SMC 3302

SET AMBITIOUS GOALS

A core tenet of the SMART framework is that goals should be achievable and realistic. Several recent articles have argued against stretch goals and recommended incremental targets instead. When it comes to setting goals, more ambition is not always better - at some point, the objectives enter the realm of delusion.

1st Generation BSC, discussion:

A failure to convert improved operational performance, as measured in the scorecard, into improved financial performance should send executives back to their drawing boards to rethink the company's strategy or its implementation plans. Measures that move companies forward: The balanced scorecard puts strategy - not control - at the center. It establishes goals but assumes that people will adopt whatever behaviors and take whatever actions are necessary to arrive at those goals. The measures are designed to pull people toward the overall vision. Senior managers may know what the end result should be, but they cannot tell employees exactly how to achieve that result, if only because the conditions in which employees operate are constantly changing.

Albertini Framework

A growing number of companies are implementing proactive environmental strategies with the objective of gaining competitive advantage through an enhanced reputation, the reduction in production costs, and a first-mover advantage in the green product market. Yet according to the natural-resource-based view, the development and maintenance of unique and valuable environmental capabilities are the central elements allowing companies to gain financial benefit from their proactive environmental strategy.

Translating the vision:

A large gap usually exists between the mission statement and employees' knowledge of how their day-to-day actions could contribute to realizing the company's vision.

Feedback and learning:

Most companies today operate in a turbulent environment with complex strategies that, though valid when they were launched, may lose their validity as business conditions change. In this kind of environment, where new threats and opportunities arise constantly, companies must become capable of what Chris Argyris calls double-loop learning- learning that produces a change in people's assumptions and theories about cause-and-effect relationships. Strategic learning consists of gathering feedback, testing the hypotheses on which strategy was used, and making the necessary adjustments.

Inside-out approach

Based on the business strategy and critical success factors → reactive vs. proactive sustainability strategy? Different requirements for measures than creating data for external reporting

DISCUSS GOALS FREQUENTLY

Companies in Dynamic sectors more likely to set quarterly goals What really matters is not whether goals are set quarterly or annually, but whether they shape the key discussions for getting work done. Goals can also provide the framework for making difficult trade-offs regarding which initiatives to prioritize, how to allocate resources, and how to respond to requests from colleagues in other teams.

Economic Value Added (EVA):

EVA: An overall measure of financial performance that is intended to focus managers' minds on the delivery of shareholder value. Maximizing shareholder value. Defined as: Accounting profit - charge for capital employed Answer to first question: Deliver as much shareholder value as possible, BUT does not take into account future earnings.

Organizational theorists stress

the importance of the study of paradoxes for developing and understanding contemporary organizations and managements. Provides an insight on how organizations can adapt two competing demands, rather than having to choose between one of them. The elements are therefore both oppositional and relational (Control and Empowerment).

Designing jobs for high performance:

"For your business to achieve its potential, each employee's supply of organizational resources should equal his or her demand for them, and the same supply-and-demand balance must apply to every function, every business unit , and the entire company".

Otley Framework

"This paper proposes a framework for analyzing the operation of management control systems structured around five central issues. These issues relate to objectives, strategies and plans for their attainment, target-setting, incentive and reward structures and information feedback loops. Their central focus is on the management of organizational performance. Because the framework has been inductively developed, its application is 'tested' against three major systems of organizational control, namely budgeting, economic value added and the balanced scorecard."

Triple Bottom Line (Economic, Social and Environmental value)

(Recognition of the need for organizations to improve the state of people, the planet, and profit simultaneously if they are to achieve sustainable, long-term growth). Breakthrough performance in triple bottom line performance requires multiple players from multiple sectors to become aligned around a shared set of desired outcomes. These players include distributors, suppliers, local cooperatives, community-based organizations, public funding entities, and impact investors, and the community residents who are the ultimate beneficiaries from getting connected to global supply chains. The Balanced Scorecard (BSC), originally developed to describe and implement a single organization's strategy, needs to be adapted to reflect such multi-stakeholder strategies for triple bottom line performance.

What characteristics do interactive control systems have? Good according to Simons:

- Feedback and feedforward loops, learning. - Be very selective in what system we use interactively. Ideally: only one. - Signaling, our interactive controls should signal what is important to the organization - Do not use it too seldom. - Debate and dialogue - everyone should be able to criticize the strategy.

The four spans of job design: Need to answer four basic questions:

-What resources do I control to accomplish my tasks? (Control) -What measures will be used to evaluate my performance? (Accountability) -Who do I need to interact with and influence to achieve my goals? (Influence) -How much support can I expect when I reach out to others for help? (Support)

Concluding comments (Continuous Budgeting):

Although confined to one organization, our study offers an example of how budgets may be deployed as an integral component of a management control system in ways which contribute both to financial discipline in terms of achieving predetermined set targets and to managers' capability for rapid and creative response to unforeseen contingencies. While criticisms of 'traditional' budgeting suggest that it is entirely unsuitable for organizations faced with conditions of uncertainty and highly competitive environments, our evidence demonstrates that the abandonment of budgeting is not the only, or necessarily the best, option for organizations to pursue. In drawing such a conclusion, however, it is important to point to the ways in which the experience of 'continuous' budgeting at Astoria, particularly the way in which it is embedded in organizational actions, is different to 'traditional' budgeting. Nevertheless our evidence demonstrates that budgeting under conditions of uncertainty may contribute effectively to management control when suitably supported by other organizational resources and practices. Exploring other examples of organizational control practices that are similar to those deployed at Astoria will help further our understanding of how the role of budgets is changing and, more particularly, the extent to which it can now be regarded as focused on issues of strategic implementation.

When Goals Harm Motivation Itself:

As goal setting increases extrinsic motivation, it can harm intrinsic motivation - engaging in a task for its own sake.

"Performance" ambiguous term (no simple definition)

Attention needs to be paid to the definition of performance from the perspectives of relevant stakeholders.

Autonomy (Three challenges):

Balancing autonomy and accountability: They understand the objectives, and they have a great deal of freedom in determining how to reach them within these guardrails. Clear goals and strategies on how to reach them, but freedom on how to achieve them. Balancing freedom to innovate versus following proven routines: The balance between consistency and innovation. Speed of innovation is critical regarding businesses that undergo reinvention because of digital transformations. On the other hand other sectors and industries may benefit from standardized approaches. Tailor the balance in regard to what industry you are operating within. Balancing alignment with control: In dynamic business environments, where innovation cycles happen in days or weeks rather than months and years, and where much of the work is cross-functional in nature and is undertaken by small, agile teams, an organizational approach that focuses heavily on top-down control, may be ineffective.

