Mechanisms exist to ensure that four things happen in a company
Chapter 10 p.8
I Ask
I often hear people say that the company is on track. How do they know that? What mechanisms exist that guide the company, its people and its business to stay on track?
I Answer
As a fast growing company in an ever-changing environment your company focuses on the effective utilization of , as R.Simons of the Harvard Business School calls it, the four levers of control.
Within the company, mechanisms exist to ensure that four things happen effectively:
- Obtaining commitment to the purpose of the company
- Staking out the territory
- Getting the job done
- Positioning for tomorrow
For each aspect there is a lever of control to ensure it Stays On Track.
This diagram identifies the four levers of control and gives you a Holistic view of the dynamics of controlling strategy:
I Ask
I can see that we are dealing with four sets of systems – the four levers – that work together to ensure that the business strategy stays on track. I recognise some of the terms, but can’t you give me practical examples that will enable me to get a better picture of what the Four Levels of Control consist of in our company.
I Explain
See the link with the symbols and the culture of the company? Remember the balance scorecard?
It’s a very useful diagnostic control system…and do you realise that the Key Results Areas process is also a diagnostic control system for individual performance.
Lets explore the What, Why and How of the four levers of control in the company:
LEVER 1: Belief systems
What:
Explicit sets of belief that define basic values, purpose and direction; including
- How value is created
- Level of desired performance
- Human relationships
Why:
To provide momentum and guidance to opportunity
- Mission statements
- Vision statements
- Credos
- Statements of purpose
LEVER 2: Boundary system
What:
Formally stated rules, limits and prescriptions tied to defined sanctions and credible threat to punishment
Why:
To allow individual creativity within defined limits of freedom
- Codes of business conduct
- Strategic planning systems
- Asset acquisition systems
- Operational systems
LEVER 3: Diagnostic control system
What:
Feedback systems that monitor organisational outcomes and correct deviations from preset standards of performance like:
- Profit plans and budgets
- Goals and objectives systems
- Project monitoring systems
- Strategic planning systems
Why:
- To allow effective resource allocation
- To define goals
How:
- Set standards
- Measure outputs
- Link incentives to goal achievement
LEVER 4: Interactive control system
What:
Those systems that teams use to advance and develop.
Why:
- To focus organisational attention on strategic uncertainties
- To provoke the emergence of new initiatives and strategies
- To ensure that the way we do business relates very closely to the changes in customer needs
How:
By ensuring that:
- Information regarding changes in technologies, customer requirements, supplier strategy, competitors strategies and team skills are adequately and proactively incorporated into the strategy process
- The chosen strategy remains appropriate to the business reality and overall company objectives
I Advise
Much of the How of Lever 4 is achieved over a cup of coffee through interaction during team discussions, and through listening to your customer…
Try some active listening and productive questioning techniques on your customer, you’ll be amazed at what you learn!
