Lars Dyrhagen’s Blog

How do you assure that creativity flourishes while controlling the realization of projects? That is the modern dilemma of innovative companies. Theorists, e.g., Terease M. Amabile, have found that creativity more often gets killed than being nursed. Others have depicted that without creativity the firm will not gain access to the sources driving product and process development. Without control systems no (economic) output will ever result from creativity.

Opening the Domain of Management Control

Traditionally, management control systems have merely been an exercise to monitor and adjust operating performance. Harvard Professor, Robert Simons, put the term “diagnostic control systems” to these kinds of operation.

Simons opens the domain for management control systems by pointing at three levers of control in addition to that of diagnostic control systems:

• Belief systems communicating core values such as mission statements, credos and vision statements.
• Boundary systems articulate codes of conduct and ethic statements that define the limits of freedom. 
• Interactive control systems provide strategic feedback and vehicles to update and redirect strategy.

If mutually employed, the levers of control are all important for innovation. A belief system may nurture and motivate creative performance. The boundary system stake out the territory for each participant and thereby relieving her from any doubt on the arena for appropriate innovative initiatives.

Balanced scorecards as interactive control systems

The interactive control system is the last-mentioned control lever. It tracks ideas and triggers new learning. The mechanism is very much like the thermostatic radiator valve, for which my company is well known for. Once the temperature is set (by top executives), the thermostatic radiator valve measures the temperature in the room (feedback from the organization) and adjusts the heating (strategic direction) supplied to the room accordingly. The triple bottom line and balanced scorecards can be means of such interactive control systems embracing financial, social and environmental management performances.

Control is, hence, not only the sovereign concern for control and budget departments. The modern management control system is a cross-disciplinary function involving Corporate Social Responsibility, IT, human resource and environmental affairs.