What is Strategic Control?

Several characteristics differentiate Strategic Control from other forms of control exercised by managers (e.g. the management of operational processes). For example, managers exercise strategic control when they work with an organisation to ensure that it achieves the strategic aims they have set for it, but to be able to do this the managers must have some discretion either to decide what needs to be achieved, or how to achieve it: such discretion is not necessarily a characteristic of other management processes. These characteristic differences become are significant when it comes to looking at the design of strategic management processes and support systems. This FAQ introduces and characterises the concept of strategic control; other FAQs in this series look how this understanding affects the design of specific tools e.g. How do I create a Balanced Scorecard for Strategic Control?. There are two types of control process that organisations use to monitor progress towards goals. Management Control is used to track and respond to progress towards operational goals. Strategic Control is used to track and respond to progress toward strategic goals. Strategic Control can be thought of as activities primarily concerned with monitoring and controlling strategy implementation, part of which will be determining and calibrating the focus of related management control systems. To find out more about the differences, see the related 2GC FAQ What are the main benefits of Balanced Scorecard? or the paper by Raman Muralidharan Strategic Control for Fast-moving Markets: Updating the Strategy and Monitoring the Performance in the journal Long Range Planning (Vol.30 No.1 pp.64-73; 1997). An example of strategic control Strategic control is concerned with monitoring progress towards strategic goals. To explain the principles consider a simple temperature control system. This system comprises a room heater combined with a thermostat to monitor and control room temperature: if the temperature falls below a set level, the heater heats the room, if it goes above a set level the heater is turned off. Ensuring that this heater control activity itself works is an example of a management control system: we know what is supposed to happen if the system is working properly, if it fails we know what to do to fix it and most importantly will be able to tell when it is fixed again.
A Temperature Control System What? Why?

Heater

Thermostat

The strategic control element of this system relates to the method by which the target temperature for the thermostat is set. This target has little to do with the nature of the temperature control system itself. The target is determined by an understanding of what Room Temp the room is for, and what needs its users have of it: the target temperature for a bedroom and a sauna will be very different, even though the underlying temperature control process will be quite similar. But compared to management control, if the strategic control element fails (e.g. we set the wrong temperature) the mechanism by which we both find out and then resolve this failure is usually quite complex: for a start someone usually has to tell us that there is a problem. Also, significantly, although we know the system has failed, we will not easily be able to tell if the new temperature is the right one for some time to come. Both processes (strategic and management control) have to work effectively if our temperature goal is to be achieved. But it is hopefully clear from this example that the two processes have quite different characteristics. Applying Strategic Control ideas in organisations Strategic control processes should ensure that strategic aims are translated into action plans designed to achieve these aims, and that the effectiveness of these plans is monitored. An effective strategic control process should ensure that an organisation is setting out to achieve the right things, and that the methods being used to achieve these things are working. Within this arena, traditionally there has been emphasis on strategic planning activities (ensuring we have the right aims, and the right action plans) but operational management control systems have reduced the need for strategic planning; indeed it has been long argued by some that distinct planning activities are not required at all. e.g.: The function of control now becomes closely linked with planning, and it serves little purpose to conceive them as separate functions. (Arthur E. Mills in The Dynamics of Management Control Systems, London Business Publications Ltd.; 1966). This implies that a strategic control process should instead set the agenda / goals for management processes, and monitor if the operational activities chosen to do this are delivering what is required. Accordingly, an effective strategic control process needs to both communicate information about what outcomes need to be achieved, and be able to monitor how well these activities are working to achieve the strategic aims of the organisation. One way of doing this is to introduce management processes built around the deployment of Strategic Balanced Scorecards e.g. as described by Kaplan & Norton in The Balanced Scorecard is more than just a new measurement system (Harvard Business Review; Boston; May/Jun 1996).

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