Simon's four levels of control
Abstract
The Levers of Control (hereby LOC) Framework is firstly introduced as a Managemment Control Systems tool in Simons' "Levers of Control: How managers use innovative control systems to drive strategic renewal" (1995). The LOC framework is constituted by four blocks: Belief systems and Interactive Control systems creating positive forces, and Boundary Control Systems and Diagnostic Control Systems creating negative forces. It must be noted that positive/negative forces are not considered as good/bad forces but as different types of forces that must be balanced to achieve proper business strategy. The concept of balance or dynamic tension is central to the proper use of the tool as the later publications took effort on demonstrating (Anne- Marie Kruisa, 2015). Despite the fact that his theory about opposing forces, the number of citations (over 3000 in Google Scholar) gives Simons' LOC framework a consolidated position within Management Control Systems literature. This article intends to give a theoretical basic description of the LOC framework presenting the different blocks of the framework and then to clarify the concept of what Simons understands as balance between innovation and creativity coming from the enablement of the employees, and the the control and set of boundaries that have to be implemented by managers, based on litterature.Then, since the LOC is traditionally a business management tool, a relation with Control Systems in Project Management is proposed taking into account the tool's limitations.
The Levels Of Control Framework
As previously mentionned, the LOC is an analytic tool serving to assess the different functions of Management Conctrol Systems (MCS) within a company or a team. MCS has two main functions: 1) controlling linked with predictability, efficiency and formalitty, and 2)enabling linked with innovation, spontaneity and transparency. Simon distinguishes two different blocks for each one of MCS' functions.
Beliefs Systems
The first one of the four blocks is Beliefs Systems, and it is associated to the core values of a company. Such core values are usually stated by the mission and the vision of an enterprise, and set the purpose and the direction in which the objectives should be pointed. Simons himself defines the beliefs as "the explicit set of organizational definitions that senior managers communicate formally and reinforce systematically to provide basic values, purpose and direction for the organization." (Simons 1995) In other words: they create positive forces that inspire.
Boundary Systems
On the other hand, Boundary Systems embody the limitations and constraints within which lower-level employees creativity is to be contained. Boundary Systems can be associated with codes of conduct, risks to be avoided or operational guidelines. Simons describes them as "formally stated rules, limits and proscriptions tied to defined sanctions and credible threat of punishment… to allow individual creativity within defined limits of freedom." (Simons 1995) Therefore, Boundary Systems create negative forces that constraint individuals' imagination.
Diagnostic Control Systems
Another one of the blocks of the LOC framework is Diagnostic Control Systems they are used to monitor specific critical indicators in relation to performance and objectives therefore using them to compare performance to expectations. They allow managers to follow-up operations remotely, while focusing on predicting uncertainties and strategy modifications. According to Simons they are "the formal information systems that managers use to monitor organizational outcomes and correct deviations from preset standards of performance." Consequently, they are seen as negative forces.Examples of these control systems could be budgets, KPI scorecards, project monitoring systms, etc...
Interactive Control Systems
The fourth block of the LOC framework is Interactive control Systems. They allow the flow of innovative ideas to flow bottom-up from lower ranks motivating them to think creatively creating positive forces. According to Simons they are the "formal information systems managers use to involve themselves regularly and personally in the decision activities of subordinates." (Simons 1995) Also, Simons argues that these control systems should generate data that should be regularly discussed to generate learning and stimulation (Simons 1999). Therefore, and in opposition with Diagnostic Control Systems, Interactive Control Systems require much higher managerial implication.They can take the form of budgeting systems, balanced scorecards and project monitoring systems. The difference between diagnostic control systems and interactive control systems resides more on the way managers use them to interact with employees rather than on their techinal design.
The concept of Balance or Dynamic Tensions
The LOC framework's strength as a tool resides in balancing the tensions between positive empowering forces and negative constraints. Litterature is rather vague in describing how to achieve balance and some authors even propose that different systems and different environments can lead to different balance situations according to their approach to strategy[1]. For instance, a small system in an entrepreneurial environment where the focus is on identifying emerging opportunities can achieve balance more easily emphasizing in interactive control systems, therefore adressing strategy as a pattern. Instead, a big system in a corporate environment concerned about strategy as a plan, is more likely to achieve balance emphasizing in boundary control systems to monitor performance. Some even state[2] that different states of balance between interactive control systems and diagnostic control systems can be used for different purposes. Simons' idea of balance has some similarities with a stream of organizational research holding that firms have to be "ambidextrous" with exploration to and explotation to control respectively strategic renewal and innovation, and predictable goal achievement. Within this stream of research, some argue that success requires control simultaniously pursuing exploration and explotation with equal weights[3]. Others propose that ambidexterity can be achieved alternating exploration and explotation phases over time [4].
Dynamic Tensions in Project Management and Project Life Cycle
The Four levers in Project Management
According to the Project Management Institute, "projects and programs are undertaken to achieve business strategy outcomes, for which many organizations now adopt formal organizational governance.[...] Because the project success may be judged on how well the resultant product or service supports organizational governance, it is important for the project manager to be knowledgeable about corporate/organizational governance policies and procedures pertaining to the subject matter of the product or service..."[5] It can be deduced from such statement that the applicability of the LOC framework in a Project Management context seems pertinent. Still, some nuances have to be made since the elements forming the different blocks might differ because of a higher importanceof stakeholders' and sponsors' influence in Project Management in comparison to Business Management. Another notable difference between LOC application in Business Management and Project Management is the fact that the optimal state of balance may shift throughout the Project Life Cycle-because of the high variance of costs and uncertainties along the way-, while it should be more stable in Business Management.
