MGT 599 Strategic Management

1. MGT 599Strategic Management Dr. Anastasia M. Luca Strategic Controls

2. Module 5 Strategic Controls • Road Map • Definition/Systems/Importance • Control Processes • Control Levels & Types • Structure and control • Organizational Culture • Reward System • Ethical Issues

3. Module 5 Strategic Controls • Definition/Systems • Strategic control represents the process of monitoring and ensuring that organizational goals and objectives are met. • This process entails • Evaluating activities and employees to ensure that activities are fulfilled effectively and efficiently • Correcting problems that may occur

4. Module 5 Strategic Controls • Definitions/Systems • Importance of Strategic Controls: • Quality • Efficiency • Innovation • Customer Response

5. Module 5 Strategic Controls • Controls • Market: • External market standards, such as market share • Bureaucratic • Authority, rules, regulations, procedures, policies • Tall hierarchies • Clan • Shared values, beliefs, goals, traditions • Flat organizations/team structures

6. Module 5 Strategic Controls • Control Processes • 1. Set standards and goals • 2. Develop measuring, evaluating, and monitoring systems • 3. Compare actual performance to the developed measurable standards and goals. • 4. Assess whether there is discrepancy • 5. Take corrective action, if necessary

7. Module 5 Strategic Controls • Control Process • Input • Feed-forward controls • Anticipates problems • Processes • Concurrent control • Correcting problems as they occur • Output • Feedback control • Corrects after errors occur

8. Module 5 Strategic Controls • Control Levels • Corporate Level • Divisional Level • Functional Level • First – Supervisory Level Output Controls • Management Objectives

9. Module 5 Strategic Controls • Control Types: • Structural/Organization Design • Financial • Output • Behavioral • Organizational Culture

10. Module 5 Strategic Controls • Control Types: • Structural/organization design • Centralized versus decentralized • How integrated are the divisions or departments? • The higher the integration (centralization), the higher the controls and associated costs. • A more complex hierarchy (tall company), with a narrow division of labor and a narrow span of control, have more controls

11. Module 5 Strategic Controls • Control Types • Financial • Stock Price (corporate /company level) • ROI (Return on Investment or Net Income / Invested Capital) • Both corporate and divisional level

12. Module 5 Strategic Controls • Control Types: • Output Controls: forecast estimates for all company levels are compared to the actual level • Division Level: e.g.. market share, sales • Department Level: e.g.: number of customers served, complaints, returns • Employee Level: number of pieces produced, customers served, etc.

13. Module 5 Strategic Controls • Control Types • Behavior Controls • Operating budgets : how resources are distributed in order to optimally reach goals • Standardization: development of precise standards regarding input, activities, and outputs, making activities and behaviors predictable • Rules and procedures: manage employees’ behavior • Performance Evaluations

14. Module 5 Strategic Controls • Organizational Culture: • Definitions of culture • Edgar Schein: MIT Sloan School of Management Professor and prominent culture scholar • Culture is a set of “shared norms, values, and assumptions” that groups have developed and that influences their actions • “set of shared, taken-for-granted implicit assumptions that a group holds and that determines how it perceives, thinks about, and reacts to its various environments” (Schein, 1996)

15. Module 5 Strategic Controls • Organizational Culture • Refers to values and norms shared by people in an organization • Values represent beliefs and goals • Norms are unwritten rules of behavior • Organizational culture is a form of control, as it directs behavior in an organization • Organizational culture is shaped by founders, CEOS, and management.

16. Module 5 Strategic Controls • Reward Systems • Individual: commission, piecework, bonus, promotion • Team: reward team rather than individual members • Group: reward group rather than individual members • Organizational: profit sharing, stock option plans

17. Module 5 Strategic Controls • Technology and Control • Technology can be a strategic method of control • Wal-Mart is an example of success due to a big extent to strategic controls and use of technology • Technology can automate production and supply chains • Technology can retrieve, store, and provide important information for manufacturing (Dell Computers), customer service, marketing.

18. Module 5 Strategic Controls • Sam Walton and Wal-Mart • Sam Walton created the largest retail company that employs most people in several decades. • The use of strategic controls has been very important. • System of permanent feedback to all employees: financial control system that provides daily performance feedback • High-technology system (satellite) connecting all stores and sharing financial information of all stores

19. Module 5 Strategic Controls • Sam Walton Wal-Mart • Rewards determined by performance • Rules and standards: all stores the same, employees trained in the same way, same behavior towards customers • Culture: strong corporate culture • Computerized inventory and distribution system • Sophisticated supply chain

20. MGT 301Module 5 Strategic Controls • Quality Control Management Standards • TQM (Total Quality Management) • Six Sigma • ISO 9000