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Questions and Answers
What is the primary benefit of unity of command?
What is the primary benefit of unity of command?
Which of the following is a theoretical argument in favor of separation of command?
Which of the following is a theoretical argument in favor of separation of command?
What is the primary role of auditors in external corporate governance mechanisms?
What is the primary role of auditors in external corporate governance mechanisms?
What is the purpose of the takeover constraint?
What is the purpose of the takeover constraint?
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What is the primary role of regulatory bodies in external corporate governance mechanisms?
What is the primary role of regulatory bodies in external corporate governance mechanisms?
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What is the primary benefit of the market for corporate control?
What is the primary benefit of the market for corporate control?
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What is the primary concern addressed by agency theory?
What is the primary concern addressed by agency theory?
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What is the primary role of banks in external corporate governance mechanisms?
What is the primary role of banks in external corporate governance mechanisms?
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What is the primary benefit of unity of command in terms of decision-making?
What is the primary benefit of unity of command in terms of decision-making?
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What is the primary role of media and public activists in external corporate governance mechanisms?
What is the primary role of media and public activists in external corporate governance mechanisms?
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Study Notes
Strategic Control: Contemporary Approach
- Strategic control involves adapting to and anticipating internal and external environmental change.
- Relationships between strategy formulation, implementation, and control are highly interactive, utilizing informational and behavioral control.
Characteristics of Effective Control Systems
- Focus on constantly changing information that has potential strategic importance.
- Information is important enough to demand frequent and regular attention from all levels.
- Data and information are interpreted and discussed in face-to-face meetings.
- Control system is a catalyst for ongoing debate about underlying data, assumptions, and action plans.
Informational Control
- Deals with both internal and external environment, ensuring goals and strategies still "fit" within the current strategic environment.
- Scans and monitors the external environment and continuously monitors the internal environment.
- Ongoing process of organizational learning, focusing on constantly changing information, with face-to-face discussions and debates.
Behavioral Control
- Focuses on implementation, "doing things right", influencing employee actions via culture, rewards, and boundaries.
- Organizational culture shapes people, organizational structures, and control systems, producing behavioral norms.
Organizational Culture
- System of shared values and beliefs that shape an organization's people, structures, and control systems.
- Can be a primary source of competitive advantage, e.g., Amazon (customer service), Lexus (product quality), Google and 3M (innovation), Walmart (operational efficiency).
- A strong culture leads to greater employee engagement, provides a common purpose and identity, and reduces monitoring costs.
Effective Organizational Culture
- Cultivated, encouraged, and fertilized through feedback, fair compensation, and a flexible structure.
- Feedback is prompt, clear, and unambiguous, compensation is fair, and structure is adaptable to changing circumstances.
Behavioral Control: Boundaries
- Useful in focusing individual efforts on strategic priorities and providing short-term objectives and action plans.
- Improve efficiency and effectiveness through rule-based controls, especially in stable and predictable environments.
Corporate Governance
- Focuses on relationships among shareholders, management, and the board of directors, ensuring alignment of managerial motives with shareholder interests.
- Deals with the principal-agent problem, where goals of principals and agents conflict.
Corporate Governance Mechanisms
- Align interests of owners and managers through:
- Committed and involved Board of Directors
- Shareholder activism and engagement
- Managerial rewards and incentives
- Contract-based outcomes
- Decisions about CEO duality
Effective Board of Directors
- Should be active, critical participants, providing clear focus and enhancing a firm's responsiveness.
- The debate around CEO duality: unity of command (in favor of duality) vs. agency theory (in favor of separation).
External Corporate Governance Mechanisms
- Market for corporate control: takeover constraint and fear of acquisition by hostile raiders.
- External governance control mechanisms include auditors, banks, analysts, regulatory bodies, and media and public activists.
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Description
This quiz assesses your understanding of strategic control, including adapting to environmental change and the relationships between strategy formulation, implementation, and control. It covers informational and behavioral control, highlighting the importance of doing the right thing and doing things right.
