Management Control Levers
From GTwM
Simons argues organisations have 5 control systems available to them at the strategic level.
The five control levers are:
- Belief systems
- Boundary systems
- Internal control systems
- Diagnostic systems, and
- Interactive systems.
He distinguishes these from tactical (accounting / compliance) and operational (SPC etc) control systems.
The following graphic illustration was adapted from Figure 13-1 (p. 349) in Kaplan & Norton's book. The original source is from Simon's book (p. 159).
- Belief systems relate to the fundamental values of the organization. Examples in this category include mission statements and vision statements.
- Boundary systems describe constraints in terms of employee behavior, i.e., forbidden actions.
- Internal control systems are related to protecting assets
- Diagnostic systems theoretically provide information indicating when a system is in control or out of control.
- Interactive systems focus on communicating and implementing the organization's strategy. The purpose of an interactive system is to promote debate related to the assumptions underlying the organization's strategy and ultimately to promote learning and growth.
Balanced Scorecard and Levers
Confusion exists as to how Kaplan & Nortons Balanced Scorecard Theory meshes with the levers of control theory. According to Simons the Balanced Scorecard was a Diagnostic System however Kaplan & Norton argued in their later book "Strategy Focused Organization" that successful balance scorecard adopters used the scorecard as both a diagnostic system and an interactive system (p. 350). Arguing that balanced scorecard implementations have often failed because companies used the scorecard as only a diagnostic system.
I found this argument, that Simon's term "interactive system" is essentially the same as Kaplan & Norton's term "strategic system" less than convincing. Simons emphasis when discussing this lever is on investigating strategic uncertainties, not just bottom up learning.
