Simons Four Levers of Control
In this article you will find a question and answer style explanation of the four levers of control.
I often hear people say that the company is on track. How do they know that? What mechanisms exist that guide the company, its people and its business to stay on track?
As a fast growing company in an ever-changing environment your company focuses on the effective utilization of , as R.Simons from Harvard Business School calls it, the four levers of control.
Within the company, mechanisms exist to ensure that four things happen effectively:
- Obtaining commitment to the purpose of the company
- Staking out the territory
- Getting the job done
- Positioning for tomorrow
For each aspect there is a lever of control to ensure it Stays On Track.
This diagram identifies the four levers of control and gives you a Holistic view of the dynamics of controlling strategy:
I can see that we are dealing with four sets of systems – the four levers – that work together to ensure that the business strategy stays on track. I recognise some of the terms, but can’t you give me practical examples that will enable me to get a better picture of what the Four Levels of Control consist of in our company.
See the link with the symbols and the culture of the company? Remember the balance scorecard?
Lets explore the What, Why and How of the four levers of control in the company:
LEVER 1: Belief systems
Explicit sets of belief that define basic values, purpose and direction; including
To provide momentum and guidance to opportunity
- Mission statements
- Vision statements
- Statements of purpose
LEVER 2: Boundary system
Formally stated rules, limits and prescriptions tied to defined sanctions and credible threat to punishment
To allow individual creativity within defined limits of freedom
- Codes of business conduct
- Strategic planning systems
- Asset acquisition systems
- Operational systems
LEVER 3: Diagnostic control system
Feedback systems that monitor organisational outcomes and correct deviations from preset standards of performance like:
- Profit plans and budgets
- Smart goal setting systems
- Project monitoring systems
- Strategic planning systems
- To allow effective resource allocation
- To define goals
- Set standards
- Measure outputs
- Link incentives to goal achievement
LEVER 4: Interactive control system
Those systems that team player skills use to advance and develop.
- To focus organisational attention on strategic uncertainties
- To provoke the emergence of new initiatives and strategies
- To ensure that the way we do business relates very closely to the changes in customer needs
By ensuring that:
- Information regarding changes in technologies, customer requirements, supplier strategy, competitors strategies and team skills are adequately and proactively incorporated into the strategy process
- The chosen strategy remains appropriate to the business reality and overall company objectives
Much of the How of Lever 4 is achieved over a cup of coffee through interaction during team discussions, and through listening to your customer…
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