4 Levers of organizational control

Summary

The video script explores the four levers of control developed by Robert Simmons to empower managers in balancing value creation and control within organizations. The levers include belief systems for guiding employees with core values, boundary systems for setting limits, diagnostic controls for ensuring goal achievement, and interactive control for strategic focus. Enterprise architects play a key role in implementing these levers by codifying principles and rules, creating data maps, and developing models that link resources to strategic outcomes, thus fostering innovation without compromising control.

Takeaways

• 😲 The fundamental problem for managers is balancing adequate control with the need for flexibility, innovation, and creativity in organizations.
• 📈 Initiative by employees is crucial for organizational growth, but it must be managed to prevent control failures, such as the Wells Fargo scandal and Amazon's feedback tool misuse.
• 🛠 Robert Simons' Four Levers of Control model offers a framework for managing the tension between value creation and control in organizations.
• 💡 Belief systems are the first lever, aiming to provide employees with a sense of purpose and direction through core values and mission statements.
• 🚧 Boundary systems are the second lever, setting clear rules and limits to guide individual creativity while maintaining organizational integrity.
• 📊 Diagnostic control systems, the third lever, help managers ensure efficient and effective achievement of important goals through resource allocation and goal definition.
• 🔄 Interactive control systems, the fourth lever, allow for a proactive approach to strategic uncertainties and the emergence of new initiatives.
• 🏛️ Enterprise architects can support belief systems by developing architecture principles that align with organizational beliefs.
• 📝 For boundary systems, enterprise architects can codify business rules and provide clear limits without dictating how tasks should be performed.
• 🗺️ In the case of diagnostic control systems, architects can create data maps to facilitate information sharing and reduce barriers.
• 🔍 Interactive control systems benefit from architects developing models that link resources and information to strategic outcomes and goal achievement.
• 👥 Effective managers use the Four Levers of Control to empower their organizations, trusting in the potential of employees to innovate while maintaining control.

Q & A

What is the fundamental problem facing managers in organizations that require flexibility, innovation, and creativity?

The fundamental problem is how to exercise adequate control in organizations that depend on employee initiative to seek opportunities and respond to customer needs, without leaving such initiative unchecked.

What was the issue with Wells Fargo in 2019 regarding employee accounts?

Thousands of Wells Fargo employees opened approximately 2 million bank and credit card accounts for customers without their permission or knowledge due to a poorly conceived incentive program created by the CEO.

What was Amazon's 'anytime feedback tool' intended to achieve, and what was the unintended consequence?

The tool was intended to provide timely feedback to improve culture, productivity, and increase engaged employees. However, it led to employees plotting against each other and not providing positive feedback.

How can organizational managers protect their organizations from control failures when employees are empowered?

Managers can protect their organizations by applying control through the four levers of control model, which helps manage the tension between value creation and control.

What are the four levers of control as developed by Robert Simons?

The four levers of control are belief systems, boundary systems, diagnostic control systems, and interactive control systems.

How do belief systems empower employees in an organization?

Belief systems provide momentum and guidance towards mission statements, vision statements, and core values, enabling employees to contribute by removing uncertainty about the organization's purpose.

What is the purpose of boundary systems in an organization?

Boundary systems establish the rules of the game, allowing individual creativity within defined limits of freedom and helping employees to do the right thing by avoiding pressure or temptation.

What role can enterprise architects play in developing belief systems within an organization?

Enterprise architects can contribute by codifying and developing architecture principles that incorporate organizational beliefs to guide and inform value creation.

How do diagnostic control systems help managers ensure important goals are achieved efficiently and effectively?

Diagnostic control systems help by ensuring effective resource allocation and clear goal definition, allowing managers to measure progress against plans and guarantee the predictable achievement of goals.

What is the objective of interactive control systems in an organization?

The objective of interactive control systems is to focus organizational attention on strategic uncertainties, provoke the emergence of new initiatives, and ensure that business practices closely relate to changes in customer needs.

How can enterprise architects contribute to the development of interactive control systems?

Enterprise architects can contribute by codifying and developing line of sight and business motivation models that link resources and information to strategic outcomes and goal achievement.

What is the significance of the four levers of control for effective managers?

The four levers of control are powerful tools that reinforce one another, helping managers to empower their organizations by believing in the innate potential of people to innovate and add value, without compromising control.

Outlines

00:00

🛠 Organizational Control Levers and Enterprise Architecture

This paragraph discusses the challenges managers face in balancing control with the need for flexibility, innovation, and creativity within organizations. It introduces the Wells Fargo and Amazon cases as examples of control failures. The solution is presented through Robert Simons' 'Four Levers of Control' model, which includes belief systems, boundary systems, diagnostic control systems, and interactive control systems. These levers are explained in the context of their purpose and how they can be applied to manage the tension between value creation and control. The paragraph also highlights the role of enterprise architecture in supporting these control mechanisms, emphasizing the importance of codifying organizational beliefs, business rules, data maps, and linking resources to strategic outcomes.