Authentic Empowerment:

Both structural and psychological empowerment are high. MCS in this form of empowerment are used to establish formal accountability structures within which employees with delegated decision-making authority can account for the exercise of their discretion. However, unlike in the case of obstructed empowerment, employees perceive themselves to be genuinely autonomous and supported in their role by management and the wider organization. A key feature of authentic empowerment is the presence of socio-ideological control mechanisms which promote individual choice and organizational values of ownership, competence and collaboration. Within an authentic empowerment environment, both formal and informal MCS operate to remove any perceived constraints on employees' ability to exercise choice and autonomy. "Authentic empowerment represents a significant improvement over obstructed empowerment regarding its implications for ongoing management control, owing to the careful cultivation of cognitive complexity and attendance to the emotional well-being of individuals."

Budgeting (Otley):

Budgeting has traditionally been a central plank of most organizations' control mechanisms, as it is one of the few techniques capable of integrating the whole gamut of organizational activity into a single coherent summary. Performance is defined essentially as profitability; in a profit center, the overall measure of performance combines an output measure (revenue) with an input measure (cost) and the budgeting process seeks to keep the two elements in balance. Target setting: Important part of budgeting. However, the downside of the narrowness of the budgetary process has been likened to driving a motor car solely by looking through the rear view mirror (and a mirror that provides only an imperfect reflection, at that). Focuses only on financial results and does not pay sufficient attention to the means by which those results are to be achieved.

The Entrepreneurial Gap:

By holding managers accountable for more than they control, a company can encourage entrepreneurial behavior.

Player-Coach Model

Chapter leaders are also squad members and squad members can switch squads and retain the same formal leader within their chapter. The third organizational element is the guild whose purpose it is to share knowledge in areas that cut across chapters and squads.

Belief Systems (Bring in the energy)

Companies have used belief systems for years in an effort to articulate the values and direction that senior managers want their employees to embrace. Are concise, value laden, and inspirational, they draw employees attention to key tenants of the business: how the organization creates value, the level of performance the organization strives for and how individuals are expected to manage both internal and external relationships. Only works if employees believe, by watching the actions of senior managers, that the company's stated beliefs represent deeply rooted values. Can motivate individuals to search for new ways of creating value.

Diagnostic control systems:

Potential: To achieve Organizational blocks: Lack of focus or of resources Managerial solution: Build and support clear targets

The questions corresponds with four basic spans of a job:

Control - Defines the range of resources - people, infrastructure and assets. (Supply) Accountability - Refers to the range of trade-offs affecting the measures used to evaluate a manager's achievements. (Demand). Influence - Refers to the width of the net that an individual needs to cast in collecting data, probing for new information, and attempting to influence the work of others. (Demand). Support - Refers to the amount of informal help an individual can expect from people in other organizational units. (Supply)

Why can environmental capabilities be important for companies and how does that relate to MCS?

Cost competitive advantage First mover competitive advantage Competitive advantage through an enhanced reputation among stakeholders, the reduction in production costs, and a first-mover advantage in the green product market. Yet according to the natural-resource-based view, the development and maintenance of unique and valuable environmental capabilities are the central elements allowing companies to gain financial benefit from their proactive environmental strategy Albertini looks at companies that have a proactive strategy (Wants to do more than the minimal requirements in terms of sustainability) the opposite of Reactive strategy. Environmental capabilities: Stakeholder integration - DCS, Belief, Boundary Shared vision - Belief and Boundary Continuous innovation - DCS and ICS Organizational learning - DCS, Belief and ICS

The balanced scorecard provides answer to four different questions from four different perspectives (1st generation BSC):

Customer Perspective: How do customers see us? The BSC shows HOW results are achieved: Did the cost of setups fall because of shorter setup times or bigger batch sizes? Customers' concerns tend to fall into four categories: time, quality, performance and service and cost. Time: For existing products, lead time can be measured from the time the company receives an order to (the time it actually delivers the product or service to the customer. For new products, lead time represents the time to market, or how long it takes to bring a new product from the product definition stage to the start of shipments. Quality: Quality measures the defect level of incoming products as perceived and measured by the customer. Quality could also measure on-time delivery, the accuracy of the company's delivery forecasts. Performance and service: The combination of performance and service measures how the company's products or services contribute to creating value for its customers. Important: In addition to measures of time, quality and performance and service, companies must remain sensitive to the cost of their products. Internal business perspective: What must we excel at? Managers need to focus on those critical internal operations that enable them to satisfy customer needs. Information systems play an invaluable role in helping managers disaggregate the summary measures. When an unexpected signal appears on the balanced scorecard, executives can query their information system to find the source of the trouble. If the aggregate measure for on-time delivery is poor, for example, executives with a good information system can quickly look behind the aggregate measure until they can identify late deliveries, day by day, by a particular plant to an individual customer. Innovation and Learning Perspective: Can we continue to improve and create value? * The customer-based and internal business process measures on the balanced scorecard identify the parameters that the company considers most important for competitive success. But the targets for success keep changing. A company's ability to innovate, improve, and learn ties directly to the company's value. That is, only through the ability to launch new products, create

The Span of Control

Defines the range of resources - people, infrastructure and assets. Executives must adjust the span of control for each key position and unit on the basis of how the company delivers value to customers. Spans of control will be set very differently in companies that follow different strategies (Walmart Standardizations Wide vs Nestlé regional tastes Narrow) To narrow the span: Reduce resources allocated to specific positions or units. To widen the span: Allocate more people, assets, and infrastructure.

Tools to reconcile the conflict between creativity and control (Levers of Control):

Diagnostic Control Systems - Allow managers to ensure that important goals are being achieved efficiently and effectively. Belief Systems - Empower individuals and encourage them to search for new opportunities. Boundary Systems - Establish the rules of the game and identify actions and pitfalls that employees must avoid. Interactive Control Systems - Enable top level managers to focus on strategic uncertainties, to learn about threats and opportunities as competitive conditions change, and to respond proactively.

Diagnostic, belief and boundary systems should be aligned.

Die or thrive as a result of strategic uncertainties.

Arguments for working with sustainability:

Ethical: It is fair to other stakeholder groups besides the owners, and more sustainable Business: It is good business to have happy employees and to offer customers sustainable products and services Fashion: Everybody else seems to do it, so we must not be left behind. (Government policies)

The paradox of success:

It has an uncanny way of setting a company up for trouble, if not outright attack. And not only for outside sources, such as competitors or regulators, but, just as important, form within the organization itself. Success should make executives nervous, better yet, it should galvanize them to identify their level of internal risk exposure.

belief systems

Potential: To contribute Organizational blocks: Uncertainty about purpose Managerial solution: Communicate core values and mission

3rd Generation BSC (The four different perspectives):

