For firms to be successful, they must practice effective strategic control and corporate governance. Without such controls, the firm will not be able to achieve competitive advantages and outperform rivals in the marketplace.
We began the chapter with the key role of informational control. We contrasted two types of control systems: what we termed "traditional" and "contemporary" information control systems. Whereas traditional control systems may have their place in placid, simple competitive environments, there are fewer of those in today's economy. Instead, we advocate the contemporary approach wherein the internal and external environment are constantly monitored so that when surprises emerge, the firm can modify its strategies, goals, and objectives.
Behavioral controls are also a vital part of effective control systems. We argue that firms must develop the proper balance between culture, rewards and incentives, and boundaries and constraints. Where there are strong and positive cultures and rewards, employees tend to internalize the organization's strategies and objectives. This permits a firm to spend fewer resources on monitoring behavior, and assures the firm that the efforts and initiatives of employees are more consistent with the overall objectives of the organization.
