Levers of Control

The book does a fantastic job of describing the levers theoretically, but doesn't do quite as much in the way of real world explanation of how to fix, manipulate or otherwise build levers that work. That said, I was looking for a piece that was more theoretical in nature. Skip this if that is not your goal or if you do not approach topics by first building a theoretical framework. Here are a few key points: Definitional: Belief Systems - what the organization has set out to do, to achieve Boundary Systems - what an individual part of the organization must never do (ex: 10 commandments) Concept 1: P. 53 - "Organizational participants can view boundary systems either as either constraining or liberating... a lack of rules can be deceiving. At first, subordinates believe they have freedom of action, but they quickly learn that superiors hold them accountable to unwritten rules that can only be determined by trial and error. The result is uncertainty and a reluctance to act." Also, P. 54 - "If improperly set, strategic boundaries can hinder adaptation to changing product, market, technology, and environmental conditions. Boundary systems make it risky for employees to search for new opportunities ouside acceptable domains of activity. Rigid strategic boundaries make it clear to employees that using company resources to experiment in proscribed product markets is subject to discovery and punishment." Thoughts: These concepts point to the idea that structure is everything inspiring people to fulfill actions in a particular manner that is counter-intuitive to the concept of the ID. Concept 2: P. 81-83 talks about dysfunctional side effects. Diagnostic measurement systems are gamed in order to achieve incentive goals that do not meet the end organizations goals. The book then draws out a few popular types of diagnostic failure: "Measuring the wrong variables" - Example was Sears incentivizing based on number of repairs completed. They ended up getting sued for making unnecessary repairs. "Building slack into targets" - Purposely making targets below standards so that anything achieved about this looks like a win for managers. "Gaming the system" - The book gives the example of a credit card company where managers were incentivized by decreasing the amount of time on a call in there department. As a result, managers would pass a caller to multiple departments instead of trying to handle the situation. Productivity numbers looked improved, but callers were not happy. "Smoothing - altering the timing and flow of data without changing the underlying transactions being measured...." "Biasing - transmitting only data that are perceived to be favorable..." "Illegal acts - violation of organizational rules and/or laws Concept 3: Strategic planning should be interactive at the boundaries. Assuming the structure is put together correctly, strategic planning on the long range should have a lot of input from the fringe senior managers and every

One of the key concepts in this book is how difficult it is to balance the company's need for predictable results with its need for innovation. How do you stay on track while being able to identify new opportunities? Dr. Simons emphasizes the scarcity of management attention and the importance of realizing there are too many "good ideas" to pursue. The countervailing levers he has identified, allow management to reduce risk in the right areas thus freeing the organization to achieve higher levels of productivity. Great book for seasoned leaders responsible for designing and implementing strategy.

Levers of Control presents a comprehensive theory illustrating how managers control strategy using 4 basic levers: belief systems, boundary systems, diagnostic systems, and interactive control systems (the whole book is based on these 4 levers). Simons shows how these control levers complement each other when used together and how effective top managers use these levers to stimulate and guide the search for strategies in the futures.

The book is far more interesting than the title suggests. "Levers of control" makes one think of man/woman being reduced to robots directed by the pulling of levers. The book is exactly about the opposite, how one can have his cake and eat it. It provides a practical framework on how to combine opposing forces in managing a company. Opposites like creativity and meeting profit objectives, precise objectives and alertness to the necessasity of changing course, reward and punishment, control and freedom. Some of the insights require reader effort to understand. For example. "Strategic planning is useless to develop strategies. Strategic planning starts once the strategy has been determined." What is meant is this. Long range planning carried out by staff departments trying to involve managers is a waste of time. Real strategies evolve interactively between several layers of managers in the organisation. Once a strategy is determined a plan must be made for implementing it. However the reader has to figure out that strategic planning no longer means strategy development but the development of a plan for strategy implementation, the execution of which has to be monitored. The book covers how to deal with the positive and negative motivations of employees, how it is possible to manage the tension between a budget system (referred to as a diagnostic system) and an action oriented intelligence-gathering system (referred to as an interactive control system). These two "control systems" are combined with two higher level "control systems", the vision and core values on the one hand and clarification of authority, accountability and no-go areas (referred to as boundary systems)on the other. None of these "control systems" are original. The originality of Prof Simons is that he shows how to operate these systems so that they reinforce and complement each other. This book is very useful for persons that have experienced how hard it is to implement strategies and to reconcile freedom with the requirement of delivering predictable financial results.