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35 Cards in this Set
- Front
- Back
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Strategic control |
the process of monitoring and correcting a firms strategy and performance -informational, behavioral |
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Traditional control system |
1. Strategies are formulated and top management sets goals 2. Strategies are implemented 3. Performance is measured against the predetermined goal set |
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Single loop learning |
Compares actual performance to a predetermined goal |
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Traditional approach to strategic control |
Most appropriate when... -Environment is stable and relatively simple -Goals and objectives can be measured with certainty -Little need for complex measures of performance |
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Contemporary control system |
Continually monitoring the environments (internal and external) Identifying trends and events that signal the need to revise strategies, goals, and objectives |
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Contemporary approach to strategic control (dual-loop learning) |
Strategic control -informational control Formulate strategies Strategic control -behavioral control Implement strategies |
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Contemporary approach - informational control |
Concerned with whether or not the organization is 'doing the right things' |
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Contemporary approach - behavioral control |
Concerned with whether or the organization is 'doing things right' in the implementation of its strategy |
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Informational control |
-Deals with internal environment and external strategic context -Doing the right thing -Key question: "Do the org's goals and strategies still fit within the context of the current strategic environment?" |
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Issues with informational control |
-Scan and monitor external environment (general and industry) - Continuously monitor the internal environment |
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Behavioral control |
A method of org control in which a firm influences the actions of employees through culture, rewards, and boundaries. --Key Question: "We have evaluated the 'right thing to do'; now are we doing those things the right way?" Focused on implementation - doing things right 3 Key control levers: culture, rewards, boundaries |
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Organizational culture |
A system of shared values and beliefs that shape a company's people, organizational structures, and control systems to produce behavioral norms |
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Organizational culture PROS |
-Defines the boundary between one org & others - Conveys a sense of identity for its members - Facilitates the generation of commitment to something larger than self interest -Enhances the stability of the social system -Serves as a sense-making and control mechanism for employees in the org |
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Organizational culture CONS |
-Hard to institute changes -Lack of diversity -Mergers/acquisitions difficult |
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Maintaining a culture |
1. Selection 2. Top Management example 3. Socialization |
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Socialization |
Process by which employees learn about and adapt to the org's culture. -Realistic Job Preview -Mentoring |
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How employees learn culture |
-Stories -Rituals -Symbols -Language |
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Strong and effective culture |
Sets implicit boundaries (unwritten standards of acceptable behavior) -Dress -Ethical matters -The way an org conducts business |
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Rewards and incentive systems |
-Powerful means of influencing org culture -Focuses efforts on high-priority tasks -Motivates individual and collective task performance -Can be effective motivator and control mechanism |
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Procedural Justice |
Perceived fairness of the PROCESS USED to determine outcomes |
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Distributive Justice |
Perceived fairness of the OUTCOME |
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Effective reward systems |
-Objectives clear and well understood -Rewards are clearly linked to performance for desired behavior -Performance measures are clear and visible -Feedback is prompt -The structure is flexible and can be adapted to changing circumstances |
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Setting boundaries and constraints |
- Focus efforts on strategic priorities - Providing short term objectives and action plans (specific and measurable, specific time horizon for attainment, achievable but challenging) - Improve operational efficiency and effectiveness -Minimizing improper/unethical conduct |
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Corporate Governance |
The relationship among various participants in determining the direction and performance of corporations Primary participants = shareholders, management, and the BOD |
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Corporation |
A mechanism created to allow different parties to contribute capital, expertise, and labor for the maximum benefit of each party |
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Agency Theory |
Deals with relationship between: -Principals - who are the owners of the firm (stockholders) - Agents - who are the people paid by principals to perform a job on their behalf (management) |
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Problems with Agent Theory |
1. The conflicting goals of principals and agents, along with the difficulty of principals to monitor the agents 2. The different attitudes and preferences towards risk of principals and agents |
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Board of directors |
A group that has a fiduciary duty to ensure that the company is run consistently with the long-term interests of the owners, or shareholders, of a corporation and that acts as an intermediary between the shareholders and management |
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Duties of BOD |
-Select, evaluate, replace CEO -Determine CEO compensation -Review/evaluate financial objectives, major strategies and plans -Provide advice to top management -Select/recommend candidates for BOD -Review adequacy for system in legal compliance |
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Shareholder activism |
Actions by large shareholders to protect their interests when they feel that managerial actions of a corporation diverge from shareholder value maximization |
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External governance control mechanisms |
Methods that ensure that managerial actions lead to shareholder value maximization and do not harm other stakeholder groups that are outside the control of the corporate governance system |
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Market for corporate control |
An external control mechanism in which shareholders dissatisfied with a firms management sell their shares |
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Takeover constraint |
The risk to management of the firm being acquired by a hostile raider |
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Expropriation of minority shareholders |
Activities that enrich the controlling shareholders at the expense of minority shareholders |
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Business groups |
A set of firms that, though legally independent, are bound together by a constellation of formal and informal ties and are accustomed to taking coordinated action |