Financial Perspective: Companies have two basic levers for their financial strategy: revenue growth and productivity. The former generally has two components: build the franchise with revenue from new markets, new products, and new customers; and increase value to existing customers by deepening relationships with them through expanded sales-for example, cross-selling products or offering bundled products instead of single products. The productivity strategy also usually has two parts: improve the company's cost structure by reducing direct and indirect expenses and use assets more efficiently. Customer Perspective: The core of any business strategy is the customer value proposition, which describes the unique mix of product and service attributes, customer relations, and corporate image that a company offers. By identifying its customer value proposition, a company will then know which classes and types of customer to target. For the customer perspective, companies typically select one of three strategies: operational excellence, customer intimacy, or product leadership. Internal Process Perspective: Once an organization has a clear picture of its customer and financial perspectives, it can then determine the means by which it will achieve the differentiated value proposition for customers and the productivity improvements to reach its financial objectives. The internal process perspective captures these critical organizational activities, which fall into four high-level processes: build the franchise by innovating with new products and services and by penetrating new markets and customer segments; increase customer value by deepening relationships with existing customers; achieve operational excellence by improving supply chain management, the cost, quality, and cycle time of internal processes, asset utilization, and capacity management; and become a good corporate citizen by establishing effective relationships with external stakeholders. Learning and Growth Perspective: The foundation of any strategy map is the learning and growth perspective, which defines the core competencies and skills, the technologies, and the corporate culture needed to support an organization's strategy. These obje

The balanced scorecard supplies three elements that are essential to strategic learning:

First, it articulates the company's shared vision, defining in clear and operational terms the results that the company, as a team, is trying to achieve. Second, the scorecard supplies the essential strategic feedback system. A business strategy can be viewed as a set of hypotheses about cause-and- effect relationships. A strategic feedback system should be able to test, validate, and modify the hypotheses embedded in a business unit's strategy. Third, the scorecard facilitates the strategy review that is essential to strategic learning. Traditionally, companies use the monthly or quarterly meetings between corporate and division executives to analyze the most recent period's financial results. Discussions focus on past performance and on explanations of why financial objectives were not achieved. The balanced scorecard, with its specification of the causal relationships between performance drivers and objectives, allows corporate and business unit executives to use their periodic review sessions to evaluate the validity of the unit's strategy and the quality of its execution

The performance management framework (Otley Framework):

Five main issues that need to be addressed in developing a framework for managing organizational performance that are represented as a set of questions: 1. What are the key objectives that are central to the organization's overall future success, and how does it go about evaluating its achievement for each of these objectives? (Closely connected to goals and measurement of goals) 2. What strategies and plans has the organization adopted and what are the processes and activities that it has decided will be required for it to successfully implement these? How does it assess and measure the performance of these activities? (Closely connected with the issues of strategy formation and deployment) 3. What level of performance does the organization need to achieve in each of the areas defined in the above two questions) and how does it go about setting appropriate performance targets for them? (Research) 4. What rewards will managers (and other employees) gain by achieving these performance targets (or, conversely, what penalties will they suffer by failing to achieve them)? (How performance measurement as being in the purview of the human resource management function). Rewards should be valued, impactful, understandable, timely, durable, reversible, cost efficient! 5. What are the information flows (feedback and feed-forward loops) that are necessary to enable the organization to learn from its experience) and to adapt its current behavior in the light of that experience? (Learning organization, employee empowerment and emergent strategy).

Superpowers of OKRs

Focus and commit to priorities: Focus and communicate what is and what is not important to dispel confusion. Align and connect for teamwork: Openly share everyone's OKRs and link everyone's objectives to the overall game plan (facilitate a sense of ownership); balance control & empowerment in the goal-setting process, facilitate horizontal coordination. Track for accountability: No-judgement (learning-oriented) accountability based on data/measurable indicators and regular check-ins, objective grading/scoring and continuous reassessment. (Connect OKRs to Interactive Control Systems). Stretch for amazing: "Doing more than one think is possible": testing limits and granting the freedom to fail (beyond business-as-usual).

Goals gone wild: The systematic side effects of overprescribing goal setting.

For decades, goal setting has been promoted as a panacea for improving employee motivation and performance in organizations. However, goal setting has been overprescribed with powerful and predictable side effects. Goal setting should be prescribed selectively, presented with a warning label, and closely monitored. Goals could be met at the expense of other important features that were not specified (safety, ethical behavior, and company reputation).

Conclusion (Goals Gone Wild):

For decades, scholars have prescribed goal setting as an all-purpose remedy for employee motivation. Rather than dispensing goal setting as a benign, over-the-counter treatment for students of management, experts need to conceptualize goal setting as a prescription-strength medication that requires careful dosing, consideration of harmful side effects, and close supervision. Given the sway of goal setting on intellectual pursuits in management, we call for a more self-critical and less self-congratulatory approach to the study of goal setting.

Balancing Empowerment and Control (Levers of control):

Freedom and motivation: Must give up control over many kinds of decisions and allow employees at lower levels of the organization to act independently. By using the control levers effectively, managers can be confident that the benefits of innovation and creativity are not achieved at the expense of control.

Can We Set the Right Goal? The Problem of Calibration

Goal setting can become problematic when the same goal is applied to many different people.

Goals, learning, and Cooperation:

Goals Inhibit Learning Goals Create a Culture of Competition

We found that four core principles underpin effective goal systems, and we summarize these elements with the acronym FAST. (See "Make Goals FAST, Not SMART.")

Goals should be embedded in frequent discussions; ambitious in scope; measured by specific metrics and milestones; and transparent for everyone in the organization to see.

5th Generation BSC (The ESG era (includes society and environment))

In a 2018 Harvard Business Review article, Robert S. Kaplan, George Serafeim, and Eduardo Tugendhat illustrated how companies can join with other firms, non-profits, and communities in positive-sum networks that create economic value while simultaneously addressing poverty, social exclusion, and environmental degradation. Such collaboration can produce great benefits in the low to middle income countries where the most impoverished people live, socially excluded and surrounded by serious environmental damage. Inclusive growth strategies can also be applied in poverty-stricken and high unemployment regions of developed nations.

Spotify encourages innovation without losing the benefits of repeatability:

In the traditional model, central functions define and enforce standards and routinized processes from the top down. At Spotify, best-practice methods are discovered over time and determined by popular adoption from the bottom up. A practice or tool becomes a standard only when enough squads have adopted it to make it a de facto standard.

Getting It Right: Harness the Power of Goals:

Just as doctors prescribe drugs selectively, mindful of interactions and adverse reactions, so too should managers carefully prescribe goals. To do so, managers must consider—and scholars must study—the complex interplay between goal setting and organizational contexts, as well as the need for safeguards and monitoring.

Interactive control systems:

Potential: To create Organizational blocks: Lack of opportunity or fear of risk Managerial solution: Open organizational dialogue to encourage learning.

Boundary systems:

Potential: To do right Organizational blocks: Pressure on temptation Managerial solution: Specify and enforce rules of the game

Kaplan, R. S., & Grossman, A. S. (2010). The emerging capital market for nonprofits.

