Levers of Control: How Managers
Use Innovative Control Systems to
Drive Strategic Renewal by Robert
Simons
Fantastic Book On How To Focus Your Organizational Efforts
Based on a ten-year examination of control systems in over 50 U.S.
businesses, this book broadens the definition of control and establishes a
critical bridge between the disciplines of strategy and accounting and
control. In addition to the more traditional diagnostic control systems,
Simons identifies three new control systems that allow strategic change:
belief systems that communicate core values and provide inspiration and
direction, boundary systems that frame the strategic domain and define the
limits of freedom, and interactive systems that provide flexibility in adapting
to competitive environments and encourage organizational learning. These
four control systems, according to Simons, will provide managers with the
basic levers for pursuing strategic objectives.

Personal Review: Levers of Control: How Managers Use
Innovative Control Systems to Drive Strategic Renewal by
Robert Simons
I read this book when it was first published in 1994 and recently re-read it,
curious to see how well it has held up. My conclusion? Very well indeed.
What I find especially noteworthy is the fact that, only decade ago, there
was nowhere near the understanding and appreciation of innovation that
we have today. As I compose this brief commentary, Amazon offers
40,135 books on the general subject and 8,707 on innovation
management. That is amazing.
In any event, Robert Simons wrote this book in order to explain "how
managers use innovative control systems to drive strategic renewal."
There is a paradox involving innovation that has always fascinated me:
That innovation initiatives are most productive and lucrative when
launched and then sustained within a stable (albeit flexible) environment.
In other words, innovative thinking needs order, structure, discipline, etc. to
which it can respond. There had to be a GE for Jack Welch to "blow up"
when Reginald Jones selected him to become its CEO. The same was true
of IBM when Lou Gerstner became its CEO. Moreover, another paradox,
organizational renewal - if not transformation - requires control systems
(key phrase) that are themselves innovative. In this volume, Simons
focuses primarily on "the informational aspects of management control
systems - the levers managers use to transmit and process inf0ormation
within organizations. For the discussion to follow, I adopt the following
definition of management control systems: [begin italics] management
control systems are the formal, information-based routines and procedures
managers use to maintain or alter patterns for organizational activities.
[end italics]" More than a decade ago, Simons saw the need for a new
theory of control that recognizes the need to balance competing demands.
Such demands today are much more intense and in much greater
numbers.
Simons suggests that an organization's strategy for control must
(somehow) accommodate these "variables": belief systems which are
used to inspire and direct the search for new opportunities; boundary
systems which set limits of opportunity-seeking behavior; diagnostic
systems which motivate, monitor, and reward achievement of specific
goals; and interactive control, systems which stimulate organizational
learning and the emergence of new ideas and strategies. I agree with
Simons that any theory of management control must be evaluated
according to criteria such as the extent to which the potentially important
variables are included in the theory, the clarity of the linkage between
control system variables and the achievement of organizational strategies,
and the reliability and validity of the evidence. The "new theory of control"
which Simons offers in this book fully accommodates such criteria.

I especially appreciate the provision of all manner of "figures" and
"exhibits" which organize and illustrate clusters of key points and concept
relationships that are analyzed in each chapter. These reader-friendly
devices will later facilitate, indeed expedite review of Simons' key points. If
reviewing nothing else in the book, busy executives should frequently
check out the detailed "Checklist Summary" in Appendix A which identifies
the WHAT, WHY, HOW, WHEN, and WHO of each of the four control
levers and of the internal control systems which are fundamental to
ensuring the integrity of data used in all control systems.
For me, some of the most valuable material is provided in Chapter 7, "The
Dynamics of Controlling Strategy." Simons points out that strategic control
"is not achieved through new and unique systems but through belief
systems, boundary systems, diagnostic control systems, and interactive
control systems working in concert to control both the implementation of
intended strategies and the formation of emergent strategies. These
systems provide the motivation, measurement, learning, and control that
allow efficient goal achievement, creative adaptation, and profitable
growth." Figure 7.3 on page 159 cleverly illustrates the dynamic
relationships between and among an organization's core values, risks to
be avoided, strategic uncertainties, and critical performance variables.
"Managing the tension between creative innovation and predictable goal
achievement is the key to profitable growth." Hence the importance of the
four control levers that can enable managers to "direct collaborative
enterprises toward their worthwhile goals."
Although published in 1994, this book offers even greater value today than
it did then. Congratulations to Simons and on a brilliant achievement. As
he explains so thoroughly and so eloquently, the extent to which innovative
thinking is both productive and profitable will largely be determined by how
well managers use innovative control systems to drive strategic renewal. I
also highly recommend two of Simons' later works, Performance
Measurement and Control Systems for Implementing Strategy and Levers
of Organization Design.
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