orientation sessions

• Training

• Formal communications such as newsletters, mission, visions, values

Process Controls• Statistical Process Control

• Real-time Inventory Control

Behavioral Controls• Bureaucratic Controls

• Rules and Procedures

• Policies – general guides to action

• Clan Control

• Socialization processes that dictate appropriate behavior• Orientation sessions

• Training

• Formal communications such as newsletters, mission, visions, values

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Feedforward Control SystemsFeedforward Control Systems

Rapid changes in the social, economic, Rapid changes in the social, economic, technological and political environments make technological and political environments make good feedforward controls necessary and importantgood feedforward controls necessary and important• Monitoring SystemsMonitoring Systems – The firm analyzes information – The firm analyzes information

from stakeholders, the industry and the broad from stakeholders, the industry and the broad environment to predict potential changesenvironment to predict potential changes

• Premise Control Premise Control – evaluates whether information used to – evaluates whether information used to establish strategies and goals is still validestablish strategies and goals is still valid

Rapid changes in the social, economic, Rapid changes in the social, economic, technological and political environments make technological and political environments make good feedforward controls necessary and importantgood feedforward controls necessary and important• Monitoring SystemsMonitoring Systems – The firm analyzes information – The firm analyzes information

from stakeholders, the industry and the broad from stakeholders, the industry and the broad environment to predict potential changesenvironment to predict potential changes

• Premise Control Premise Control – evaluates whether information used to – evaluates whether information used to establish strategies and goals is still validestablish strategies and goals is still valid

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Comprehensive Strategic Control Systems

Comprehensive Strategic Control Systems

Rapidly advancing technologies make continuous Rapidly advancing technologies make continuous improvements through control systems a possibilityimprovements through control systems a possibility

• Information generated should be an important and recurring item to be addressed by top management

• Control process should be given frequent attention at all levels

• Data from system should be discussed in face-to-face meetings

• Continually challenge the underlying data, assumptions and strategies

Rapidly advancing technologies make continuous Rapidly advancing technologies make continuous improvements through control systems a possibilityimprovements through control systems a possibility

• Information generated should be an important and recurring item to be addressed by top management

• Control process should be given frequent attention at all levels

• Data from system should be discussed in face-to-face meetings

• Continually challenge the underlying data, assumptions and strategies

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National CulturesNational Cultures

For control systems to be effective they should reflect the For control systems to be effective they should reflect the culture of the nation in which they are established:culture of the nation in which they are established:

• Power distancePower distance - degree to which members of society - degree to which members of society accept uneven power distributionaccept uneven power distribution

• Individualism/collectivismIndividualism/collectivism – degree to which the – degree to which the focus of society is on individual or groupfocus of society is on individual or group

• Masculine/feminineMasculine/feminine – degree to which society draws – degree to which society draws strong distinctions between gender rolesstrong distinctions between gender roles

• Uncertainty avoidanceUncertainty avoidance – degree to which members of – degree to which members of society are tolerant of uncertainty and ambiguitysociety are tolerant of uncertainty and ambiguity

• Confucian dynamicsConfucian dynamics – degree to which decisions are – degree to which decisions are focused on the long term vs. the short termfocused on the long term vs. the short term

For control systems to be effective they should reflect the For control systems to be effective they should reflect the culture of the nation in which they are established:culture of the nation in which they are established:

• Power distancePower distance - degree to which members of society - degree to which members of society accept uneven power distributionaccept uneven power distribution

• Individualism/collectivismIndividualism/collectivism – degree to which the – degree to which the focus of society is on individual or groupfocus of society is on individual or group

• Masculine/feminineMasculine/feminine – degree to which society draws – degree to which society draws strong distinctions between gender rolesstrong distinctions between gender roles

• Uncertainty avoidanceUncertainty avoidance – degree to which members of – degree to which members of society are tolerant of uncertainty and ambiguitysociety are tolerant of uncertainty and ambiguity

• Confucian dynamicsConfucian dynamics – degree to which decisions are – degree to which decisions are focused on the long term vs. the short termfocused on the long term vs. the short term

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National Cultures and Control SystemsNational Cultures and Control Systems

Influence of national cultures on characteristics of control systems:Influence of national cultures on characteristics of control systems:

• Power distancePower distance high high – focus on outcomes– focus on outcomesPower distance lowPower distance low – focus on adherence to plan – focus on adherence to plan

• Individualism Individualism – individual rewards– individual rewardsCollectivism Collectivism – team-based rewards– team-based rewards

• Masculine Masculine – value on achievement, heroism and material success– value on achievement, heroism and material successFeminineFeminine – value on relationships and quality of life – value on relationships and quality of life

• Uncertainty avoidanceUncertainty avoidance – control over management risk taking – control over management risk takingUncertainty toleranceUncertainty tolerance – less rule based – less rule based

• Long-term oriented Long-term oriented – focus on sales growth and customer satisfaction– focus on sales growth and customer satisfactionShort-term orientedShort-term oriented – focus on profits – focus on profits

Influence of national cultures on characteristics of control systems:Influence of national cultures on characteristics of control systems:

• Power distancePower distance high high – focus on outcomes– focus on outcomesPower distance lowPower distance low – focus on adherence to plan – focus on adherence to plan