In this Harvard Business Review article titled "The Emerging Capital Market for Nonprofits" by Robert S. Kaplan and Allen S. Grossman, the authors discuss the need for mechanisms and institutions to channel information and money between donors and nonprofits, similar to how capital markets work in the private sector. They highlight the lack of effective infrastructure in the nonprofit sector for assessing and measuring the social impact of donations and how this hinders the growth and effectiveness of nonprofits. The authors argue that the dynamics of growth and success seen in the for-profit sector, where start-ups can grow into large corporations, are not replicated in the nonprofit sector. They emphasize the importance of leveraging economies of scale and management talent to deliver improved services at a lower cost. They suggest that a lack of development in mechanisms that channel information and funds is to blame for this disparity. The article discusses the emergence of a new generation of charitable foundations and intermediaries that are focusing on measuring the social impact of donations and funding effective nonprofits. These organizations seek to hold nonprofits accountable for delivering results and use governance structures to monitor and guide their journey to successful outcomes. The authors present two models: one similar to a mutual fund (e.g., Robin Hood Foundation) that allocates funds to effective poverty-fighting nonprofits, and another resembling a venture capital fund (e.g., New Profit) that invests in innovative nonprofits and actively manages their investments to increase their social impact. They stress the importance of translating social objectives into actionable strategies and using tools like the balanced scorecard system to manage and track the performance of nonprofits. They call for corporations and their foundations to become better partners in philanthropic efforts by insisting on metrics for the social return from their charitable giving. Ultimately, they envision a well-functioning social capital market that directs resources to the most effective nonprofits, enabling them to grow and create a stronger and more dynamic social sector.

Psychological Empowerment:

Involves an individual's subjective experience (meaning, impact etc.) with their organizational role. The employee's perception or subjective experience of being empowered. This view is considered to be on a micro-level. Consists of four dimensions: meaning, impact, competence and self-determination. Psychological empowerment seems to be greatly linked with individual level outcomes such as performance.

Types of paradoxical tension within the dynamic model of organizing:

Latent paradoxical tension: Tensions that are embedded within organizational systems and processes but remain unnoticed by organizational members until environmental factors bring the opposing elements into juxtaposition. Iron cage: Overt legitimated control over organizational members. Salient paradoxical tension: Demands an organizational response. Three environmental factors that render latent paradoxical tensions salient. 1. Plurality (in which multiple and competing goals are active simultaneously), 2. scarcity (in which resources are insufficient for the achievement of all active goals) and 3. change (in goals or conditions that affect their achievement).

Interactive Control Systems (Bring in the energy):

Like weather-tracking systems, interactive control systems are the formal information systems that managers use to involve themselves regularly and personally in the decision of subordinates. Through them, senior managers participate in the decisions of subordinates and focus organizational attention and learning on key strategic issues. Four characteristics that set ICS from DCS: 1.Focus on constantly changing information 2.The information is significant enough 3.Data collected is best discussed face-to-face 4.Debate about underlying data, assumptions, and action plans. Changing industry conditions keeps managers awake at night Interactive control systems focus on constantly changing information that senior managers consider potentially strategic.

Designing management control systems for sustainability

Link sustainable/social metrics to employee compensation. Both pros and cons. Strive towards ESG targets at the expense of employee compensation → Only achieve targets for own personal gain → Bad for the overall business.

After a series of workshops and interviews with each JSC member, the project team identified the alliance's strategic objectives. Following BSC practice, it sorted those objectives into five strategic themes:

Living the alliance: Ensure that we have the right culture (including trust), communication, leadership, people development, IT, and rewards and recognition. Collaboration: Create the transparency we desire and make the best use of resources and services across organizations and third parties. Speed and process innovation: Do things right; leverage our global expertise; and improve the start- up and management of studies to achieve break- through results. Growth: Create the right portfolio of new products; collaborate on decisions to develop com- pounds; improve investment management; and accelerate the flow of compounds into the clinical development phase. Value for both: Create value for both organizations by jointly driving all these activities.

Logic Framework

Logic Framework 1. Inputs- Funds- Equipment and supplies- Knowledge and technical expertise 2. Activities- Basic needs delivery, such as food and shelter- Service delivery, such as job training and counseling- Infrastructure construction, such as transportation 3. Outputs: (Results: Immediate)- People fed, housed, or treated- People trained or educated- Roads built and goods transported to market 4. Outcomes: (Results: Medium- and long term)- Improved quality of life, health, educational attainment etc.- Increased incomes(measured for individuals) 5. Impacts: (Results: effect on root causes, sustained significant change)- Sustained drop in poverty (or obesity, illiteracy, etc.)- Improvement in Human Development Indicators(measured in terms of communities, populations or ecosystems) Conventional wisdom in the social sector suggests that one should measure results as far down the logic chain as possible, to outcomes and societal impacts. Outputs: Direct products of program activities quantified via volume-of-work metrics Outcomes: Lasting changes in the lives of individuals Impacts: Lasting results achieved at a community or societal level

1st Generation BSC (Cockpit metaphor)

Managers should not have to choose between financial and operational measures: The Balanced scorecard: A set of measures that gives top managers a fast but comprehensive view of the business. Includes financial measures with operational measures. Financial measures: Tells the results of action already taken. Operational measures: Customer satisfaction, internal processes, and the organization's innovation and improvement activities. In other words, operational measures are drivers of future financial performance. (Consider the balanced scorecard as the dials and indicators in an airplane cockpit. Pilots need detailed information about many aspects of the flight: fuel level, air speed, altitude etc. Reliance on one instrument can be fatal.) Companies that have adopted the BSC demonstrated that it meets managerial needs. First the BSC brings together many of the seemingly disparate elements of a company's competitive agenda like: becoming customer oriented, shortening response time, improving quality, emphasizing teamwork, reducing new product launch times, and managing for the long term. Second, it guards against suboptimization (a situation in which a business is not as successful as it could be because one part or department works only on its own or only for its own success). By forcing senior managers to consider all the important operational measures together, the BSC lets them see whether improvement in one area may have been achieved at the expense of another. Companies rarely suffer from having too few measures and its more common that consultants recommends to add new measures The balanced scorecard forces managers to focus on the handful of measures that are most critical.

The Balanced Scorecard Approach (Otely)

Multidimensional approach to performance management and management that is linked specifically to organizational strategy. It suggests that as well as financial measures of performance, attention should be paid to the requirements of customers, business processes (internally) and long-term sustainability. A major strength of the balanced scorecard approach is the emphasis it places on linking performance measures with business unit strategy. Two major stakeholders: Providers of finance and customers. Other stakeholders such as suppliers, governments, local communities and the environment are just briefly mentioned. Does not specify how trade-offs are to be made between the difference measures used. Reward structure is only briefly mentioned. Procedures for mapping means-end relationships are not explicated. In addition and surprisingly, target-setting is not mentioned despite its central role; the links with reward structures are neglected; and the establishment of information systems and feedback loops are taken for granted. All of these neglected areas provide opportunities for further research.

Three different ways which organizations can engage with management control and employee empowerment simultaneously:

Obstructed Empowerment: When structural empowerment does not lead to psychological empowerment. Illusory Empowerment: When psychological empowerment can exist in the absence of structural empowerment. Authentic Empowerment: When both psychological and structural empowerment are present.

