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Levers of Control (LoC)
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Finding ways to protect organizations from control lapses caused by a creative and empowered workforce has always remained a critical concern for executives.
These changing times require ingenuity and adaptability to manage employees. In highly competitive industries with diverse clientele, companies are heavily dependent on employee imagination and creativity to seize opportunities and meet customer demands.
The challenges of maintaining control expose businesses to excessive risks or behaviors that harm a company’s reputation. Control failures cost the organizations substantially in terms of reputation damage, fines, business setbacks, and lost opportunities. Control breaches can adversely impact an organization’s data assets, operations, audit results, revenue, and profitability.
In competitive markets, control can’t be achieved by hiring good people, aligning rewards, and hoping for the best alone. Some organizations adopt tight-knit bureaucracies and maintain control by specifying how tasks should be executed and continuously monitoring them to avoid unwelcome surprises. While this approach might seem outmoded for contemporary businesses, it remains effective in situations such as on an assembly line.
Robert Simons, a Harvard professor, put forth the Levers of Control framework in 1995 to strike a balance between managing and controlling an organization. The Levers of Control model recognizes that achieving organizational objectives necessitates more than just setting targets. It involves influencing the behavior of individuals and groups within the organization to work in a coordinated manner toward those objectives.
As per the Levers of Control model, equilibrium in an organization depends on elements including codes of conduct, formal requirements, procedures, and well-defined boundaries, often enforced by restrictions and penalties. Striking the right balance among these factors and navigating the inherent conflicts between autonomy and control, trial and error, and top-down versus bottom-up administration is the essence of the Levers of Control model.
The framework encompasses 4 levers, which are not mutually exclusive and can be employed in combination.
- Belief Systems
- Boundary Systems
- Diagnostic Control Systems
- Interactive Control Systems
Let’s dive deeper into the first two levers of the model, for now.
Belief Systems
Belief Systems communicate the core values, mission, and purpose of the organization, providing a framework for employee motivation and guidance. This lever ensures fulfillment of the mission of the enterprise by inspiring behaviors, values, performance, and a sense of contribution in people to serve the customers better.
In the absence of a clearly defined Belief System, employees are left at the mercy of conjecture regarding the desired behaviors and organizational purpose. Belief systems outline the organization’s obligations towards employees, customers, society, and other stakeholders. This lever works best for organizations desiring to nurture strong cultures and align diverse actions with central ideals, such as startups and organizations undergoing Transformation.
Boundary Systems
This control lever facilitates setting up standards and policies to inform people about what not to do without hampering their creativity or entrepreneurial abilities. Boundary Systems delineate the limits within which employees operate through rules, codes of conduct, and predefined strategic boundaries, outlining acceptable and unacceptable behaviors.
These boundaries clearly indicate the nonnegotiable consequences of overstepping moral codes and the opportunities to be avoided. Boundary Systems are recommended for sectors subject to stringent regulations, risk-averse enterprises, or organizations aiming to restructure or transform behaviors where operational efficiency and reduction of waste and errors are of utmost importance.
Interested in learning more about the other levers of the Levers of Control framework? You can download an editable PowerPoint presentation on the Levers of Control Framework here on the Flevy documents marketplace.
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About Mark Bridges
Mark Bridges is a Senior Director of Strategy at Flevy. Flevy is your go-to resource for best practices in business management, covering management topics from Strategic Planning to Operational Excellence to Digital Transformation (view full list here). Learn how the Fortune 100 and global consulting firms do it. Improve the growth and efficiency of your organization by leveraging Flevy's library of best practice methodologies and templates. Prior to Flevy, Mark worked as an Associate at McKinsey & Co. and holds an MBA from the Booth School of Business at the University of Chicago. You can connect with Mark on LinkedIn here.
