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Chapter 9

Whenever organizations chose their strategy and them implement it, the process of

controlling starts. For this purpose, we should consider two factors of behavioral and

informational, which help our staff (managers and ordinary workforces) to (1) recognize the

company’s goals and objectives, (2) the different type of rules and ways we use in the process, and

(3) the potential rewards for specific actions. It is important to note that this control system should

be fit with our chosen strategy. It means that when individuals accept the visions of the corporation,

he/she is more likely to accept the goals, and as a result, it is less required for monitoring our

people. Instead of this, we can focus more on the corporation’s objectives and goals as nowadays

we have more uncertain and complicated environment both in the domestic and global context. In

the past, we have a different way to control the strategy, in which based on the previously defined

goals by the top management before the implementation, we measure the performance by those

metrics. So, this approach acted as a single loop learning. However, as in today business generally

we can not expect to have a stable and simple environment, it is hard to use this strategy. Also,

some scientist such as Mintzberg believed that the fix goals could be detrimental to the

performance of the company as they can not adapt easily to the new changes in the environment.

As I mentioned, the controlling process covers three systems. First is informational system,

in which we focus on finding that our company is doing the right thing or not.in this element, we

will analyze both the external and internal environment, which can be covered by the technological

‘changes, shifting in the taste of the customers, and the regulation of government, and the

competition between the companies in the industry. So, this element will play an important role in

the concept of organizational learning, which is defined as a continuous cycle of learning in the

organization that constantly evaluated the underline assumptions to find the real cause of problems.
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This contemporary system will have several characteristics like as focusing on that type of

information that is considered strategically important. The second character can be the importance

of that data that regularly has a significant amount of demand from all level of the organization.

The third character refers to the potential power of physical meeting in interpreting those data, and

the last character is the strong role of this control system as a catalyzer in generating debate

regarding the company’s action plans, and their underlying assumptions, which affect the

company’s strategy.

In the second, behavioral control, we will evaluate the company about how much it does

the thing right. In this factor, we focus on the implementation part, which covers the three elements

of culture, different boundaries, and rewards. In this way, by increasing the uncertainty in the

market, we need to more coordination throughout the business, and for this purpose, we can use

from the rewarding and punishment strategy. In the organization culture, we can see the recognize

to our employees which behaviors will receive rewards, and which behaviors are punished

deserved. Besides this, we should consider that the individuals nowadays are more likely to work

in a short time than a long time.

We should build our culture in a way that it acts effectively. Generally, successful

companies shape the organizational structure base on their culture, and this helps them to align

their people with their specific norms. For example, different companies have their different

culture as we can see that Amazon has been taking advantage of it great customer service approach.

As we can see in the Pixar company, a great culture can increase the sense of engagement, which

can help them to understand the vision with their heart and mind. This approach can help us to

create more loyal staff which can be considered as our core competencies. Another challenge of

the companies after creating that kind of culture is sustaining of this culture in their organization
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over the time. One good technique for this purpose can be using form storytelling about the role

of this culture in reaching success.

By aligning the staff with our culture, the reward and incentive programs should have some

characteristics. One character is being clear in defining the rewards, and its connection to the

performance. The measurement of performance should be clear and accurate. After evaluating the

actual performance, the system should provide clear and effective feedback. The system should

also be fair which can increase the trust for people.

An effective rewards system should be designed in a way that it can a strong means for

developing the culture within the company. It should also focus more on the task that has more

priority. It should not only act as a motivation creator, but it should be a controller for the

functionality of the system. However, this system can have some downsides: if the staff perceived

that their action is not connected to their compensation, they would lose their motivation. In a

corporation, each business units can have their specific rewards system that can cause some

conflicts in the system. In this way, it can create an environment that individuals tend to not share

the information between themselves.

Regarding boundary and constraints, it can act as an improvement in efficiency and

effectiveness when we use rule-based controls in the system with some specific characteristics.

For example, in the environment, there should be stability in the environment, and our workforces

should be considered as unskilled and ordinary one. Moreover, the consistency should be seen

between the products and services. By having explicit terms, we will decrease the rate of unethical

actions like the corruption with the existing or future suppliers. Boundaries and constraints also

focus on defining priorities strategically. These boundaries can be found in the monetary sector or

in the non-monetary sector. Also, we will consider in defining objectives for short-term. These
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objectives should be easily measurable and clear. Also, we should set a time frame for achieving

those objectives. It should also be designed in a way that creates motivation for a manager with

respect to being achievable.

