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whole or part.
Chapter 13
Strategic Control
Chapter Summary
Strategies are forward looking, designed to be accomplished several years into the future, and
based on management assumptions about numerous events that have not yet occurred. Strategic
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.
Lecture Outline
I. Introduction
A. Strategies are forward looking, designed to be accomplished several years into the future,
and based on management assumptions about numerous events that have not yet occurred.
How should managers control a strategy?
B. Strategic control is concerned with tracking a strategy as it is being implemented,
detecting problems or changes in its underlying premises, and making necessary
adjustments.
1. In contrast to post-action control, strategic control is concerned with guiding
2. Managers responsible for the success of a strategy typically are concerned with
two sets of questions.
a) Are we moving in the proper direction? Are key things falling into place?
b) How are we performing? Are objectives and schedules being met? Are costs,
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whole or part.
c) This chapter discusses traditional strategic controls and then examines ways
II. Establishing Strategic Controls
A. The control of strategy can be characterized as a form of “steering control.”
1. As time elapses between the initial implementation of a strategy and achievement
a) Also, during that time, changes are taking place in both the environmental
Types of Strategic Control, are:
(1) Premise control
B. Premise Control
1. Every strategy is based on certain planning premises—assumptions or predictions.
a) Premise control is designed to check systematically and continuously
whether the premises on which the strategy is based are still valid.
2. Environmental Factors
a) Although a firm has little or no control over environmental factors, these
b) Inflation, technology, interest rates, regulation, and demographic/social
3. Industry Factors
a) The performance of the firms in a given industry is affected by industry
factors.
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(1) Competitors, suppliers, product substitutes, and barriers to entry are a
b) Strategies are often based on numerous premises, some major and some
(1) Tracking all of these premises is unnecessarily expensive and time
would have a major impact on the firm and its strategy.
C. Strategic Surveillance
1. By their nature, premise controls are focused controls; strategic surveillance,
however, is unfocused.
a) Strategic surveillance is designed to monitor a broad range of events inside
2. Strategic surveillance must be kept as unfocused as possible.
a) It should be a loose “environmental scanning” activity. See Exhibit 13.2,
Top Global Strategist, for an example of this.
b) Trade magazines, The Wall Street Journal, trade conferences, conversations,
c) Despite its looseness, strategic surveillance provides an ongoing, broad-
D. Special Alert Control
1. Another type of strategic control, really a subset of the other three, is special alert
control.
2. A drastic event should trigger an immediate and intense reassessment of the firm’s
strategy and its current strategic situation.
a) In many firms, crisis teams handle the firm’s initial response to unforeseen
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whole or part.
E. Implementation Control
1. Strategy implementation takes place as series of steps, programs, investments, and
moves that occur over an extended time.
a) Special programs are undertaken.
b) Functional areas initiate strategy-related activities.
c) Key people are added or reassigned.
d) Resources are mobilized.
2. Implementation control is the type of strategic control that must be exercised as
those events unfold.
a) Implementation control is designed to assess whether the overall strategy
thrusts and (2) milestone reviews.
3. Monitoring Strategic Thrusts or Projects
a) As a means of implementing broad strategies, narrow strategic projects are
(1) These strategic thrusts provide managers with information that helps
b) Although the utility of strategic thrusts seems readily apparent, or it is not
always easy to use them for control purposes.
(1) It may be difficult to interpret early experience or to evaluate the overall
(2) One approach is to agree early in the planning process on which thrusts
(3) Managers responsible for these implementation controls will single
(4) Another approach is to use stop/go assessments that are linked to a
4. Milestone Reviews
a) Managers often attempt to identify significant milestones that will be reached
during strategy implementation.
(1) These milestones may be critical events, major resource allocations, or
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(2) The milestone reviews that then take place usually involve a full-scale
b) Implementation control is also enabled through operational control systems
like budgets, schedules, and key success factors.
(1) While strategic controls attempt to steer the company over an extended
(2) To be effective, operational control systems must take four steps
(a) Set standards of performance.
c) Exhibit 13.4, Monitoring and Evaluating Performance Deviations,
illustrates a typical operational control system.
(1) These indicators represent progress after two years of a five-year
(2) Management’s concern is to compare progress to date with expected
(3) The current deviation is of particular interest because it provides a basis
d) From Exhibit 13.4, it appears that the firm is maintaining control of its cost
structure.
(1) Indeed, it is ahead of schedule on reducing overhead.
(2) The firm is well ahead of its delivery cycle target, while slightly below
(5) The absenteeism rate in the service area is on target, but the turnover
e) After deviations and their causes have been identified, the implications of the
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(1) For example, the rapid product-line expansion indicated in Exhibit 13.4
(2) At the same time, product performance is still low, and, while the
(3) Contributing to this substandard ratio (and perhaps reflecting a lack of
(4) The rapid reduction in indirect overhead costs might mean that
f) This information presents operations managers with several options.
(1) They may attribute the deviations primarily to internal discrepancies.
g) This is but one of many possible interpretations of Exhibit 13.4.
(1) The important point here is the critical need to monitor progress against
(2) After the deviations have been evaluated, slight adjustments may be
(3) In the unusual event of extreme deviations—generally because of
F. The Balanced Scorecard Methodology
1. An alternative approach linking operational and strategic control, developed by
a) Recognizing some of the weaknesses and vagueness of previous
2. The balanced scorecard is a management system (not only a measurement system)
a) It provides feedback around both the internal business processes and external
outcomes in order to continuously improve strategic performance and results.
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b) When fully deployed, the balanced scorecard is intended to transform
3. The balanced scorecard methodology adapts the total quality management (TQM)
b) This creates a “double–loop feedback” process in the balanced scorecard.
d) A system that links shareholder interests in return on capital with a system of
4. Exhibit 13.5, Integrating Shareholder Value and Organizational Activities
across Organizational Levels, illustrates the balanced scorecard approach
a) The balanced scorecard seeks to “balance” shareholder goals with customer
goals and operational performance goals, and Exhibit 13.5 shows that they
are interconnected: shareholder value creation is linked to divisional
concerns for return on capital employed, which, in turn, is driven by
b) The balanced scorecard suggests that we view the organization from four
(1) The learning and growth perspective: How well are we continuously
improving and creating value?
(a) The scorecard insists on measures related to innovation and
(2) The business process perspective: What are our core competencies and
areas of operational excellence?
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(a) Internal business processes and their effective execution as
(3) The customer perspective: How satisfied are our customers?
(a) A customer satisfaction perspective typically adds measures
(4) The financial perspective: How are we doing for our shareholders?
(a) A financial perspective typically uses measures like cash flow,
5. Through the integration of goals from each of these four perspectives, the
a) The integrating power of the balanced scorecard can be seen at Mobile
6. Strategic controls and comprehensive control programs like the balanced
scorecard bring the entire management task into focus.
a) Organizational leaders can adjust or radically change their firm’s strategy
b) The overriding goal is to enable the survival and long-term success of the
business.