STRATEGIC CONTROL

Advanced Strategic Management

What do we call the chief

accounting officer of an
organization?
Answer: The Controller

Financial information was primary source

Reward efficiency
Encouraged dysfunctional behavior

What is strategic control?

Answer?

Process used by organizations to control the formation and execution of strategic plans;
it is a specialized form of management control, and differs from other forms of
management control in respect of its need to handle uncertainty and ambiguity at
various points in the control process.
Focused on THE ACHIEVEMENT OF FUTURE GOALS.
SC involves tracking a strategy as its been implemented. Its also concerned with
detecting problems or changes in the strategy and making necessary adjustments.

An ideal control system

Establish standards and
targets
Create measuring and
monitoring systems
Comparing actual
performance against the
established targets
Evaluate results and take
action if necessary

Questions involved in Assessing a Strategys

Success

1. Are we moving in the proper

direction? Are our assumptions
about major trends and changes 2. How are we performing? Are
correct? Should we adjust or abort
objectives and schedules being met?
this strategy?
Are costs, revenues, and cash flows
matching projections? Do we need
to make operational changes?

Strategic Control and Control Systems

Should motivate people toward desired organizational
behavior rather than promote dysfunctional behavior
Traditional

What is
Measured?

1990s thru 21st

Century

Meeting Budget

Customer Satisfaction

Production Efficiency

New Product
Development Rates

Inputs
Quantitative
Performance(Mostly
Financial)

Outcomes
Quantitative & Qualitative
Performance

Who is evaluated?

Traditional
Individuals
Functions
Responsibility
Centers

1990s thru 21st

Century

Individuals
Teams (Groups)
Cross-Functional
People

Basis of Rewards control Systems

Traditional

1990s thru 21st

Century

Efficiency

Quality

Profits

Innovation

ROI

Creativity
Overall Company
Performance

Focus of Contemporary Control Systems

Traditional

Internal

1990s thru 21st

Century

Macro Environment
Industry Environment
Internal

Types of Strategic Control

Premise Control
Special Alert Control
Implementation Control
Strategic Surveillance

Premise Control
Every

strategy is based on certain planning premises or predictions.

Premise control is designed to check methodically and constantly whether
the premises on which a strategy is grounded on are still valid.
If you discover that an important premise is no longer valid, the strategy
may have to be changed. The sooner you recognize and reject an invalid
premise, the better.
This is because the strategy can be adjusted to reflect the reality.

Special Alert Control

The

rigorous and rapid reassessment of the organizations strategy because

of the occurrence of an immediate, unforeseen event.
An example of such event is the acquisition of a companys competitor by
an outsider.
Such an event will trigger an immediate and intense reassessment of the
firms strategy.
The company must form crisis teams to handle its initial response to the
unforeseen events.

Implementation Control
Implementing

a strategy takes place as a series of steps, activities,

investments and acts that occur over a lengthy period.
As a manager, one will mobilize resources, carry out special projects and
employ or reassign staff.
Must be carried out as the events unfold.
Two types: Strategic thrusts or projects and milestone reviews.

 Strategic

thrusts provide you with information that helps you determine

whether the overall strategy is shaping up as planned.
Two approaches: 1) to agree early in the planning process on which thrusts
are critical factors in the success of the strategy or of that thrust. 2) to use
stop/go assessments linked to a series of meaningful thresholds (time, costs,
research and development, success, etc.)
With Milestone reviews, you monitor the progress of the strategy at various
intervals or milestones.
A milestone review usually involves a full-scale reassessment of the strategy
and the advisability of continuing or refocusing the direction of the
company.

Strategic Surveillance
Designed

to observe a wide range of events within and outside the

organization that are likely to affect the track of the organizations strategy.
Based on the idea that one can uncover important yet unanticipated
information by monitoring multiple information sources.
Such sources include trade magazines, journals such as The Wall Street
Journal, trade conferences, conversations and observations.

Operational Control

Systems that
guide, monitor,
& evaluate
progress in
meeting shortterm
objectives,
providing postaction
evaluation and
control over
short periods.

Operational

control systems are designed to ensure that dayto-day actions are consistent with established plans and
objectives.
Focuses on events in a recent period.
Derived from the requirements of the management control
systems.
Corrective actions is taken where performance does not
meet standards.
This action may involve training, motivation, leadership,
discipline, or termination.

 Effective

operational controls add value by ensuring that the people,

processes, and technology that drive the organizations core functions
remain aligned.
Can be automated and manual
In addition to flagging potential risks as they occur, operational controls can
identify misalignments that arise from inefficient business processes, poor
training, improperly configured IT systems, and fraud.
Three categories: Transactional, configurable and master data controls.

Master Data
Controls

Core

information about an organizations customers, vendors, employees,

raw materials, and chart of accounts; this data is fundamental to the
execution of mission-critical business processes.
Ensure integrity of this data
Examples Ensure that vendor and employee address do not match;
Ensure that vendor and employee bank information do not match;
Ensure that duplicate vendors are identified and merged.
*The key is that rules are enforced consistently, regardless of which
transactions affect the data.

Transaction-Level
Control

As

individuals perform day-to-day business processes, key steps and milestones are
recorded as transactions and can take form of entries in systems, e-mails, or even
conversations.
Serve to prevent, identify, or detect inappropriate , inaccurate, or unauthorized
transactions in these systems wherever they are.
Examples Ensure purchase orders are created before goods are received;
Ensure purchase orders are created before an invoice is received;
Ensure goods are purchased from preferred vendors.
*Typically embedded in enterprise resource planning software or other core systems
and are performed as transactions occur.

Configurable
Controls

Business

processes and corporate policies are comprised of a prescribed

sequence of tasks, events, and transactions.
Ensure that processes are executed as intended.
Examples Ensure that minimum and maximum inventory levels are defined and that
inventory levels stay within these boundaries.
Ensure rules around invoice and purchase orders are configured and that
neither invoices not purchase orders stay open beyond these tolerances.
*Typically embedded in system parameters and settings.