Obstructed Empowerment

Occurs when employees experience psychological disempowerment despite high levels of structural empowerment: the inverse of the illusory empowerment form. "Where conflicts exist between an individual's accountability within the formal and informal structures of an organization, individual employees are unlikely to experience psychological empowerment. "As in the case of a traditional bureaucracy, managers may seek to address behavioral and motivational problems by increasing their use of monitoring systems or through the introduction of incentives designed to align the interests of the individual with those of the organization. However, in an obstructed empowerment environment, increased reliance on formal MCS is likely to fuel a vicious cycle and perpetuate the conditions for psychological disempowerment which initially gave rise to the problems. The alternative strategy - the attachment of incentives to the achievement of specific outcomes - is equally problematic. By intensifying the pressure on employees to achieve outcomes within their area of hierarchical accountability without addressing the competing demands of the informal organization, the use of incentives in this organizational form is more likely to exacerbate the experience of paradoxical tension than to resolve it."

Boundary Systems (Focus)

Power of negative thinking Telling people what not to do allows for innovation, but within clearly defined limits. Unlike Diagnostic Control Systems (which monitor critical performance outcomes or belief systems (which communicate core values), boundary systems are stated in negative terms or as minimum standards (activities that are off-limits). They are an organization's brakes. People generally want to do the right thing - to act ethically in accordance with established moral codes. But pressures to achieve superior results, sometimes collide with stricter codes of behavior. Boundary systems are especially critical in those businesses where a reputation built on trust is a key competitive asset. Two types of boundary systems: Business conduct boundaries (External) Strategic boundaries (Internal) Be clear on what you DON NOT DO

Pressure Points Due to Growth:

Pressures for performance: Fast growing businesses are often intense and exciting environments. A burgeoning company attracts the interest of employees and the capital markets alike. In pursuing strategies that emphasize growth, executives often set ambitious sales and profit goals. Those who deliver are rewarded for their work; those who fail to meet expectations do not share in the bounty. Subordinates may fear that failing to meet performance expectations will jeopardize their status or compensation. Accordingly, they may feel intense pressure to succeed at all costs, even if their actions overstep ethical bounds or contravene company policy. Rate of expansion: New production facilities, distribution channels, and product lines are only necessary when business is booming. However, without careful planning and allocation of resources, the infrastructure to support rapid expansion may quickly become overloaded, resulting in sacrifices in quality. Inexperience of Key Employees: When large numbers of people come on hoard quickly, managers sometimes waive background checks or lower performance standards and educational qualifications.

Narayanan, V. and Boyce, G. (2019), "Exploring the transformative potential of management control systems in organizational change towards sustainability"

Purpose - The purpose of this paper is to examine the role of management control systems (MCS) in organizational change towards sustainability. In particular, it examines the extent to which MCS may be instrumental in transformative organizational change in this sphere. Findings - The findings indicate that although MCS are not irrelevant, they do not play a transformative role in enabling deep-seated organizational change towards sustainability. The critical literature on the nature of MCS is drawn upon to explore the reasons for the observed non-role. A number of changes were observed in the LOC at Construct Ltd. While belief systems and diagnostic controls easily adapted and molded to the emergent organizational discourse of sustainability, boundary systems and interactive controls did not follow. Taken together, the study's findings show that the role of MCS in organizational change can be better understood when viewed in light of the interrelationship between competing discourses, particularly those relating to sustainability, on the one hand, and profit maximization, on the other. For deep-seated change towards sustainability, the findings of this study suggest that the continued dominance of the financial discourse must be overcome. The case shows how MCS predominantly support the status quo and the related business case inherent in the financial discourse. The critical literature suggests that the roots of MCS and, in particular, the notion of control may underlie these outcomes. In organizations where the profit-seeking logics dominate, MCS may only serve to strengthen the financial discourse rather than aid radical change away from such an orientation. The findings indicate that strategic discourses of sustainability, conveyed through belief systems alone, are insufficient for deep-seated change. More far-reaching change requires this to be accompanied by changes in boundary controls and interactive use of sustainability-related data, and supported by diagnostic measurement of sustainability performance. Clearer links are needed between strategic priorities in relation to sustainability and the MCS.

Five Questions About Risk (There is one question for each of the four levers: belief systems, boundary systems, diagnostic control systems, and interactive control systems. A fifth and final question relates to what are commonly known as internal controls-the checks and balances designed to safe- guard assets and ensure reliable information.)

Question #1: Have senior managers communicated the core values of the business in a way that people understand and embrace? Belief Systems related question Question #2: Have managers in your organization clearly identified the specific actions and behaviors that are off-limits? Boundary Systems related question Question #3: Are diagnostic control systems adequate at monitoring critical performance variables? Diagnostic Control Systems related question Question #4: Are your control systems interactive and designed to stimulate learning? Interactive Control Systems related question Question #5: Are you paying enough for traditional internal controls? As a company grows, the money invested in such systems should be growing commensurately. It may feel wasteful at the time-especially since success makes risk seem so remote-but it is money well spent. That's a fact, unfortunately, that many managers don't learn until it's too late.

Spotify's approach

Spotify's approach focuses heavily on autonomous squads that consist of a maximum of eight people where each squad has the freedom to decide what to build, how to build it and with whom to work with. The squads is a part of a tribe which is linked together via a chapter.

Stress-test your strategy: the 7 questions to ask:

Question 1: Who is Your Primary Customer? (Strict priorities) This should determine how you allocate resources: Allocate all possible resources to meet and exceed your primary customer's needs. Minimizing the resources devoted to everything else. Question 2: How Do Your Core Values Prioritize Shareholders, Employees, and Customers? (Strict priorities) Companies that execute strategy well define their core values to reflect the relative importance of shareholders, employees, and customers. Core values must indicate whose interests come first when difficult trade-offs must be made. Question 3: What Critical Performance Variables Are you Tracking? (Your ability to focus on those priorities by designating critical performance variables and constraints). Many managers complain that they're overwhelmed by how many things they're asked to keep track of in all-inclusive lists of performance measures. It's not uncommon for companies to create scoreboards with 30,40, or more variables, in the mistaken belief that adding measures results in a more complete - and therefore better - scorecard. Adding to many measurements will drive out innovation. Question 4: What Strategic Boundaries Have You Set? (Your ability to focus on those priorities by designating critical performance variables and constraints). Every strategy carries the risk that an individual's actions will push the business off course. The risk intensifies when managers feel pressure to hit growth and profit targets. There are two ways to control such risk: You can tell people what to do or you can tell them what not to do. Telling people what to do helps assure that they won't make mistakes by engaging in unauthorized activities. This is the prudent approach if safety and quality are paramount concerns—if, say, you're running a nuclear power plant or overseeing a space launch. In such cases you want employees to follow standard operating procedures to the letter. However, if innovation and entrepreneurial thinking are important, you should follow a different course: You should hire creative people and tell them what not to do. In other words, you should give them freedom to exercise their creativity—within defined limits. But remember: Boundaries are power

The Span of Support

Refers to the amount of informal help an individual can expect from people in other organizational units. The Slider can be set anywhere from narrow to wide depending on how much commitment from others the person needs in order to implement strategy. Customer satisfaction usually needs a wide range of support among employees. To narrow the span: Use leveraged, highly individualized rewards, and clearly single out winners and losers. To widen the span: Build shared responsibilities through purpose and mission, group identification, trust, and equity-based incentive plans.

