Strategy Implementation Performance and Control System

Monitoring strategy implementation is often done with strategic control system. Based on Atkinson (2006) “Strategic control system provides short-term targets that deliver long-term goals.” Therefore, the system needs to include both “feedback” and “feed-forward” information. With strategy control system top managers can overcome the organizational inertia and focus attention to strategic projects (Simons 1994). A stra-tegic control system helps corporate leadership team to assess how intended strat-egy is accomplished and help to identify areas that need to be further developed.

Strategic performance management system is a tool for efficiently implementing strat-egy (Gimbert et al. 2010). Goold and Quinn (1990) developed a strategic control framework that recognizes the degree of environmental turbulence and the ability to specify and measure corporations’ strategic objectives. Framework is presented in Figure 6.

Figure 6 Approaches to strategic control systems in different businesses (Goold and Quinn 1990)

Based on Goold´s and Quinn´s (1990) framework in Figure 6 the strategic control system needs to be suitable for different circumstances and businesses need to de-velop their own approach to control system. Based on Atkinson (2006) control sys-tems need to be flexible to face constant changes in the business environment. Con-sumer goods industry is quite a turbulent business environment, therefore control systems need to able to be flexible and face the changes in strategy and operations.

Micheli et al. (2011) studied the link between strategy implementation, performance measurement and strategic alignment, and found that unconditioned use of perfor-mance management systems to limited extend leads to strategy implementation.

Moreover, Micheli et al. (2011) promoted balanced top-down control and bottom up empowerment with financial and non-financial measurements, that provide greater

sense of direction to business units. Using both qualitative and non-financial meas-urement and data can reduce misinterpretation of business unit performance. No IT system of performance management alone has an effect to strategy implementation.

(Micheli et al. 2011).

Lynch and Cross (1995) listed three criteria: link operational targets to strategic goals, integrate financial and non-financial information and focus on business activities on meeting customer requirements, for performance management system in order to effectively mediate between corporation’s strategy and every day activities. Chenhall (2005) instead found key dimensions of strategic performance management systems, that were: integrative information that helps to deliver positive strategic outcomes, strategic and operational linkage help to integrate elements in value chain, customer orientation includes financial and customer measures and supplier orientation that include business processes and innovation measures. Chenhall (2005) also found in his empirical study that performance management indirectly influences strategic out-comes by aligning manufacturing with strategy and organizational learning.

Based on Simons (1994) there are four types of management control systems: be-liefs-, boundary-, diagnostic control- and interactive control systems and together they comprise a controlling business strategy framework. Figure 7 presents the Si-mons (1994) controlling business strategy framework.

Figure 7 Controlling business strategy (Simons 1994)

Based on Simons (1994) all the systems are used in different times of strategy im-plementation. Belief systems meaning the formal systems to define, communicate and reinforce the direction, purpose and values of the corporation. Boundary system

means the limits and rules that are created through code of conduct, strategic plan-ning and operational guidance. Diagnostic control system instead means monitoring outcomes and correct deviations by formal feedback system and performance man-agement, for example budgets and business plans. Interactive control systems help focus the attention, facilitate dialogue and learning throughout the organization by personally involving managers. Based on the longitudinal study among newly ap-pointed managers control systems were used to: 1. Overcome difficulties in organi-zation, 2. Communicate agenda, 3. Make implementation targets and timetables, 4.

Ensure attention to important issues and 5. Focus on learning from strategy imple-mentation. (Simons 1994). These elements are also seen in corporate strategy, therefore framework fits to corporate strategy. All these systems are important, but in this study, focus is more in the critical performance variables and managing strategic uncertainties side.

Balanced scorecard (BSC) method was developed by Kaplan and Norton (1996) to address weaknesses in traditional performance measurement systems. BSC tries to give comprehensive view on of the business and provide a framework for strategy implementation while allowing strategy to reflect the changes in the business envi-ronment (Kaplan, Norton 1994). BSC views performance from four perspectives: fi-nancial, internal business, customer and learning & growth perspective which corpo-rations should articulate their vision, strategy and targets before translating them into certain projects, goals and measurements (Atkinson 2006). BSC both measures pro-gress with financial and non-financial indicators such as service quality, employee engagement and customer satisfaction that identifies the cause-and-effect relation-ships (Atkinson 2006). BSC has also faced some criticism related to congruence be-tween corporations other control systems, being more like a list of measures, focusing on hierarchical top-down approach (Atkinson 2006). All in all, BSC can be seen as one example or platform of performance management and corporations can develop their own strategy implementation control system themselves.

Based on Micheli and Manzoni (2010), Atkinson (2006), Chenhall (2005) and Simons (1994) customer focus, alignment of strategy and operations and financial and non-financial elements are the key elements of strategic control system. In strategic con-trol system performance indicators play because they are big part in middle managers day-to-day work and reporting (Atkinson 2006). But still operative and strategic meas-urement should not be mixed together (Micheli, Manzoni 2010). Performance man-agement system can be a link between corporate and business units to ensure the alignment and dialogue (Dossi, Patelli 2008; Micheli et al. 2011) and can enhance

corporations strategic competitiveness (Chenhall 2005). Based on Micheli and Man-zoni (2010) benefits of measuring and monitoring strategic performance are: effective strategy process from formulation to review, communicating results to shareholders thus strengthening corporate brand, motivating employees in every level with promot-ing performance improvement culture and enhancpromot-ing learnpromot-ing in organizations. All the studies stressed that with strategic control or performance management system learnings from strategic development can be collected and used.

Based on Chenhall (2005) control systems are configured in various ways. Therefore, every corporation needs to find the right way to control their strategic development and address the issues in their business environment. For the strategic projects the performance management is often done in the strategic project portfolio or PMO.

Therefore, project monitoring practices need to be further investigated and aligned with strategy implementation practices.