Management Midterm 2 Chapter 11 part

strategic control-and- reward systems

A key building block of organizational design; internal-governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees).

input controls

Mechanisms in a strategic control- and-reward system that seek to define and direct employee behavior through a set of explicit, codified rules and standard operating procedures that are considered prior to the value- creating activities.

output controls

Mechanisms in a strategic control- and-reward system that seek to guide employee behavior by defining expected results (outputs), but leave the means to those results open to individual employees, groups, or SBUs.

LO 11-7 / Compare and contrast different strategic control-and-reward systems.

■ Strategic control-and-reward systems are internal governance mechanisms put in place to align the incentives of principals (shareholders) and agents (employees). ■ Strategic control-and-reward systems allow man- agers to specify goals, measure progress, and pro- vide performance feedback. ■ In addition to the balanced-scorecard frame- work, managers can use organizational cul- ture, input controls, and output controls as part of the firm's strategic control-and-reward systems. ■ Input controls define and direct employee behav- ior through explicit and codified rules and stan- dard operating procedures. ■ Output controls guide employee behavior by defining expected results, but leave the means to those results open to individual employees, groups, or SBUs.