The Span of Accountability

Refers to the range of trade-offs affecting the measures used to evaluate a manager's achievements. For example, a person who is accountable for head count or specific expenses in an operating budget can make few trade-offs in trying to improve the measured dimensions of performance and so has a narrow span of accountability. By contrast, a manager responsible for market share or business profit can make many trade-offs and thus has a relatively wide span of accountability. Your setting for this span is determined by the kind of behavior you want to see. To narrow the span: Standardize work by using measures (either financial, such as line-item budget expenses or nonfinancial, such as head count) that allow few trade-offs. To widen the span: Use nonfinancial measures (such as customer satisfaction) or broad financial measurements (such as profit) that allow many trade-offs.

The Span of Influence

Refers to the width of the net that an individual needs to cast in collecting data, probing for new information, and attempting to influence the work of others. Narrow span: No need to focus on people outside his small area to do his job effectively. Wide span: Must interact extensively with, and influence, people in other units. Adjust the span to affect behavior within the organization. To narrow the span: Require people to pay attention only to their own jobs: do not allocate costs across units; use single reporting lines; and reward individual performance. To widen the span: Inject creative tension through structures, systems, and goals - for example, cross-unit teams, dotted lines, matrix structures, stretch goals, cross-unit cost allocations, and transfer prices.

Structural Empowerment:

Relates to the degree of decentralization of an organization. Relates to the extent to which employees are subject to centralization and formalization. Decision rights. This view is considered to be on a macro-level.

Outside-in approach

Reporting should create transparency about the company's impacts (reducing information asymmetry) Measures derived from sustainability reporting requirements/societal expectations Sustainability indicators should: be standardized, quantify, and comparable be understandable for a broad range of external stakeholders represent aggregated information on the company's impacts overall Sustainability reporting has become a taken-for-granted disclosure practice Disclosure everywhere: What do we disclose? "As long as we disclose it, we have done our part" What do we really do with the sustainability report → Greenwashing The notion of measuring outputs and inputs Outside-in approach (continued) Integrating sustainability performance data only into external reports may not contribute to sustainable development

Illusory empowerment:

Resembles a glass cage as members feel as though they have a choice and autonomy but are actually tightly controlled through mechanisms which are both more transparent and more subtle than the explicitly bureaucratic practices of the iron cage. Paradoxical tension within illusory empowerment: MCS exert tight control over employees behaviors while simultaneously masking their operation through the presence of strong organizational values and cultural norms. "A surprising feature of illusory empowerment is the comprehensiveness with which it addresses control issues which remain unresolved within other forms of empowerment. Structural features of this particular set of MCS ensure that behavior is largely prescribed and decision making is centralized. To this end, ensuring coordination across multiple business units is relatively unproblematic and tight control does not come at the expense of the motivation and performance of individual employees. The implications for management control, then, only extend to maintaining the socio-ideological control mechanisms which mask the operation of formal controls and reduce the likelihood that individuals will become aware of the paradoxical tension to which they are subject."

Pressure Points Due to Culture:

Rewards for entrepreneurial risk taking: Rewarding entrepreneurial initiative is generally the right thing to do. But as the rewards for entrepreneurial behavior rise, so too does risk exposure. Executive resistance to bad news: Another cultural pressure point has to do with in- formation-particularly as it flows upward. To their peril, executives running successful organizations often develop a resistance to bad news. They want to be surrounded by people who share their pride in the business and exude confidence about reaching demanding performance goals. People w h o speak of obstacles, problems, or impending dangers are derided as annoying naysayers and abused for not being team players. Yet it is often these individuals - many of whom communicate daily with frontline employees, customers, and suppliers-who are best able to see risk creeping in. In cultures where the philosophy is "the boss knows best," many learn not to speak out about such risk. Level of internal competition: To compound the problem, employees feeling the pressures of internal competition may gamble with business assets, potential credit losses, and the company's reputation in their attempts to enhance short-term performance. In such instances, risks and rewards are not evenly distributed. If the gamble succeeds, there is an upside for both the employee and the company. But if the gamble fails, the employee may-at worst-lose his or her job. The organization can also be left with catastrophic losses.

When goals are too challenging:

Risk Taking Unethical Behavior Dissatisfaction and the Psychological consequences of Goal Failure

'Continuous budgeting":

Seeks to avoid the inherently restrictive nature of budgetary control by enabling managers, when confronted by unexpected events, such as problems with the preparation and launch of new products, to consider, and if necessary implement, a revision of plans and reallocation of resources in pursuit of strategic organizational objectives.

Key Results:

Short-term focus, accomplishment within 30-90 days Can be seen as a testable hypotheses Specific, time-bound, measurable, verifiable, aggressive yet realistic IDEALLY, FOCUS ON OUTCOME, NOT ACTIVITIES OR OUTPUT Adjustable over time Not linked to performance evaluation and bonuses or promotions KEY RESULTS: More earthbound and metrics driven (Needs to be quantifiable)

3rd Generation BSC (How strategy maps show how an organization plans to convert its various assets into desired outcomes):

Shows how employees need certain knowledge, skills, and systems (learning and growth perspective) to innovate and build the right strategic capabilities and efficiencies (internal process perspective) so that they can deliver specific value to the market (customer perspective), which will lead to higher shareholder value (financial perspective).

3rd Generation BSC (Cause and effect links)

Strategy maps show the cause-and- effect links by which specific improvements create desired outcomes - for example, how faster process-cycle times and enhanced employee capabilities will increase retention of customers and thus increase a company's revenues. From a larger perspective, strategy maps show how an organization will convert its initiatives and resources-including intangible assets such as corporate culture and employee knowledge- into tangible outcomes.

When spans are misaligned:

The Crisis of Resources: Most likely occurs when executives spend too much time thinking about control, influence, and accountability and not enough time thinking about support. The Crisis of Control: Can occur when the supply of resources exceeds corporate management's ability to effectively monitor tradeoffs and to ensure coordination of knowledge sharing with other units. The Crisis of Red Tape: This can occur in any organization where powerful staff groups, overseeing key internal processes such as strategic planning and resource allocation, design performance management systems that are too com- plex for the organization. In such circumstances, spans of accountability and influence are very high, but resources are insufficient and misdirected. Adjusting the Spans over Time: Organizations and job designs must change with shifting circumstances and strategy.

MAKE GOALS SPECIFIC WITH METRICS AND MILESTONES

The OKR Framework: Consists of two parts: 1.Objectives are short descriptions of what you want to achieve. Each objective should include a handful of key results - typically quantitative metrics or milestones that specify the steps required to achieve the goal and measure progress. 2.Linking goals to key results makes it easier to adjust as circumstances change, without losing sight of the company's must-win battles.

