Levers of Control

Executing winning strategies is the key to business success. The best strategy in the world, however, is worthless unless it can be implemented in changing competitive circumstances. Effective controls — from accounting to budgetting to performance measurements — are the essential tools of implementation. Yet because so many businesses in the 1980s adapted to a complex and customer-driven marketplace by creating a more flexible and responsive work force, managers in the 1990s and beyond need to develop new control systems that really work in these empowered organizations.

In Levers of Control, Harvard Business School professor Robert Simons shows business leaders how to retain control of their organizations and capitalize on the autonomy and drive present at lower levers while simultaneously responding to emerging opportunities. Based on a ten-year examination of control systems inover fifty U.S. businesses, Levers of Control is a ground-breaking work by a major new voice in management scholarship. It argues for a broader definition of the role of control and establishes a critical bridge between the disciplines of strategy and accounting and control.

Simons finds that control as traditionally practiced — through monitoring and measuring the achievements of strict, preset goals — works well in small firms of several hundred people. As organizations become larger and more complex, however, and competitive environments grow increasingly turbulent, such control inhibits creativity, experimentation, and employee initiative. The challenge becomes finding a way to allow empowerment to flourish while encouraging accountability — a difficult job given the conflicts between top-down direction and bottom-up creativity.

Simon's Levers of Control solves the dilemma by introducing three new systems that effective managers use along with more familiar methods as levers to manage these organization tensions. Each system has its own countervailing purpose in controlling strategy:

• Beliefs systems are used to communicate core values and to inspire commitment to the organization and frame the search for new opportunities.
• Boundary systems are used to define the limits of freedom, including acceptable risks and standards of business conduct.
• Diagnostic systems are used to coordinate and monitor intended strategies; and
• Interactive systems are used to gather and share information up and down the organization about uncertainties and emerging opportunities, to encourage learning, and to facilitate new strategies.

The power of this framework is unleashed as managers use the control systems simultaneously, singly, or in sequence as levers to exert pressure and manage tensions appropriately for the unique information and control needs of their organization. Simons provides first-person reports of new managers who use the same control system differently according to their business situations— either in a strategic turnaround or in the continuation of a successful strategy — and in keeping with their personal management styles. Levers of Control also addresses how effective managers with unlimited opportunities but limited time use the systems to focus scarce attention and maximize "return on management".

In offering both a radical way of thinking about the challenges of strategy implementation and a realistic guide to balancing competing demands on people and organizations in a constantly evolving business environment, Levers of Control makes a lasting contribution to the literature on strategy and expands the practical uses of control systems by turning them into agents of strategic change. Employing control systems in this way, managers create a dynamic environment that keeps the business on track while staking out new territory for experimentation and competition, and stimulating the search for future strategies of profitable growth.

• Part I: Strategy, Organization, and Control
1. Introduction
• Control and Control Systems in Organizations
• Controlling Business Strategy
• Organization of the Book
2. A Balancing Act: Tensions to Be Managed
• The Dynamics of Creating Value
• The Dynamics of Strategy Making
• The Dynamics of Human Motives
• The Dynamics of Controlling Business Strategy
• Summary
• Part II: Basic Levers of Control
3. Belief and Boundaries: Framing the Strategic Domain
• Beliefs Systems
• Boundary Systems
• Actions Speak Louder than Words
• Beliefs, Boundaries, and Managers
• Beliefs, Boundaries, and Control Staff Specialists
• Summary
4. Diagnostic Control Systems: Implementing Intended Strategies
• Alternatives to Diagnostic Control
• Intended Strategy and Critical Performance Variables
• Conserving Management Attention
• Design Considerations
• The Role for Staff Groups
• Asset Acquisition Systems as Diagnostic Control Systems
• Summary
5. Interactive Control Systems; Adapting to Competitive Environments
• Strategic Uncertainties
• Interactive Control Systems
• Linking the Concept of Interactive Control Systems to Other Theory
• Design Considerations
• Roles for Managers and Staff Groups
• Summary
• Part III: Dynamic Framework for Controlling Business Strategy
6. The Control Levers in Action
• How Ten New Senior Managers Use the Levers of Control
• Cluster 1: Strategic Turnaround
• Cluster 2: Strategic Evolution
• Relative Success
• Analysis of the Managers' Actions
• Summary
7. The Dynamics of Controlling Business Strategy
• Using the Control Levers to Guide Strategy
• Balancing Empowerment and Control
• Implications for Managers
• Summary
• Appendix A: Checklist Summary of the Levers of Control
• Lever #1: Beliefs Systems
• Lever #2: Boundary Systems
• Lever #3: Diagnostic Control Systems
• Lever #4: Interactive Control Systems
• Foundation: Internal Control Systems
• Appendix B: Use and Misuse of Information Technology
• Levers of Control and Information Technology

An interesting book about control systems, and what makes them effective and how to approach them. And it is still valid 20 years after having been written, which tells us a lot of the progress in the area.

If you want a good understanding of control systems, this is definitely recommended reading, even though it sometimes get a bit academic instead of practical.