• Individualism Individualism – individual rewards– individual rewardsCollectivism Collectivism – team-based rewards– team-based rewards

• Masculine Masculine – value on achievement, heroism and material success– value on achievement, heroism and material successFeminineFeminine – value on relationships and quality of life – value on relationships and quality of life

• Uncertainty avoidanceUncertainty avoidance – control over management risk taking – control over management risk takingUncertainty toleranceUncertainty tolerance – less rule based – less rule based

• Long-term oriented Long-term oriented – focus on sales growth and customer satisfaction– focus on sales growth and customer satisfactionShort-term orientedShort-term oriented – focus on profits – focus on profits

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Common Restructuring Common Restructuring ApproachesApproaches

Common Restructuring Common Restructuring ApproachesApproaches

• Refocusing Corporate Assets: dRefocusing Corporate Assets: downscopingownscoping• Retrenchment: turnaround strategy, often involving Retrenchment: turnaround strategy, often involving

downsizing (workforce reductions)downsizing (workforce reductions)• Chapter XI Reorganization: provides temporary court Chapter XI Reorganization: provides temporary court

protection from foreclosure and an opportunity to protection from foreclosure and an opportunity to renegotiate contractsrenegotiate contracts

• Leveraged Buyout (LBO): private purchase of business by Leveraged Buyout (LBO): private purchase of business by managers, employees, unions, or private investorsmanagers, employees, unions, or private investors

• Structural Reorganization: changes to organizational designStructural Reorganization: changes to organizational design

• Refocusing Corporate Assets: dRefocusing Corporate Assets: downscopingownscoping• Retrenchment: turnaround strategy, often involving Retrenchment: turnaround strategy, often involving

downsizing (workforce reductions)downsizing (workforce reductions)• Chapter XI Reorganization: provides temporary court Chapter XI Reorganization: provides temporary court

protection from foreclosure and an opportunity to protection from foreclosure and an opportunity to renegotiate contractsrenegotiate contracts

• Leveraged Buyout (LBO): private purchase of business by Leveraged Buyout (LBO): private purchase of business by managers, employees, unions, or private investorsmanagers, employees, unions, or private investors

• Structural Reorganization: changes to organizational designStructural Reorganization: changes to organizational design

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Business Cycle OrientationBusiness Cycle Orientation

Capabilities that allow a firm to respond more Capabilities that allow a firm to respond more quickly than rivals to business cycles:quickly than rivals to business cycles:

• Business cycle literacy• Forecasting resources• Facilitative organizational structure• Business-cycle sensitive management principles• Supportive organizational culture

Capabilities that allow a firm to respond more Capabilities that allow a firm to respond more quickly than rivals to business cycles:quickly than rivals to business cycles:

• Business cycle literacy• Forecasting resources• Facilitative organizational structure• Business-cycle sensitive management principles• Supportive organizational culture

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Trends:Trends:• Increasing global complexity and Increasing global complexity and

interconnectedness, fueled by technological interconnectedness, fueled by technological advancementsadvancements

• Specialized, mobile and diverse labor pools, Specialized, mobile and diverse labor pools, including those found outside home countriesincluding those found outside home countries

• Education levels, income levels and access to Education levels, income levels and access to capital will continue to grow worldwidecapital will continue to grow worldwide

• New powerful competitors in global marketplaceNew powerful competitors in global marketplace• Increased concern about governance, sustainability Increased concern about governance, sustainability

and social responsibility; increased regulationand social responsibility; increased regulation

Trends:Trends:• Increasing global complexity and Increasing global complexity and

interconnectedness, fueled by technological interconnectedness, fueled by technological advancementsadvancements

• Specialized, mobile and diverse labor pools, Specialized, mobile and diverse labor pools, including those found outside home countriesincluding those found outside home countries

• Education levels, income levels and access to Education levels, income levels and access to capital will continue to grow worldwidecapital will continue to grow worldwide

• New powerful competitors in global marketplaceNew powerful competitors in global marketplace• Increased concern about governance, sustainability Increased concern about governance, sustainability

and social responsibility; increased regulationand social responsibility; increased regulation

The FutureThe FutureThe FutureThe Future

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Challenge of the FutureChallenge of the FutureChallenge of the FutureChallenge of the Future

Challenges for managers:• retaining valuable employeesretaining valuable employees• creating and preserving competitive advantagecreating and preserving competitive advantage• discouraging new entrantsdiscouraging new entrants• serving increasingly demanding customersserving increasingly demanding customers• choosing and timing technology investments at choosing and timing technology investments at

a time when change is so rapida time when change is so rapid• major shocks associated with terrorism, new major shocks associated with terrorism, new

diseases and warsdiseases and wars

Challenges for managers:• retaining valuable employeesretaining valuable employees• creating and preserving competitive advantagecreating and preserving competitive advantage• discouraging new entrantsdiscouraging new entrants• serving increasingly demanding customersserving increasingly demanding customers• choosing and timing technology investments at choosing and timing technology investments at

a time when change is so rapida time when change is so rapid• major shocks associated with terrorism, new major shocks associated with terrorism, new

diseases and warsdiseases and wars