05:01

🚀 Empowering Organizations Through Control Levers

In this paragraph, the focus is on how effective managers can empower their organizations by trusting in the potential of their employees to innovate and add value. It stresses the importance of senior leaders relinquishing control and allowing lower-level employees to make independent decisions. The paragraph reinforces the idea that the four levers of control are interdependent and mutually reinforcing tools. The role of enterprise architects in developing these control levers is emphasized, ensuring that innovation and creativity do not compromise control. The paragraph concludes with a call to action for viewers to subscribe to the channel and stay updated with notifications.

Keywords

💡Organizational Control

Organizational control refers to the mechanisms and processes used by managers to ensure that organizational goals are met efficiently and effectively. It is central to the video's theme, as it discusses how to balance control with the need for flexibility, innovation, and creativity in organizations. The Wells Fargo scandal mentioned in the script exemplifies a failure in organizational control, where employees opened unauthorized accounts due to a poorly conceived incentive program.

💡Employee Initiative

Employee initiative is the autonomy and proactive behavior of employees in identifying opportunities and responding to customer needs. It is a key concept in the video, as it highlights the importance of allowing employees to take the lead in their tasks while ensuring that their actions align with the organization's objectives. The Amazon feedback tool example demonstrates how lack of proper control can lead to negative consequences, such as employees plotting against each other.

💡Control Failures

Control failures occur when the mechanisms in place to guide and oversee organizational activities do not function as intended, leading to negative outcomes. The video discusses how to prevent such failures by using the four levers of control. The Wells Fargo example is a clear instance of a control failure, where the incentive program led to unethical practices by employees.

💡Four Levers of Control

The four levers of control model, developed by Robert Simons, provides a framework for managing the tension between value creation and control. The video explains that these levers—belief systems, boundary systems, diagnostic control systems, and interactive control systems—are essential for organizational managers to effectively balance control and empowerment. Each lever serves a distinct purpose and is discussed in detail in the script.

💡Belief Systems

Belief systems in the context of the video refer to the core values and mission that guide employees and provide them with a sense of purpose. They are one of the four levers of control and are used to empower employees by removing uncertainty about the organization's direction. The script mentions that enterprise architects can contribute by developing architecture principles that incorporate these beliefs.

💡Boundary Systems

Boundary systems are rules and guidelines that define the limits within which employees can operate, allowing creativity while avoiding unethical behavior. The video script explains that these systems enable employees to do the right thing by specifying and enforcing rules, such as codes of business conduct and strategic planning systems, which are essential for maintaining organizational integrity.

💡Diagnostic Control Systems

Diagnostic control systems are mechanisms that measure progress against plans to ensure the predictable achievement of goals. The video emphasizes their importance in helping managers focus on resource allocation and goal definition. Enterprise architects are highlighted as playing a role in creating data maps to reduce information sharing barriers, thus supporting the effectiveness of diagnostic controls.

💡Interactive Control Systems

Interactive control systems are designed to enable top-level managers to focus on strategic uncertainties and respond proactively. The video script describes their purpose as provoking the emergence of new initiatives and ensuring alignment with changing customer needs. Enterprise architects contribute by developing models that link resources and information to strategic outcomes.

💡Enterprise Architecture

Enterprise architecture is a discipline for proactively managing the key elements of an organization's business structure and its computational systems in a manner that is aligned with the organization's mission and strategic goals. In the video, enterprise architects are presented as key contributors to the development of the four control levers, helping to ensure that innovation and creativity do not come at the expense of control.

💡Value Creation

Value creation is the process of generating economic, social, or other forms of value within an organization. The video's main theme revolves around how managers can harness employee value creation while maintaining necessary control. The four levers of control are presented as tools to manage this balance, with enterprise architecture playing a crucial role in facilitating this process.

💡Strategic Uncertainties

Strategic uncertainties refer to the unpredictable elements or risks that organizations face when planning for the future. The video discusses how interactive control systems help managers focus on these uncertainties and provoke new strategies to ensure the organization remains adaptable and responsive to change. This concept is integral to the proactive approach advocated in the script.

Highlights

Organizational managers face the challenge of balancing flexibility, innovation, and creativity with adequate control.

Employee initiative is crucial for identifying opportunities and responding to customer needs, but it must be managed to prevent misuse.

The Wells Fargo scandal in 2019 exemplifies the risks of unchecked employee initiative due to a flawed incentive program.

Amazon's anytime feedback tool, intended to improve culture and productivity, led to negative consequences such as internal plotting among employees.

Managers must protect their organizations from control failures while encouraging empowered employees to redefine their job roles.

Control is often narrowly defined by managers as measuring progress against plans to ensure predictable goal achievement.

Robert Simons' Four Levers of Control model offers a framework for managing the tension between value creation and control.

The four control levers are belief systems, boundary systems, diagnostic control systems, and interactive control systems.