How new top managers use control systems as levers of strategic renewal. (Simons)

The article's purpose: Understanding their business vision and strategy and how they use formal control systems as levers of strategic change and renewal. The study focuses exclusively on new managers. Study of newly appointed managers. Organizational changes in strategy, structure and process were documented - Cluster 1: Strategic turnaround: Main challenge: Create momentum in a new direction, Unlearn old behavior - Cluster 2: Strategic evolution: Main challenge: Continuing a trajectory of profitable growth, More 'subtly' shifting strategy

The 4th Generation BSC (Strategy map, the importance of visuals. Highlight with arrows (indicates collaboration))

The balanced scorecard management system can help companies switch their alliance management focus from contributions and operations to strategy and commitment.

Communicating and linking:

The balanced scorecard signals to everyone what the organization is trying to achieve for shareholders and customers alike. But to align employees' individual performances with the overall strategy, scorecard users generally engage in three activities: communicating and educating, setting goals, and linking rewards to performance measures. Communicating and Educating, implementing a strategy begins with educating those who have to execute it. Setting goals, mere awareness of corporate goals, however, is not enough to change many people's behavior Linking rewards to performance measures, should compensation systems be linked to balanced scorecard measures? The personal scorecard helps to communicate corporate and unit objectives to the people and teams performing the work.

Otley Conclusion:

The conclusion is straightforward. Although individual techniques of management accounting and control have been studied individually within a restricted context, they need also to be studied as part of a wider organizational control system. The use of management accounting and control systems can be fruitfully analyzed from the framework of performance measurement and performance management. This makes it clear that management accounting and other performance measurement practices need to be evaluated not just from an economic perspective, but from a social, behavioral and managerial perspective, within an overall organizational context. It is these social, cross-national and cultural aspects that make the study of control systems such a fascinating topic for academic research and such a challenge to the practitioner. This paper has attempted to provide an outline framework that will help both academics and practitioners to more fully understand the context in which they are working, and to help develop control practices that are well-suited to the contexts in which they are applied.

The core of the logic framework

The core of our framework for measuring social performance is relatively simple: clarify the operational mission, specify the set of activities to address that mission (scope), and identify the target size of the problem (scale).

Ebrahim, A., & Rangan, V. K. (2014). What impact? A framework for measuring the scale and scope of social performance. (Conclusion):

The core of our framework for measuring social performance is relatively simple: clarify the operational mission, specify the set of activities to address that mission (scope), and identify the target size of the problem (scale). Yet, such measurement is rare in practice. Our approach provides a basis for assessing performance that is empirically rooted, rather than relying on unsubstantiated claims and unrealistic expectations about performance. It is a general approach that can be applied to any organization, while still allowing organizations to adapt their metrics of scale and scope to their specific contexts. All too often, social sec- tor organizations seek to measure, or take credit for, impacts that extend well beyond the scale and scope of what they actually do. As a result, they risk either exposing themselves to permanent failure, or being taken to task for impacts they cannot realistically achieve.

2nd Generation BSC (The importance of the link between the vision and the strategy and the BSC perspectives)

The first new process - translating the vision - helps managers build a consensus around the organization's vision and strategy. The second process - communicating and linking - lets managers communicate their strategy up and down the organization and link departmental and individual objectives. The third process - business planning - enables companies to integrate their business and financial plans. The fourth process - feedback and learning - gives companies the capacity for what we call strategic lessons.

The 5th generation Balanced Scorecard (BSC) over comes the limitations of these traditional management systems by introducing two principal tools:

The scorecard itself, which offers a framework for adding non-financial performance metrics to traditional financial ones, and the strategy map, which enables a visual representation among a company's multiple and linked strategic objectives.

Achieving Equilibrium:

Two of the spans measure the supply of organizational resources of the company provides to individuals: The Span of Control: relates to the level of direct control a person has over people, assets, and information. The Span of Support: softer counterpart, reflecting the supply of resources in the form of help from people in the organization. Two of the spans measure the demand of organizational resources: The Span of Accountability: Affects the level of pressure on employees to make tradeoffs; that pressure in turn drives his need for organizational resources. (Hard) The Span of Influence: Level of influence reflects the extent to which employees need resources.

Paradox theory:

enables us to understand not only the nature of the relationship between employee empowerment and management control but also the diverse ways in which organizations and individuals attempt to manage competing demands simultaneously and the consequences of their (in)effective management.

Business planning:

The very exercise of creating a balanced scorecard forces companies to integrate their strategic planning and budgeting processes and therefore helps to ensure that their budgets support their strategies. Scorecard users select measures of progress from all four scorecard perspectives and set targets for each of them. Then they determine which actions will drive them toward their tar- gets, identify the measures they will apply to those drivers from the four perspectives, and establish the short-term milestones that will mark their progress along the strategic paths they have selected. Building a scorecard thus enables a company to link its financial budgets with its strategic goals. Good to adopt milestones, as they are tangible expressions of managers' beliefs about when and to what degree their current programs will affect those measures. In establishing milestones managers are expanding the traditional budgeting process to incorporate strategic as well as financial goals. At the end of the business planning process, managers should have set targets for the long-term objectives they would like to achieve in all four scorecard perspectives; they should have identified the strategic initiatives required and allocated the necessary resources to those initiatives,- and they should have established milestones for the measures that mark progress toward achieving their strategic goals.

Contingency theory (Otely)

There is no best way to design a MSC, rather relates to whether an organization is successful or not → The aim is a good "fit" between the context, the strategy, and the MSC design.

Mundy, J. (2010) Creating dynamic tensions through a balanced use of management control systems.

This paper explores how organizations balance controlling and enabling uses of management control systems (MCS), and how this balance facilitates the creation of dynamic tensions and unique organizational capabilities. MCS, two roles: Control and empowerment. The findings from the current study indicate that balance, rather than dynamic tension, is directly determined by managerial uses of MCS. Balance presents a complex challenge for organizations. The simultaneous use of MCS to direct and to empower requires purposeful intervention by senior managers in order to create the conditions in which productive tensions can emerge. Balancing these competing demands represents a unique capability because each manager faces an individual set of choices in how they use the levers of control to manage inherent organizational conflicts. These choices are influenced by a range of individual and organizational factors that have immediate consequences for the capacity of an organization to generate dynamic tensions. The findings from this study thus offer an elaboration of how dynamic tensions are created through the balance between controlling and enabling uses of MCS. Levers of control generate a"dynamic tension between opportunistic innovation and predictable goal achievement that is essential for positive growth"(Simons, 1995, p. 153)

"Continuous" budgeting: Reconciling budget flexibility with budgetary control.

