Control is pivotal to ensuring alignment between business objectives and outcomes and fostering a culture of strategy execution.
Because of this, many companies implement rigorous oversight measures, such as performance metrics and regular progress reviews. They also have robust systems of checks and balances, known as levers of control.
If you struggle to implement strategic initiatives, you’re not alone. Here’s a breakdown of levers of control and how they can impact strategy execution.
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Levers of control enable you to manage tension, guide strategy execution, and achieve business goals and objectives. The four levers are:
- Belief systems
- Boundary systems
- Diagnostic systems
- Interactive control systems
According to Harvard Business School Professor Robert Simons, who teaches the online course Strategy Execution, the four Ps of strategy drive the levers:
- Strategy as perspective: Provides overarching direction that helps guide and inspire pride in employees
- Strategy as position: Creates a value proposition that attracts customers and differentiates products and services from competitors’
- Strategy as plans: Focuses on key initiatives through formal systems that set strategic goals, determine action plans, and measure progress
- Strategy as patterns of action: Detects changes in the competitive environment and adapts quickly through continuous learning
Here’s an overview of each lever so you can consider all four during strategy implementation.
Belief Systems
Belief systems are sets of organizational definitions you communicate and reinforce to provide direction to employees. They commonly take the form of credos, mission statements, and core values that define your organization’s purpose and impart what employees should do and how to act.
Belief systems are central to strategy as perspective, which considers your organization’s larger mission and purpose to inspire employee pride.
“It's a lens by which everyone in the business looks for new opportunities and understands how to conduct themselves,” Simons says in Strategy Execution.
Employees who support your strategic initiatives will likely search for ways to support your strategy’s execution. Belief systems provide clarity for them and help unleash their desire to contribute.
Boundary Systems
While belief systems often produce positive results, employees can behave badly—for example, by manipulating financial records or cutting corners in quality assurance—to achieve company goals.
Highly standardized processes can help safeguard from unethical behavior. Simons encourages taking a different approach, though, if your organization is in a constant state of change.
That approach involves using boundary systems—negatively phrased statements that tell employees what behaviors are forbidden. Rather than relying on positive messaging, like belief systems, this lever of control describes what not to do.
According to Strategy Execution, boundary systems can comprise:
- Business conduct boundaries: Documents like codes of conduct that outline unethical behaviors.
- Strategic boundaries: Opportunities you shouldn’t pursue because they don’t align with your strategy.
Strategic boundaries, in particular, control strategy as position. By identifying risks you should avoid, your employees can better understand how to create customer value.
Whereas belief systems focus on overarching principles that guide employee behavior, boundaries refine what to prioritize—giving your business a clear strategic direction.
“Businesses without a clear strategic position may lapse into trying to please everyone, and thus, please no one,” Simons says in Strategy Execution.
Related: A Beginner’s Guide to Value-Based Strategy
Diagnostic Control Systems
Even when employees understand your organization’s mission and the limits of their support in strategic initiatives, you still need to monitor their efforts to ensure your strategy execution runs smoothly.
You can accomplish that using the third level of control: diagnostic control systems—formal information systems that help monitor organizational outcomes.
Examples of diagnostic control systems include:
- Performance scorecards
- Project monitoring systems
- Human resources systems
“It allows managers to put key activities on autopilot,” Simons says in Strategy Execution.
For example, consider a call center’s monitoring efforts. Instead of combing through data, it could use automation to track metrics like the number of calls and customer satisfaction scores to identify areas for improvement, provide targeted training, and allocate resources more effectively.
It's crucial to strike a balance between monitoring and suppressing when designing such systems because they control strategy as plans—meaning they directly influence what action plan best supports your strategic initiatives.
“You must not only spend time negotiating and setting goals,” Simons says in Strategy Execution, “you must also design measures for these goals and then align performance incentives.”
Interactive Control Systems
Strategy execution often requires going on the defensive to avoid risk. However, the fourth lever of control allows you to do the opposite and mitigate risk through interactive control systems.
“Interactive control systems are the formal systems managers use to personally involve themselves in the decision activities of subordinates,” Simons says in Strategy Execution. “Decision activities that relate to and impact strategic uncertainties.”
For example, financial services firm JP Morgan implements interactive control systems that leverage AI for fraud detection and risk mitigation. Through real-time monitoring tools, its employees can detect and investigate suspicious patterns or anomalies in transactions. Those employees can then use their expertise to better inform automated technologies of how to enhance risk detection—making their company more effective at safeguarding against potential threats.
Employees shouldn’t be involved in all decision-making activities. To pinpoint which control systems would benefit from your team’s involvement, you must identify strategic uncertainties.
“Strategic uncertainties dictate which control systems you and your organization focus attention on, the types of information from those systems that will prove most relevant, and the nature of the debate and dialogue in which you want your entire organization to engage,” Simons says in Strategy Execution.
With a refined list of uncertainties requiring internal support, you can shape strategy as patterns of action and empower employees to assist in monitoring industry changes.
How Levers of Control Impact Strategy Execution
All four levers of control are vital to strategy execution.
Successful businesses search for ways to strike a balance between innovation and control. Consider Apple and Netflix. While both are highly profitable because of their innovative products and services, they suffer from constant pressure to do the next big thing.
When companies feel that pressure, so do their employees, which can lead to poor decision-making, unethical behavior, and illegal practices.
Implementing too many internal controls isn’t the answer. While many companies fear bad behavior’s legal ramifications, they still want to remain competitive in their industries.
“I think a lot of firms are trying to achieve this balance,” HBS Professor Eugene Soltes says in Strategy Execution. “Young, nimble startup firms tend to maybe not have enough controls. And some very large organizations potentially have too many.”
Employees are foundational to that balance, which is why using control systems interactively is essential in strategy implementation.
“If you devote your time and attention to asking questions about certain projects or systems, about specific customer data and initiatives, and if you pull your employees into frequent conversations about them, you can bet your company’s strategic uncertainties will be keeping them awake at night, too,” Simons says in Strategy Execution.
In doing so, you can create a top-down culture of strategy execution wherein employees monitor changes in the competitive environment and focus on mitigating ways your strategy can fail.
“You need to push people out of their comfort zone,” Simons says, “forcing them to take risks and move the needle for the business. To make that happen, you must drive the top-down questioning.”
Take Control of Your Strategy Execution
Controlling your strategy doesn’t have to require external help. With the right frameworks, tools, and employee support, you can successfully guide its execution.
“I want to emphasize that you don't need to hire a fancy consulting firm to implement your ideas,” Simons says in Strategy Execution. “All you need is the knowledge and discipline to apply these common-sense ideas to your own organization.”
By enrolling in an online course, like Strategy Execution, you can help ensure your organization strikes a balance between innovation and control.
Want to learn more about levers of control? Explore Strategy Execution—one of our online strategy courses—and download our free strategy e-book to take the first step toward successfully executing your business strategy.