For using form each of these behavioral systems, we should consider that our approach

should be an inconsistency with the nature of our organizations and tasks. For example, when we

want to use from culture, the organization should be considered professional, and the staff has a

high degree of autonomy in their job positions. In this kind of organization, the employees use

from the defined norms as a reference for their behaviors. For use from the rule system, we will

define and declare some clear guidelines that can control strictly the behaviors. This system fits

those companies that use standardization strategy, and the nature of the job requires some routine

tasks. Generally, in this kind of organization, companies do not need motivation and creativity in

their operation. For implementing a rewards system, we will use from incentive programs to

evaluate the performance. This system is good when we have unrelated diversification in our

corporation system.

Corporate governance

These concepts refer to those mechanisms and rules we use to direct and monitor the

company. This system includes all the interest of shareholders and stakeholders. In this regard, we

should consider that nowadays, the ownership and the management are not as same as in the past.

Traditionally, the owner of a company was also acting as manager of that company. But, in modern

business, the ownership of firms is separated from the management position. So, it is important

the interest of owners is the same as the interest of managers. For this purpose, we will look for

some ways to making alignment between the motivation of managers to both shareholders and

board of directors’ interest. The lack of this concept can cause several conflicts particularly when
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a firm in under hard financial situation, but the top managers believed that they are deserved to a

large amount of bonus in that time. For example, when the operation of a company is not profitable,

the shareholders do not expect to see the big rewards for the CEO because of his/her outstanding

performance in making no profit.

The board of directors should have a commitment in order to get involved in the process

of monitoring the top executives and the shareholders of the company. For them, some

responsibilities are defined, and these responsibilities are:

 They should responsible for evaluating the CEO that starts with selection

and controlling the CEO, and even in some specific situation, they have the authority to

fire the CEO.

 They should responsible for controlling the performance of the company in

reaching to the defined financial objectives; Also, they should underline the strategies of

the company to sure about the effectiveness of that strategy for the company.

 They are responsible for controlling the performance of the board of director

performance, and they should prepare a list of suitable people for attending in the board,

and giving this list to the shareholders for the election.

 They should monitor the system in order to be an inconsistency with the law

and application.

It is also better that the member of the board of director does not have a relationship

with the CEO and top managers in the company. For the size of the board, it is better to

have a medium size board than the large size board. Also, we should choose that member

who has enough knowledge and skills, and they will be eager to participate actively in the

board’s meeting and activities. They should also recognize the gap in the present and
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predict the future needs. In the meeting, the board of directors should be defined effective

norms and follow the norms in their meeting. In their meeting, there should be a good

atmosphere in which members that should trust each other easily.

Agency theory refers to having a relationship with the against and potential

principals, which we discuss two elements of attitudes and conflicts. In this way, we

evaluate the goals of principals and the way they are monitoring the agents. Also, we

consider the different aptitude of these different group regarding the risk management. If

we consider a situation that while managers are more willing to use from diversification,

the shareholders are more likely to see this diversification opposite to their interest.

Shareholder activism refers to the right that shareholders which can be the right of

them to sell the stock and make some information. Shareholders also have some authority

in different tasks.

Another concept is dual leadership, which is described as a situation where the CEO

has two positions of the CEO position and being the chair of the board. We can use from

the unity of command that believes that an individual can effectively act in both positions.

However, an agency theory, having two positions at the same time, we can have some

conflicts that the interest of one position is opposite of the other’s position. Importantly,

we should consider that we should manage the external governance by controlling

mechanism. We can find this concept as the corporate control. For example, when a

shareholder sells its company’s stock, the value of the company will be declined. For

example, one strategy can be golden parachutes when we offer an interesting package for

customers to get the future bonus even if the managers got fired.
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The concept of principal-principal conflicts which act oppositely to the principal-

agent conflicts, and in this way, the family ownership will increase the engagement in the

process that expropriate the minority of shareholders. Also, we will have business groups

can increase a company’s value. By related transactions, those owners who are controller

the assets can sell the company’s assets to the company that they are a shareholder of it.