Lecture 6 + 7 - Strategy & MCS + MCSs for innovation and controls + MC as package Flashcards
(!) Describe the relationship between MCS & strategy
General:
- Complex two-way interrelation
- MCS = Strategi into action
- Tailor MCS to support strategy: Actionplan
- May not contribute as intended if unrealized or changed strategy
- Limited knowledge on how CS suit particular strategies
- MCS can be designed to innovation type, process & changes
- Highlight importance of strategic data analysis
- BSC show challenge using strategy in MCS
- Increase in interest
- Eg. PMS = LOC & BSC
___________
Risks:
- May be too abstract & rigid
- May avoid local efforts since central instruction
(!!) Describe MCS in general & gaps between theory & practice
General:
- Seek improvement
- Context specific
- Both part of formulation & formation of strategy
- Goal congruence: Self interest > Best interest: Ref. Power
- Researched by case studies
- Monitor: In constrast to MAS
- Usage vary: Maybe just symbolic
- Strategy –> actions
- Must understand strategy at multiple firm levels
- Must understand content & process
- Change as strategy change: Depend on innovation type & process
- Rarely huge change
- Relevance determined by efficient execution
- Eg. PMS: BSC or Levers of control
___________
Gaps in theory vs. practice:
- Knowledge transfer problem: Lack info from practitioners
- More complex behavior IRL
- (Also opposite)
(.) Describe performance management & control & the extended framework
General:
- Create integrated MCS: Handle complex relation between strategy & MCS
- Today financial & non-financial controls: Include behavioral aspect & reduce gaming
- Discuss choice of measures: “What u measure is what u get”. Subjective weights
- Acknowledge difficult anticipation of behavior
- Include wide range of controls: Interaction between them. Not just top-down
____________
Extended Performance management framework:
General:
- 12 questions
- Assist examination of integrated performance & MC-framework
- (Systematic categorization & discussion of case findings)
- (Still open for extension)
Critique:
- Focus on formal design rather than practise
- Dont include benefits of Simons belief & boundary systems
- (Little advise on interconnection of questions)
(!!) Describe Simons levers of control
General:
- Managerial tool for strategic change
- Broaden role of MCS: Emergent strategies
- Explain MCS & strategy relation
- Deliberate & top-down
- Often trade-off between measures
_____________
Levers:
General:
- Must be balanced
- First two: Create positive & inspirational forces
- Last two: Create constraints & ensure compliance with rules
Diagnostic control:
- Strategy: Plan. Ref. Planning school
- In stable environments
- Tell if intended strategies are achieved
- Not like traditional diagnostic
- Only open for changes within framework
- Measure & control critical performance variables
- Implement intended strategies
- Management at staff specialists
Interactive control:
- Strategy: Pattern: Ref. Learning school
- Tools for experimenting & seek opportunities
- When uncertain environments & crisis
- No formal plan
- Activate learning & new strategies
- Monitor emergent threats & opportunities
- Guide creative search processes
- Pattern become realized strategy over time
- Debates & dialogues
Belief system:
- Strategy: Perspective. Ref. Cultural school & Entrepreneurship
- Inspire intended & emergent strategy
- Vision expressed in mission statement
- Guide & inspire seeking opportunities
- Influenced by core values
- Innate desire of belongingness
Boundary system:
- Strategy: Position. Ref. Positioning school
- Ensure realized strategy within accepted domain
- Ensure prioritizing resources
- Make cost of acting outside areas explicit
- Controls risk
- Eg. Specific market or risk
_____________
Critique:
- No group norms
- No socialization
- No culture
- Only applied to senior level
(!) Describe the difference between internal hybrids & external hybrids
Internal hybrids:
General:
- Horisontal: Across organization
- Highlight informal communication & socializing form of control
- MCS must balance: Predictability + central control + synergies vs. horisontal relationship + renewal + change
Examples:
- ABC
- BSC
- TQM
___________
External hybrids:
General:
- Vertical
- Wider network of interconnections
- Contracts to divide market & hierarchy
- Take asymmetric info & info overload into account
- Contracts or trust
- Ref. ANT
Examples:
- PMS
- Project teams
- Inter-organizational relationships: Contracts or trust
- Outsourcing
- Alliances
- Joint ventures
- (Functional analysis)
- (OBA)
(.) Describe recent research on management control
Actor-network theory / ANT:
- Interest of various actors & actants
