Cluster 1
Simons’ Levers of Control
- Belief system (Inspire)
Employees get a sense of ownership, closeness and understanding of the work
needed to be done. Important to articulate the interests of the organization so that
the employee understand it. Most important to knowledge intensive firms.
- Boundary systems (Limitations)
The boundary systems works as limitations to what employees can and cannot do.
Important part of industrial firms, bureaucratic firms. Implementation of policies and
procedures, describing roles.
- Diagnostic controls (Monitoring)
Control systems that are used to motivate, monitor and reward achievements of
specified objectives.
- Interactive controls (Stimulation)
Stimulates organizational learning and emergence of new ideas and strategies.
- Industrial value creation
Rigid, time consuming and repetitive
Little room for employee interpretation
Need for boundaries and monitoring due to high level of pre-programmed tasks.
The bias towards process means a greater need for routines and procedures, i.e.
Boundary systems.
- Network value creation
Due to technology, and performance of primary activities there is an equal role of all
four control systems.
Most important might however be the interactive controls as these enables
organizational learning and innovation.
- Knowledge value creation
The individuality of tasks means that boundary systems has the lowest importance in
this value creation logic.
Diagnostic controls are used rather to steer the organization in the right direction,
but it is important to not overdo them and thereby micro managing the employees.
The most important controls are definitely belief systems and interactive control
systems.
These firms are vulnerable to loss of reputation, so it is important that employees
have a strong sense of ownership.
- Summary of the Levers view
Profound importance of the particular value creation logic when choosing the lever
of control needed.
Integrated Performance Measurement Systems Approach
- Balanced Scorecard is the most important performance measurement.
Each perspective’s measures must be found through the strategy
There must be established measures in all perspectives, and there should be a mix of
financial and non-financial measures.
Thirdly, there must be measures included that measures within and across different
perspectives.
The company must be able to learn from the signals received by the measures.
Comparison of perspectives
- Customer perspective
Most critical to knowledge firms as they live of their reputation.
Also important to the networking firm as they create value through the number of
customers.
- Learning and Growth
Also important to the value shop; new and unknown task must be seen as a learning
opportunity, rather than an obstacle. All firms must focus to some extent at learning
and growth, however, it is not the same immediacy to it as with the value shops.
- Financial perspective
Kaplan and Norton stresses that the focus on financial measures must not be to
prominent. Too much focus on solely financial measures can result in myopia about Commented [s1]: Myopia: Nearsightedness and short-
strategic direction term incentives.
The financial perspective should be of least importance in a knowledge intensive
firm, and most important in an industrial firm.
All firms will to some extent focus on apply measures that belong in the financial
perspective, however, the amount on reliance placed on such measures will vary
substantially between them.
- Internal Business processes
All firms depend on processes to create value. However, the processes will vary
between them. Firms where the process are more structured and easier to examine
will to a higher extent depend on and utilize such measures.
Knowledge intensive firms depend on learning and customization to the current
situation. Processes will in this instance be more about “housekeeping and control”
rather than managing every element of the processes.
- Summary of the impact of Value Creation Logic on the use of BSC
The type of value logic affects how the company should choose its BSC and especially
the measures used.
The focus is not whether a perspective can be dropped! All perspectives are to some
extent important to all value logics, however, there is differences in the need for
focus on each of the perspectives.
Cybernetics
From Quattrone 5.3.2
Cybernetics: integrate technology and data in the human information processing and decision-
making
Information process
Focus on the informational process as an aspect of organizational action
Aims to:
o Improve decision-making by improving data collection and retrieval
o Building and managing useful data bases
o Grafting computer-based models onto human information processing and decision-
making
o Get online, real-time information into the decision process
We want to the right amount of information into the decision-making process at the right time
But what is right?
--> Decided by task uncertainty
Task uncertainty
The task Is poorly understood
High task uncertainty
--> Need more information
Low task uncertainty
--> Need less information
Task uncertainty is a function of 3 characteristics
Output diversity
Input resource utilized
Level of goal difficulty inherent in the task
