traditional approach to strategic control
A sequential method of organizational control in which (1) strategies are formulated and top management set goals, (2) strategies are implemented, and (3) performance is measured against the predetermined goal set.
- when environment is stable and relatively simple
- Goals and objectives can be measured with certainty
- Little need for complex measures of performance
contemporary approach to strategic control
This approach suggests continually monitoring the environments (internal and
external) as well as identifying trends and events that signal the need to revise strategies, goals and objectives
A method or organizational control in which a firm gathers and analyzes information from the internal and external environment in order to obtain the best fit between the organization's goals and strategies and the strategic environment.
A method or organizational control in which a firm influences the actions of employees through culture, rewards and boundaries.
A system of shared values and beliefs that shape a company's people, organizational structures, and control systems to produce behavioral norms.
Effective culture must be cultivated, encouraged, and "fertilized". Maintaining an effective culture can be achieved through storytelling or through rallies or "pep talks" by top executives.
characteristics of effective reward and evaluation systems
- Objectives are clear, well understood, and broadly accepted
effective reward and - The structure is flexible; it can adapt to changing circumstance
- Rewards are clearly linked to performance and desired behaviors
- Performance measures are clear and highly visible
- Feedback is prompt, clear, and unambiguous
- The compensation "system" is perceived as fair and equitable
- The structure is flexible; it can adapt to changing circumstances
The relationship among various participants in determining the direction and performance of corporations. The primary participants are (1) the shareholders, (2) the management, and (3) the board of directors.
A mechanism created to allow different parties to contribute capital, expertise, and labor for the maximum benefit of each party.
A theory of the relationship between principals and their agents, with emphasis on two problems: (1) the conflicting goals of principals and agents, along with the difficulty of principals to monitor the agents, and (2) the different attitudes and preferences towards risk of principals and agents
board of directors
1.) Select, regularly evaluate, and, if necessary, replace the CEO
2.) Review and, where appropriate, approve the financial objectives, major strategies, and plans of the corporation
3.) Provide advice and counsel to top management
4.) Select and recommend to shareholders for election an appropriate slate of candidates for the board of directors
5.) Review the adequacy of the systems to comply with all applicable laws/regulations.
Actions by large shareholders to protect their interests when they feel that managerial actions of a corporation diverge from shareholder value maximization.
managerial rewards and incentives
1.) Boards can require that the CEOs become substantial owners of company stock.
2.) Salaries, bonuses, and stock options can be structured so as to provide rewards for superior performance and penalties for poor performance.
3.) Threat of dismissal for poor performance can be a realistic outcome
The risk to management of the firm being acquired by a hostile raider.
Auditing forms are independent organizations staffed by certified professionals who verify the firm's books of accounts. Audits can unearth financial irregularities and ensure that financial reporting by the firm conforms to standard accounting practices.
Conflicts between two classes of principals - controlling shareholders and minority shareholders - within the context of a corporate governance system.
Three conditions must be met for PP conflicts to occur:
- A dominant owner or group of owners who have interests that are distinct from minority shareholders
- Motivation for the controlling shareholders to exercise their dominant positions to their advantage
- Few formal (such as legislation or regulatory bodies) or informal constraints that would discourage or prevent the controlling shareholders from exploiting their advantageous positions.
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.