- Actors = Humans
- Actants = Nonhumans. Eg. Accounting & control
- Look at power structures
- ABC & BCS maybe used since popular
Insititutional theory:
- Ref. Environmental school
- Coercive process
- Mimic process
- Normative process
_____________
Other:
Control & risk:
- Systematic risk management
- Risk is difficult
- Limited time used on it
- Managers rarely consider risk systematic or use statistics
- Often over- or undervalued
- Biases often forgot
Control & culture:
- Strong link
- Culture dominate control or opposite?: TM designed vs. norm & cognition
- Culture is control: Establish norm & cognitions shaping everything
Control & IT:
- Bring non-accounting people into field: AI & BI
- Impact control design & capability
- Eg. ERP & internet
(!) Describe the difference between MAS, MA MC & MCS
MCS:
- Not just top-down
- Include guidance & monitoring
- More focused on influencing behavior
- Include personal & clan control
- Broader than MC: Yet difference not important
- Both at each SBU & overall firm
- Differ from package
- BSC = PMS
- (Include strategic development, control & learning processes)
- (Not if only planning purpose)
MC:
- Systems, rules, practices, values or activities to direct behavior
- When complete system: Not simple rule
- (Framing device: Not answer machine)
MA:
- Budgeting
- Product costing
MAS:
- Focus on info for decision making
- Unmonitored systems
- Systematic use of MA for some goal
- (MAS & organization structure is inseparable & interdependent)
(!) Describe MC as a package
General:
- Package of interconnected systems
- Not single holistic system
- Nearly becomes anything
- Acknowledge components dont work in isolation
- More approachable in case studies than surveys
- Affect conclusion if only studying single innovations
- Large, complex & across organization
- Wide variation & inconsistence in clarity of concept
- Not just TM understanding of strategy
- Package > System: Since elements not perfectly coordinated
Reasons:
- Large & complex combinations of MCS
- Existing research conceptualize MCS differently
Critique:
- Links within systems
(!!) Describe the MC package conceptual framework
General:
- Everything must connect for right direction
___________
Top
Cultural controls:
General:
- Informal part of firm
- Influence behavior
- Comes from bottom
- Changes slowly
- Broad
- Provide frame for other controls
- Shared by members
- Influence thoughts & actions
- Ref. to belief system
- Control if used to regulate behavior
- Eg. Mission & vision
Clans:
- Values & beliefs through ceremonies & ritual of clan
- Microcultures: Eg. Profession or unit
Values
- Impact on levels
- Recruiting
- Socializing
- Behaving
Symbols:
- Location
- Dresscode
___________
Middle:
General:
- Tightly linked
Planning:
- Ex ante
- Three controls: Set goals & direct effort & behavior to them + Provide standards + Coordinate by aligning goals across functions
- Action planning: 12 month. Tactical focus
- Long-range planning: > 12 months. Strategic focus
- Not per se financial
- Ref. Planning school
Cybernetic controls:
- Five characteristics: Quantified measures + Standards + Feedback process + VA + modification
- Measure toward something
- Feedback process/loop
- Compare performance with standards & modify system
- Link behavior to targets
- Accountability makes it a MCS not MAS
- Eg. Balanced scorecard, EVA or TQM
Reward & compensation:
- Motivate & increase performance
- Intrinsic/extrinsic
- Effort direction: (Task individual focus on)
- Effort duration: (Time devoted to task)
- Effort intensity: (Attention devoted to task)
- Also group rewards
__________
Bottom:
Administrative controls:
General:
- Formal part of firm
- Create structure for the middle
Organizational structure:
- Organize individuals & groups
- Also design
- Encourage certain contacts & relationships
Governance structure:
- Formal lines of authority & accountability
- Monitor behavior
- Monitor who employee are accountable to
- Company board structure
- Management
- Project teams
Policies & procedures:
- Specify how task & behaviour should be performed
___________
(Critique:)
- How elements relate to each other
- Potential difference in use on different levels
(!!) Describe the difference between the traditional & new role of MCS
Traditional role:
- Diagnostic
- Ref. Lever of control
- Guide implementation: Planned & explicit goals
- Suppress & minimize deviations: Coercive > learning
- Accounting-based control: Plan, monitor, measure
- “Just need right measures”
- Focus on effective & efficient resource use
- Effective mean for coordination & control
- Focus on status quo: Block innovation
- Separate from strategic & operational control
New role:
