Simons-diagnostic control systems

Simon suggests that diagnostic control systems are very essential for an organisation's decision making, as they can be used to measure and monitor outcomes and thus correct deviations from preset performance by applying given strategies. The difference between actual outputs and preset standards is always fundamental for a firm. It therefore needs to adjust its actions in order to get things back on track or set more accurate budgets. To achieve Casement Ltd's targets, its managers need to look out for diagnose control on setting budgets or goals, performance measures, designing incentives, reviewing exception reports and following up significant exceptions.

However the diagnostic control systems are risky sometimes and are not always sufficient for business to achieve success in today's competitive markets, firstly, because these systems only measure variance of critical performance variables (factors must be identified and performed by intended strategies for the successful business) and then create automatic feedbacks which constrain innovation and opportunity-seeking. Secondly, as for the suggestions from Chief Executive Officer (CEO) of Casement Ltd to reward those who meet targets, it may not necessarily be helpful. It is because when bonuses are tied to diagnostic measures, an increase of the measure does not always lead to advancement of the goals unless the rewards base on employees' contribution and effort, rather than results. Employees will be motivated to communicate their suggestions related to any current problems of the firm. Lastly, the diagnostic control systems may be able to keep things on track; it can also cause misalignment due to limiting attention. Hence interactive control systems are required to focus organizational attention on strategic uncertainties.

In order for the CEO of Casement Ltd to be in control of the company's budgeting, it is important that employees understand the business strategy and how to achieve the company's target. Therefore the application of interactive control systems provides frameworks for debate, as well as inspiration on emergence of new strategic initiatives. Since strategic uncertainties are different to critical performance variables, they focus on a search for new information rather than a check-up to ensure that plans are going as planned. This approach encourages senior managers to discuss the current business strategy and the strategic visions with subordinates throughout an organization and also share the information for comparison, so that they all get involved in the decision making of strategic uncertainties for instance weekly face-to-face meetings between the managers and subordinates. Thus senior managers need to employ the interactive control systems to build internal pressure for motivating their members for more assumptions and opportunity-seeking.

With the shared information employees can compare and learn the data and then build their own information systems to deal with uncertainties and respond with new action plans. If some of these individuals' action plans succeed, they may be tested, learnt and developed as a new strategy by the company. Moreover, unless subordinates are too junior to be directly involved with the system, the involvement of employees from all levels of the company will lead to effective communication, thus more new ideas can be generated for better strategies through the process of debate and learning. For instance, a new, better market strategy can result in more sales on Plastic and Mahogany window frame.


  • Simons, R., 1995. Levers of control: how managers use innovative control systems to drive strategic renewal, Harvard Business School Press, Boston.
  • Simons, R., 2000. Performance measurement and control systems for implementing strategies, Prentice Hall, Upper Saddle River.

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