Lecture10

Strategic control

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 Learning Objectives
1. Describe and illustrate four types of strategic
control.
2. Summarize the balanced scorecard approach and
how it integrates strategic and operational control.
3. Illustrate the use of controls to guide and monitor
strategy implementation.

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 Strategic Control
• Management efforts to track a strategy as
it is being implemented, detect problems
or changes in its underlying premises, and
make necessary adjustments.

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 Questions That Drive Strategic Control
1. Are we moving in the proper direction?
2. How are we performing?

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Types of Strategic Control
• Premise control
• Strategic surveillance
• Special alert control
• Implementation control

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Ex. 13.1 Four Types of Strategic Control

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 Premise Control
• Premise control is designed to check
systematically and continuously whether the
premises on which the strategy is based are
still valid
• Primarily concerned with
– Environmental factors
– Industry factors

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 Strategic Surveillance
• Strategic surveillance is designed to monitor a
broad range of events inside and outside the
firm that are likely to affect the course of its
strategy because they were overlooked

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 Special Alert Control
• A special alert control is the thorough, and often
rapid, reconsideration of the firm’s strategy
because of a sudden, unexpected event
• A drastic event should trigger an immediate and
intense reassessment of the firm’s strategy and its
current strategic situation
• Crisis teams
• Contingency plans

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Implementation Control
• Implementation control is designed to assess
whether the overall strategy should be changed
in light of the results associated with the
incremental actions that implement the overall
strategy

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 Implementation Control (contd.)
• The two basic types of implementation
control are:
• Monitoring strategic thrusts
• Milestone reviews

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 Strategic Thrusts or Projects
• Special efforts that are early steps in executing
a broader strategy, usually involving significant
resource commitments yet where
predetermined feedback will help
management determine whether continuing
to pursue the strategy is appropriate or
whether it needs adjustment or major change.

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 Milestone Reviews
• Points in time, or at the completion of major
parts of a bigger strategy, where managers
have predetermined they will undertake this
key task.

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 Operational Control Systems
• To be effective, operational control systems must
take four steps common to all postaction controls:
– Set standards of performance or KPIs
– Measure actual performance
– Identify deviations from standards set
– Initiate corrective action

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 The Balanced Scorecard Methodology
• An alternative approach linking operational and
strategic control, developed by Harvard Business
School professors Robert Kaplan and David
Norton, is a system they named the balanced
scorecard

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 Balanced Scorecard
• A management control system that enables
companies to clarify their strategies, translate
them into action, and provide quantitative
feedback as to whether the strategy is creating
value, leveraging core competencies,
satisfying the company’s customers, and
generating a financial reward to its
shareholders.

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 Kaplan and Norton on the Balanced
Scorecard
• “The balanced scorecard retains traditional financial
measures. But financial measures tell the story of past
events, an adequate story for industrial age companies
for which investments in long-term capabilities and
customer relationships were not critical for success.
These financial measures are inadequate, however, for
guiding and evaluating the journey that information
age companies must make to create future value
through investment in customers, suppliers, employees,
processes, technology, and innovation.”

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Ex. 13.5 Integrating Shareholder Value and Organizational Activities
across Organizational Levels

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 Balanced Scorecard
Four perspectives:
1. The learning and growth perspective: How well
are we continuously improving and creating
value?
2. The business process perspective: What are our
core competencies and areas of operational
excellence?

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 Balanced Scorecard Perspectives
(contd.)

1. The customer perspective: How satisfied are

our customers?
2. The financial perspective: How are we doing
for our shareholders?

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Ex. 13.6 Exxon’s NAM&R Division’s Balanced
Scorecard

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 Ex. 13.6 (contd.)

Strategic Objectives Strategic Measures

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 Ex. 13.6 (contd.)

Strategic Objectives Strategic Measures

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 Ex. 13.6 (contd.)

Strategic Objectives Strategic Measures

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 Dashboard
• A user interface that organizes and presents
information from multiple digital sources
simultaneously in a user-designed format on
the computer screen

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 Dashboard Uses
• Key management tool for timely strategic and
operational control
• Users can decide the key indicators that tell
them about the unfolding success of their
strategies

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 Summing Up Strategic Control
• Strategic control and comprehensive control
programs like the balanced scorecard bring
the entire management task into focus.
• Organizational leaders can adjust or radically
change their firm’s strategy based on feedback
from a balanced scorecard approach as well as
other strategic controls.

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 Key Terms
• Balanced scorecard • Special alert control
• Dashboard • Strategic control
• Implementation control • Strategic surveillance
• Milestone reviews • Strategic thrusts or
• Premise control projects

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