Chapter 13

Question 1

13.1: Differentiate between strategy, risk and control in the context of strategic control and performance management

Answer 1

The purpose of a strategic plan is to enable required change from the current position to the vision – strategy: setting the
direction.

As all strategy is based in the unknown future, inevitably risk is being created – risk: the dangers along the route.

The people within the organisation need to understand and challenge risk at different levels and implement measures of
control as they see best – control: intelligent parameters:

• We need to understand where we are heading – the strategic vision.
• We need to determine the dangers of the change – the perceived risks.
• We need to understand the drivers of success – the required control parameters.

It is important for directors and managers to develop appropriate methods and tools to enable the monitoring of the
various strategies that will be taking place simultaneously and to find a way of alerting themselves when the journey is
moving outside the perceived parameters.

Question 2

13.2: Suggest the meaning, of and identify an organisation, or type of organisation, which could be aligned with the metaphors of each of: a) machine-control, and b) brain-control

Answer 2

a) Machine-control: A machine is designed to work – you push the button and it operates, in a continuous and
repetitive manner, to deliver one or more pre-defined outcomes. There is a strong reliance on the efficiency of the
parts of the machine, which simply need replacing when they wear out or fail. The control can be built in as part
of the system. An example would be a fast-food outlet such as McDonald’s.

b) Brain-control: The inputs can be manipulated to ensure that the outputs are delivered, but the outputs themselves
are likely to also be manipulated. The human brain is itself seen as a control system, which will reactively and
proactively bring about changes to the operation of the system. As with the brain, the system needs to have the ability to teach itself to learn and build its own methods of controls, based upon objective external stimuli. An example would be a marketing or advertising firm relying on the creative output of different people

Question 3

13.3: Suggest why gap analysis is a useful tool when implementing a control process

Answer 3

Gap analysis is one of the most powerful control tools, as long as it is embedded into the structure, culture and system,
and does not wait until the end of the journey before being considered. If we know that the future is likely to differ from
our expectations, then sensible control will require us to understand the key drivers of the original projection and then to be able to judge, through our analysis of the gap(s), how and why these have changed the anticipated path.

Question 4

13.4: What are the original four perspectives suggested by Kaplan and Norton in their balanced scorecard model?

Answer 4

• Customer perspective: What do our customers think of us? Why do they buy from us? Will they continue to buy
  from us? Etc.
• Internal business perspective: What do we look like from the inside? Are we efficient? What do our employees
  say about us? What does our culture look like?
• Innovation and learning perspective: What does our ‘today’ point look like? Is it always changing? Has it stayed
  still for too long? When did we last change the way we do things? How seriously are we taking the technological
  challenges of the next 10–20 years?
• Financial perspective: How robust is our financial infrastructure? What could make us fail (one aspect going
  wrong, or a concatenation of aspects)? Do our key players have their respective fingers on the financial pulse of the
  organisation?