Chapter 8 Strategic Control and Restructuring

1. Chapter 8Strategic Controland Restructuring

2. Learning Objectives To understand: • feedback, concurrent, feedforward and comprehensive strategic control systems • the implications of national cultures for the design of control systems • characteristics of the most common restructuring tactics • the concept of business cycle orientation and how it is useful in helping firms deal with economic cycles

3. Strategic Management Process External and Internal Analysis Strategy Formulation (corporate and business level) Strategic Direction Strategy Implementation and Control Strategic Restructuring

4. Strategic Control System A system to support managers in - assessing whether the organization’s strategy is accomplishing goals as intended - identifying areas needing attention

5. Types of Control • Feedback - Provides managers with performance information so that they can make adjustments if necessary • Concurrent - Provides real-time information used to control organizational processes • Feedforward – Monitoring systems that help managers anticipate changes in their external and internal environments

6. Stakeholders and Environment Feedback that guides impressions & expectations FEEDFORWARD CONTROL time Missions and Goals Implementation (including targets & concurrentcontrols) Performance Strategies Comparison of Performance with Targets FEEDBACK CONTROL Assessment of Cause and Effect Feedback used to alter plans and strategies

7. Feedback Controls Functions of feedback controls in organizations: • Creating specific objectives or targets ensures that managers understand the plans and strategies that guide firm decisions • Motivate managers to pursue organizational interests • Help managers decide when and how to intervene to make corrections

8. Elements in a Feedback Control System Establish Broad Goals Based on Mission, Vision, and Purpose Identify Key Result Areas for Each of the Broad Goals Establish Targets for Each Result Area and a Time Frame for Accomplishment Follow Up With Each Manager Develop an Action Plan for Accomplishing Each Target Make a Specific Manager Responsible for Each Target

9. Characteristics of Effective Objectives or Targets • High enough to be motivating • Realistic • Specific • Measurable • Understood by all affected managers & employees • Set through participative processes • Use feedback on performance • Cover specific time frame

10. Concurrent Controls Process Controls • Statistical Process Control • Real-time Inventory Control Behavioral Controls • Bureaucratic Controls • Rules and Procedures • Policies – general guides to action • Clan Control • Socialization processes that dictate appropriate behavior • Orientation sessions • Training • Formal communications such as newsletters, mission, visions, values

11. Feedforward Control Systems Rapid changes in the social, economic, technological and political environments make good feedforward controls necessary and important • Monitoring Systems– The firm analyzes information from stakeholders, the industry and the broad environment to predict potential changes • Premise Control – evaluates whether information used to establish strategies and goals is still valid

12. Comprehensive Strategic Control Systems Rapidly advancing technologies make continuous improvements through control systems a possibility • Information generated should be an important and recurring item to be addressed by top management • Control process should be given frequent attention at all levels • Data from system should be discussed in face-to-face meetings • Continually challenge the underlying data, assumptions and strategies

13. National Cultures For control systems to be effective they should reflect the culture of the nation in which they are established: • Power distance - degree to which members of society accept uneven power distribution • Individualism/collectivism – degree to which the focus of society is on individual or group • Masculine/feminine – degree to which society draws strong distinctions between gender roles • Uncertainty avoidance – degree to which members of society are tolerant of uncertainty and ambiguity • Confucian dynamics – degree to which decisions are focused on the long term vs. the short term

14. National Cultures and Control Systems Influence of national cultures on characteristics of control systems: • Power distancehigh – focus on outcomes Power distance low – focus on adherence to plan • Individualism – individual rewards Collectivism – team-based rewards • Masculine – value on achievement, heroism and material success Feminine – value on relationships and quality of life • Uncertainty avoidance – control over management risk taking Uncertainty tolerance – less rule based • Long-term oriented – focus on sales growth and customer satisfaction Short-term oriented – focus on profits

15. Common Restructuring Approaches • Refocusing Corporate Assets: downscoping • Retrenchment: turnaround strategy, often involving downsizing (workforce reductions) • Chapter XI Reorganization: provides temporary court protection from foreclosure and an opportunity to renegotiate contracts • Leveraged Buyout (LBO): private purchase of business by managers, employees, unions, or private investors • Structural Reorganization: changes to organizational design

16. Business Cycle Orientation Capabilities that allow a firm to respond more quickly than rivals to business cycles: • Business cycle literacy • Forecasting resources • Facilitative organizational structure • Business-cycle sensitive management principles • Supportive organizational culture

17. The Future Trends: • Increasing global complexity and interconnectedness, fueled by technological advancements • Specialized, mobile and diverse labor pools, including those found outside home countries • Education levels, income levels and access to capital will continue to grow worldwide • New powerful competitors in global marketplace • Increased concern about governance, sustainability and social responsibility; increased regulation

18. Challenge of the Future Challenges for managers: • retaining valuable employees • creating and preserving competitive advantage • discouraging new entrants • serving increasingly demanding customers • choosing and timing technology investments at a time when change is so rapid • major shocks associated with terrorism, new diseases and wars