Chapter 10

Powerful Essays
0Chapter 10: Strategic Control and Corporate Governance

* Organizations must have effective strategic controls if they are to successfully develop and implement their strategies. * This means having systems that allow the organization to effectively respond to environmental changes as well as balance and align the organization’s culture, rewards, and boundaries. * Overriding this is the goal of the firm’s owners (shareholders) and their elected representatives (board of directors) to ensure that the firm’s executives (management team) strive to fulfill their fiduciary duty and maximize the firm’s long- term value. . * A list of controls that are, or are supposed to be, in place for the functioning of each individual corporation and to ensure the presence of trust in the entire institution of public corporations includes effective * Corporate governance aligning managerial and shareholder interests * Informational controls ensuring that the organization is informed and that its strategies and goals remain aligned with the changing environment— that the organization does the right things * Behavioural controls ensuring that all the members of the organization behave consistently and in coordination, to achieve desirable outcomes— that the organization does things right. * Complementing these controls are financial and operating controls; that is, quantitative measures which ensure that the firm’s performance on multiple dimensions meets previously established targets.

Feedback Control Systems * Traditional control mechanisms rely on measuring outcomes. Managers set targets and devise specific metrics to measure the achievement of those targets. The targets are established to match specific objectives and organizational goals. * An appropriate time frame is also established that allows pursuit of those objectives and the delivery of results. * Performance is measured against the targets. Targets can take

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