This paper explores the tensions between the use of budgets and the development of more flexible modes of management. We draw on a case study of one organization, which we have called Astoria, to illuminate the ways in which managers combine budgeting with other management controls to meet the potentially competing objectives of flexibility and adaptation required for strategy implementation on the one hand, and the achievement of specified financial targets on the other. Our purpose is to analyze how Astoria understood, and gave effect to, the notion that managing strategic uncertainties is an organizational process that is susceptible to intervention and control on a sustained basis.

Conclusion (Albertini):

This study aims to examine how a company can use Simons' four levers of control to enhance environmental capabilities, which in turn, can contribute to competitive advantages (Reduction cost competitive advantage and first mover competitive advantage). From our findings, we propose a conceptual framework of management control levers that shows how companies can foster (1) stakeholder integration capability through the joint use of belief systems, boundary systems, and DCS; (2) shared vision capability through the joint use of belief and boundary systems; (3) organizational learning capability through the joint use of DCS and ICS; and (4) continuous innovation capability through the use of ICS, belief systems, and to a lesser extent DCS.

O'Leary, S., & Smith, D. (2020). Moments of resistance: An internally persuasive view of performance and impact reports in non-governmental organizations.

This study examines how accounting practices influence moments of resistance within organizations, particularly focusing on non-governmental organizations (NGOs) dealing with accountability standards. The study is rooted in the ideas of Mikhail Bakhtin, a Russian philosopher known for studying everyday dialogues. The research finds a shift in how organizations view accounting reports about their performance and impact. Initially seen as authoritative, these reports gradually become more persuasive internally. This shift helps organizations resist the prevailing authoritative views on accountability. The study emphasizes how accounting's potential for different interpretations supports this resistance. By challenging conventional beliefs about accounting, this research sheds light on how accounting gains acceptance in society. It adopts a Bakhtin-inspired approach, exploring how accounting interacts with established organizational practices. The study reveals how accounting can respond to and resist prevailing circumstances, aligning with broader goals of empowering and liberating accounting research. The study stresses the role of dialogic accounting in resistance, a function not typically considered in traditional views of accounting. It suggests that dialogic accounting can fuel resistance in everyday organizational settings, allowing minority perspectives to be heard and envisioning alternative futures. The findings offer valuable insights into understanding dialogic accounting and its effects. While the study acknowledges its limitations, such as not directly involving beneficiaries and donors in the NGO under examination, it calls for further exploration. This includes studying resistance to established views in various organizational contexts and recognizing the political aspects of identity. The study concludes by highlighting the need to foster political identities for effective resistance and transformation. In summary, this research provides a deep understanding of how accounting practices can drive resistance, challenging established views and showcasing the role of dialogic accounting in effecting change within organizations and society.

4th Generation BSC (FOR CROSS-ENTITY COLLABORATION):

To yield the highest rewards, the partners must first agree on strategy and then design metrics to determine how well the strategy is being implemented. They must communicate a common vision and offer incentives that motivate employees to improve collaboration and deliver results. They also need a process that allows them to talk candidly about difficulties, resolve disputes, share information, and continually adapt the strategy to evolving external conditions as well as to newly created internal capabilities. The balanced scorecard management system provides a framework for partners to work collaboratively and productively to achieve benefits that neither could accomplish on its own.

Pressure Points Due to Information Management:

Transaction complexity and velocity: Success in the marketplace is often accompanied by increasingly sophisticated products, by innovations in the way that customers are served, and by creativity in bundling new products or services. All these changes can increase the complexity of transactions. When that happens, fewer people fully understand the nature of the risks that these transactions create and how to control them. Gaps in diagnostic performance measures: Success also puts pressure on the internal reporting systems that measure critical performance variables, such as return on capital employed, same- store sales, order backlogs, and product or service quality. In bad times, managers usually pore over such facts and figures as they try to divine the source of their problems. In good times, however, managers will frequently let this process slide. There are two reasons. First, rapid growth often renders these systems outdated and inadequate to the new demands of the business. And second, it's human nature. If everything is going well and profits are high, there's little reason to plow through mounds of data in order to find anomalies or ways of making small improvements. Degree of decentralized decision making: When companies expand quickly, local managers are often given a great deal of autonomy to make decisions. Indeed, top-level corporate managers are typically involved only in matters of resource allocation, goal setting, and performance reviews. Of course, decentralization yields many advantages. It enables local business units to respond quickly to market demands, allows more creativity and innovation, and it can enhance the motivation and career satisfaction of managers. But again, these positive effects also have their downsides. First, local managers acting without a larger sense of their organization's corporate strategy may unknowingly take on too much risk. Second, decentralized organizations do not have well-defined information channels for sharing information either sideways or upward. If senior executives are not hearing important information until it's too late, then they need to give themselves a high score on this pressure point.

2nd Generation BCS Summarized:

Translating the vision (Belief system?): -Clarifying the vision -Gaining consensus Communicating and linking (Diagnostic Control System?): -Communicating and educating -Setting goals -Linking rewards to performance measures Business planning (Boundary system?): -Setting targets -Aligning strategic initiatives -Establishing milestones Feedback and Leaning (Interactive control system?): -Articulating the shared vision -Supplying strategic feedback -Facilitating strategy review and learning

Cluster 2: Strategic evolution

Use of management control systems in the first 12 months. Analysis of interview and other data for managers classified in the Strategic Evolution cluster revealed three demands: Forcing the organization to feel uneasy with current performance Teaching the organization the agenda for strategic renewal Testing to ensure that agendas were being altered to allow the implementation of new strategic directions.

Cluster 1: Strategic turnaround

Use of management control systems in the first 12 months. From content analysis of interview and other data, the short-term challenges perceived by newly-appointed managers attempting strategic turnaround revolve around three urgent demands: Overcoming organizational inertia Structuring and communicating performance expectations Gaining organizational allegiance to the new agenda The use of formal systems played an enabling role in meeting all three of these demands.

MAKE GOALS TRANSPARENT

When employees can see top-level goals, they can align their individual and team objectives with the company's overall direction. Clarity on how their work contributes to the success of the organization as a whole, moreover, is one of the top drivers of employee engagement.

How goals go wild:

When goals are too specific: Narrow Goals Too Many Goals Inappropriate Time Horizon

Diagnostic Control Systems (Focus the energy, related to 1st Generation BSC)

Work like the dials on the control panel of an airplane cockpit, enabling the pilot to scan for signs of abnormal functioning to keep critical performance variables within preset limits. Tracking the progress of individuals toward strategically important goals. Uses these systems to monitor goals and profitability, and to measure progress toward targets such as revenue growth and market share. ARE NOT adequate to ensure effective control, creates pressures that can lead to control failures. Dangers when empowered employees are held accountable for performance goals. One of the main purposes of diagnostic measurement systems is to eliminate the manager's burden of constant monitoring. Once goals are established and people have performance targets on which their rewards will be based, many managers believe they can move on to other issues, knowing that employees will be working diligently to meet the agreed-upon goals.

The risk exposure calculator:

is divided into three types of internal pressures-those due to growth, to culture, and to information management. For each of those pressures, success can increase the level of risk.