According to the Project Management Base of Knowledge[5], the Project Life Cycle Phases are:
- Starting the project
- Organizing and preparing
- Carrying out the project work
- Closing the project
Dynamic tensions in starting the project phase
The main activities in starting the project being the definition of the project and the authorisation of this one, logic says that balance should be acquired emphasizing in Beliefs Systems and Interactive Control Systems.[5]. During the defintion project managers have to ensure the staff is acknowledging the expected outcomes and the objectives set based on them, through what could be seen as Interactice control systems. These could be considered as Beliefs System since they will set he "mission" the projects intends to fullfil. On the other hand, the acceptable risks(i.e. stringency in environmental or safety requirements, budget, etc...) and the code of conduct are to be defined in this phase and could be seen as the Boundary systems definsing the employees limitations. Since no project work is done, and the phase objectives are mostly the definition of the scope, the objectives and the boundaries in which staff will be free to operate, emphasis should be given to Interactive Control Systems to ensure that further empowerment leading to creativity will be driven in the intended direction for the project. Still the feasability of the project is to be checked in thise phase and therefore Diagnostic Control Systems must not be pushed apart.
Dynamic tensions in organizing and preparing
Within this phase, the project documents that will be used are developed defining the deliverables that will have to be made in the following phases, building up the Boundary Systems and further defining the indicators that will serve for Diagnostic Control Systems. Therefore despite the balance might still be emphasizing in empowering, it is more likely to progressively move into more negative forces defining the expected performance in time and objective terms. Boundary Systems have to be properly comunicated to employees by the end of this phase since the cost of making changes in the following phases is severly increased.
Dynamic tensions in carrying out the project work
Design and execution are done within these phase, therefore the importance of Diagnostic control systems is increased to ensure performance and predictable goals. Regarding Beliefs and Boundary Systems, they should be defined and understood by the time the organization arrives to this phase. Since change costs at this point tend to be elevated Interactive Control Systems should be used to suggest changes. The amount of importance provided to Interactive Control Systems at this phase depends on the type of project. It must be noted that carrying out the project work appears to be the most sensitive phase in terms of finding the right balance between dynamic tensions, due to the existence of a loop formed between planning, executing and monitoring and controlling processes.
Dynamic tensions in closing the project
Given that the tasks in this phase are related to reporting and delivering, and thus not much innovation or creativity are required, the balance in this case should be inclined into Diagnostic Control Systems and Boundary Systems.
Limitations
As previously mentionned, Simons' levers of control despite being an impactful theory in Management Control Systems and Business Management, is also critizised for being ambiguous, ill-defined, or vaguely defined in some of its concepts. Some authors have tried to discuss such ambiguities.[6]. The claim in that regard is that vague of definition of the concepts leads to mixed empirical results that impede the bulding of a unified body of knowledge. A clear example is the definition of the balance, where infinite possibilities exist depending on each case. Despite the fact that some progress has been made, Kruis, Speklé and Widener [1] for example gathered empirical data about 217 managers belonging to different companies, considered as successful, in different environments. Such data helped making a series of case studies that allowed them to propose a series of balance scenarios linked to the companies industries. So far no litterature exists on the use of the LOC framework in a Project Management context, but the limitations are evident aswell since different optimal balance scenarios can be seen through the different phases of a single project.
Conclusion
This article has presented a description of Simons' Levers of Control framework based the existing litterature in Business Management. It has been described that the framework is formed of four building blocks two of them creating positive forces that are meant to enable employees, and two of them creating negative forces that are meant to constrain them. It has also been explained the concept that balance between these positive and negative forces leads to successful business management accoring to Simons theory. Once LOC's blocks were defined and the dynamic tensions have been explained, a proposition on how could that theory be applied to project management was made. It was stressed that successful balance situations may evolve and change throughout the project life cycle. Finally a statement was made on the limitations expressed in litterature about the tool and its ambiguities.
Annotated Bibliography
References
- ↑ 1.0 1.1 Anne-Marie Kruis, Roland F. Speklé, Sally K. Widener(2015). The Levers of Control Framework: An exploratory analysis of balance. Management Accounting Research 32(2016) 27-44
- ↑ Henri, J.F., 2006. Management control systems and strategy: a resource-based perspective. Account. Organ. Soc. 31, 529–558.
- ↑ Cao, Q., Gedajlovic, E., Zhang, H., 2009. Unpacking organizational ambidexterity:dimensions, contingencies, and synergistic effects. Organ. Sci. 20, 781–796.
- ↑ Gupta, A.K., Smith, K.G., Shalley, C.E., 2006. The interplay between exploration andexploitation. Acad. Manage. J. 49, 693–706.
- ↑ 5.0 5.1 5.2 A guide to the project management body of knowledge,5th edition,2013
- ↑ Sophie Tessiera, David Otleyb, 2012. A conceptual development of Simons’ Levers of Control framework. Management Accounting Research 23 (2012) 171– 185