Belief systems aim to provide momentum and guidance towards organizational purpose by communicating core values and mission.

Boundary systems establish rules of the game, allowing individual creativity within defined limits of freedom.

Diagnostic control systems ensure that important goals are achieved efficiently and effectively through resource allocation and goal definition.

Interactive control systems enable top-level managers to focus on strategic uncertainties and respond proactively.

Enterprise architects can contribute by codifying and developing architecture principles that incorporate organizational beliefs.

Enterprise architects can also help by developing business rules that identify what is not allowed while providing clear limits.

Data maps created by enterprise architects can reduce information sharing barriers by identifying how critical data is generated and shared.

Line of sight and business motivation models developed by enterprise architects link resources and information to strategic outcomes and goal achievement.

Effective managers empower their organizations by believing in the innate potential of people to innovate and add value.

The Four Levers of Control reinforce one another and can be developed with the help of enterprise architects to balance innovation with control.

Transcripts

exploring the four levers of

organizational control

how enterprise architecture can help to

empower organizational managers

a fundamental problem facing managers is

how to exercise adequate control in

organizations

that demand flexibility innovation and

creativity

organizations must increasingly rely on

employee initiative

to seek out opportunities and respond to

customer needs

however initiative cannot be left

unchecked

for example in 2019 when it was revealed

thousands of banking institution wells

fargo employees

had opened approximately 2 million bank

and credit card accounts

for customers without the customer's

permission or even their knowledge

as a result of a poorly conceived

incentive program

created by the wells fargo ceo

or the retail giant amazon's anytime

feedback tool that was created as a way

for employees to provide their

evaluation and feedback

on other employees whenever they felt

like it the objective was intended to

get more timely feedback to improve

culture productivity and increasing the

amount of engaged employees

instead employees began to plot against

each other

and not provide positive employee

feedback

so how do organizational managers

protect their organizations from control

failures

when empowered employees are encouraged

to redefine

how they go about doing their jobs how

do organizational managers ensure that

subordinates with an entrepreneurial

flair

do not put the well-being of the

organization at risk

well the answer is through the

application of control often

managers have tended to define control

narrowly such as measuring progress

against plans to guarantee the

predictable achievement of goals

however such diagnostic control systems

are only one mechanism

or lever of control available to

managers

robert simmons developed the four levers

of control model that provides managers

a framework

to manage the tension between value

creation and control

as a function of managing and measuring

value

the four control levers are belief

systems

boundary systems diagnostic control

systems

and interactive control systems

each of the four control levers has a

distinct purpose for managers attempting

to harness the natural value creation

of employees belief systems enable

employees

with the potential to contribute by

removing uncertainty

about purpose with managers

communicating core values and mission

boundary systems enable employees the

potential to do the right thing

and avoid pressure or temptation with

managers specifying and enforcing

rules of the game diagnostic control

systems enable employees to achieve

which is often hindered by a lack of

focus and or resources

managers build support and resource

clear targets interactive control

systems

enable employees to create by supporting

opportunity identification

and removing fear of risk managers

enable this

by establishing open organizational

dialogue

to encourage learning let us take a look

at these in a little more detail

and how enterprise architecture can play

a role

belief systems empower employees and

encourage them to search for new

opportunities

the purpose of the belief system is to

provide momentum and guidance towards

mission statements

vision statements credos and statements

of purpose

enterprise architects can contribute by

codifying and developing architecture

principles

that incorporate organizational beliefs

to guide and

inform value creation boundary systems

establish the rules of the game

the purpose of the boundary system is to

allow individual creativity

within defined limits of freedom such as

establishing codes of business conduct

strategic planning systems asset

acquisition systems

and operational systems enterprise

architects can contribute by codifying

and developing business rules

that identify what is not allowed and

providing clear limits

while avoiding telling people how to do

things

diagnostic control systems allow

managers to ensure that important goals

are being achieved efficiently and

effectively

the objective of diagnostic control

systems include

effective resource allocation and goal

definition

enterprise architects can contribute by

codifying and developing the creation

of data maps to identify how critical

data is generated and shared

thus reducing information sharing

barriers

interactive control systems enable top

level managers

to focus on strategic uncertainties and

to respond proactively

the objective of interactive control

systems are to focus organizational

attention

on strategic uncertainties provoke the

emergence of new initiatives

and strategies to ensure that the way we

do business relates very closely to the

changes in customer needs

enterprise architects can contribute by

codifying and developing line of sight

and business motivation models that link

resource and

information to strategic outcomes and

goal achievement

effective managers empower their

organizations because they believe

in the innate potential of people to

innovate and add value

this requires senior leaders and

managers relinquish control over many

kinds of decisions

and allow employees at lower levels to

act independently

the four levers of control are powerful

tools that reinforce one another

enterprise architects can play an active

role in developing each of these control

levers

this facilitates managerial confidence

that the benefits of innovation and

creativity

are not achieved at the expense of

control

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channel and hit the notification button

thank you for watching