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Strategic control and performance management

3. The nature of management control

Control methods

Internal awareness (single-loop system)

straight iteration around the system, the control sits as part of the problem solving and is built into the system itself.

(e.g. a strategy has a goal requiring delivery of a certain volume, production ceases when that volume is met)

External awareness (double-loop system)

many more than just two loops (iterations), there is an external sense-check built into the system which is required before it is allowed to continue.

(e.g. a strategy has a goal requiring delivery of a certain volume, when that volume is met, the operational team are required to consider whether there is commercial benefit in producing a higher volume

Organisational metaphors

Creative Problem Solving Robert Flood

suggests the use of a number of different metaphors to help us to understand a range of different types of control and behaviour that exist within our organisational systems

MACHINE metaphor

- ‘closed system’ single-loop view (e.g. the armed forces, fast food chains)

- A machine is designed to work, you push the button and it operates, in a continuous and repetitive manner, to deliver one or more pre-defined outcomes

- strong reliance on the efficiency of the parts of the machine, which simply need replacing when they wear out or fail

ORGANIC metaphor

- ‘open system’ double-loop view (most industrial businesses)

- inputs can be determined, but the outputs will evolve

- represents a direct challenge to the machine view particularly when one or more of the ‘parts’ of the machine is a person

- people do not easily comply with a machine philosophy, not least because different brains react in different ways to the same set of stimuli

BRAIN metaphor

- ‘open system’ with a keen focus on ‘viability (autonomous work groups, innovative industrial firms, consultancy firms)

- inputs can be manipulated to ensure that the outputs are delivered, but the outputs themselves are likely to also be manipulated.

- the system needs to have the ability to teach itself to learn and build its own methods of controls, based upon objective external stimuli.

CULTURE metaphor

- unspoken, familiar ways of thinking and acting in all organisations (e.g. high-technology firms, competitive individualism, machine-like military structures)

- inputs may be selected based upon the culture criteria, then the engine of the organisation will operate in a manner dictated by the beliefs, practices and evolving norms of the organisation

POLITICAL metaphor

- the pursuit of power by individuals and the impact this has on organisational relationships (e.g. all organisations show examples of political activity)

- The influence of the individual will ultimately drive success. The politics can skew the control output and communication to others.

Leadership and control

effective control in the strategic thinking process needs to be aligned with achieving the right balance in the governance process

structure requires a balance of differing leadership skills

Experienced players: people who understand what they are dealing with.

Lateral thinkers: people who have the ability to think beyond the obvious.

Intelligent listeners: people who will audit (hear, listen, understand) the views of others.

Determined challengers: people who are prepared to formulate and ask the difficult questions.

Independent unbiased and objective leaders with certain specific and relevant knowledge and skill sets (this is often the expectation of nonexecutive director (NEDs)).

Leaders who are prepared to lead the process as effective leaders of committees and boards (chair)

differing levers of control within an organisation

1. Beliefs (core values of the org)

need to understand how and why value is created, so where the controls need to be placed

2. Boundaries (pre-defined limits and parameters.)

strategic boundaries will define the journey and need for appropriate control measures

3. People interaction

often be aligned to the power culture that exists – and the identification of who makes the core decisions – how do we people know who has the power and authority to make decisions?

4. Feedback monitoring

need to understand what happens when a control system alarm is activated – who does what, how and why

how do people know when to deliver feedback and who they should deliver it to?