- Enabling role: Dynamic environment
- Ref. Levers of control
- Explore deviations: Learning > Coercive
- Support responding & adapting to environment
- Focus on innovation
- Focus on LLM
- Also long term: Benchmarks & non-financial measures
- Cooperation toward common goals
(!!) Describe the different processes of innovations & implications for MCS
General:
- (Ref. Hybrids)
Incremental innovation:
- Within current strategy
- Structural context: By TM. Formal structure, info-process & MCS
- Build upon current competencies
- Low risk, low return
- Can accumulate to significant competitive advantages
- Often young strategies
- Easy: Not cheap per se
Radical innovation:
- Outside current strategy
- Strategic context
- High risk, high return
- Shift power structure
- Require funding
____________
Types:
Deliberate strategy:
- Top down + incremental change
- Small improvements in MCS
- MCS translate strategy into actions & value
- TM set direction
- Motivation > monitoring
- MCS must facilitate delegation
- Eg. Budgets
Intended strategic action:
- Bottom-up + incremental change
- Ref. Interactive control
- TM allow input
- Small refinement of strategy
- MCS help learning
- More iterative & emergent
- (Only guide action)
- Ref. Learning
Strategic innovation:
- Top-down + radical change
- Emergent strategy
- MCS focus to develop competencies for future
- MCS monitor environment carefully
- Eg. Investment in new market
- Ref. Entrepreneur
Autonomous strategic action:
- Bottom-up + radical change
- Emergent strategy
- Local knowledge: Individual or small groups
- Not very controlled: TM may not be aware
- Redefine strategy
- Eg. Changed belief system or resource allocation process
- (More unpredictable than incremental innovation)
- Maybe ref. Cultural
(.) Describe the three traditional ways of control
General:
- Keep intended strategies on track
Financial control:
- Not involved in strategy planning
Strategic planning:
- HQ part of strategy planning
Strategy control:
- Hybrid form
- Strategic plan & budgets must be accepted for monitoring
- Monitor performance against strategic milestones: Eg. Market share & budgets
- BU autonomy + Corporate interests
(!) Describe the content approaches
General:
- How choices are related
- Ansoff´s gap analysis: SW vs. OT
- Assume rationality & optimal strategy in given setting
- Competitive advantage by adapting to context
- Informal approach
___________
Outside in:
General:
- External environment: OT –> SW
- Criticized for being to simplistic
- MSC, strategy & environment must be aligned
- Market focus
Models & theories:
- Generic strategies
- Porters five forces
- Prospector / Defender
- Build, hold, harvest
- PLC: MCS depend on stage. Ref. Contingency
- Network: Joint venture, strategic alliance, sourcing, IO-relation
- Globalization
Schools:
- Positioning school
- Environmental school
__________
Inside out:
- Internal resources: SW –> OT
- Resource based view
- Resources & capabilities build over long time
- Firm-specific core competencies: Sustainable competitive advantage
- Both tangible & intangible assets
- Slow adaption to changes
- Maybe resources not transferable: Eg. Culture
- Hard to pinpoint succes: Often combination of IV´s
- Still important external perspective
- Strategy for each resource pool
Schools:
- Learning school
- Cultural school
- Counter argument to Porter
Models & theories:
VRIO/VRIN:
- Valueability: Eg. Air for humans
- Rarity
- Inimitability: Hard if upbuild. Eg. Human Capital, brand & culture
- Non-substitutability
Other:
- TQM
- Continuous improvement
- Process reengineering
- ABCM
- Target costing
(!) Describe the process approaches
General:
- How strategic choices is made in particular firm
- Interaction between TM & rest of organization
- How process influence content & vice versa
- Impacted by structure, culture, & interaction on analysis, selection & implementation of choices
- May extend to suppliers & customers
Considerations:
- Incrementalist view: How strategies & ideas emerge
- Understand learning
- Important Interactive control for innovation & change: Ref. LOC
- Humans: bounded rationality, limited info & accept second best
- Understand if stability or revolutionary change
- Resistance to change
(!) Describe the formal & informal controls
Formal controls:
- Rules
- Objective
- Financially oriented
- Control specific outcomes
- Standard operating procedures
- Budgeting systems
- Visible
- Easy to research
- Monitor, measure & take corrective actions
- Counterproductive: Dont allow flexibility & creativity
Informal controls:
- Not consciously designed
- Subjective
- Unwritten policies: Artefact of culture, shared values & norms
- Ref. Culture school
- (True strategy in the minds of key managers)
