Balancing Control and Empowerment

One of the first articles we had to read during my recent HBS class was “Control in an Age of Empowerment” by Robert Simons. Even though the article was published in Harvard Business Review more than 10 years ago, I had never read it before and a quick poll of my classmates suggests very few of them had either. That’s unfortunate because I found it to be one of the most thought-provoking articles of the entire week.

Simon’s basic premise is managers cannot spend their time making sure employees are doing what is expected, except in rare circumstances such as assembly lines in which standardization is critical for high performance. The article also argues that hiring talented people, aligning incentive systems with strategy, and providing appropriate motivations is not enough to control performance. Instead, Simons advocates using four distinct control levels to help balance creativity and control:

1. belief systems,
2. boundary systems,
3. diagnostic control systems, and
4. interactive control systems.

Belief systems communicate core values and missions that promote a desire to contribute and help remove uncertainty about an organization’s purpose. Diagnostic control systems articulate goals with clearly defined targets, focusing resources and encouraging employees to achieve. Both belief and diagnostic control systems are widely used and well-studied by performance management practitioners.

Perhaps because they are less well known, I found the ideas of boundary systems and interactive control systems to be particularly intriguing. Boundary systems, as the name implies, specify limits of acceptable practices and are designed to avoid temptations of unethical or non-strategic efforts. Simons claims that “telling people what to do by establishing standard operating procedures and rule books discourages the initiative and creativity unleashed by the empowered, entrepreneurial employees. Telling them what not to do allows innovation, but within clearly defined limits.” Managers use boundary systems as guard rails to ensure that their employees can control their own cars but never get too far off track.

Interactive control systems, on the other hand, provide an early warning detector for when a business inevitably steers off course. While diagnostic control systems are populated with well-designed measures that monitor progress towards defined goals, interactive control systems attempt to track strategic uncertainties by highlighting exceptions and unexpected results. By encouraging open dialogues and shared learning, interactive control systems can counteract fear of risk and encourage employees to create. Simons uses the metaphor of the remote sensing systems deployed by the National Weather Service.

Without all four control levers, an organization can get out of balance and fail to achieve its intended goals. An accompanying case study on ATH Technologies (fictitious name) showed vividly how an organization tried to improve its performance over a decade by successively instituting boundary, diagnostic control, and belief systems. ATH ultimately failed because it overlooked a change in the competitive landscape (i.e. no interactive control system).

Although he never uses the word, Simons is saying that true alignment cannot come from just establishing core values (belief systems) and developing cascaded goals and metrics (diagnostic control systems). The alignment focused organization must also define risks to be avoided (boundary systems) and be on the lookout for strategic uncertainties (interactive control systems).

Set limits and expect the unexpected. That’s a lot to ask for but may well be what separates high performance organizations from everyone else.