Management And Accounting Web

Simons' Levers of Control in Relation to the Balanced Scorecard

Note by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

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In Chapter 10 of The Strategy-Focused Organization1, Kaplan and Norton discuss Simons2 five levers of control. The purpose of this note is to summarize their discussion in an attempt to clear up some of the confusion about how the balanced scorecard should be used, or at least provide a basis for discussing the confusion.

The five control levers include:

1. Belief systems,
2. Boundary systems,
3. Internal control systems,
4. Diagnostic systems, and
5. Interactive systems.

The following graphic illustration was adapted from Figure 13-1 (p. 349) in Kaplan & Norton's book. The original source is from Simon's book (p. 159).

Simon's Lever's of Control


Belief systems relate to the fundamental values of the organization. Examples in this category include mission statements and vision statements.

Boundary systems describe constraints in terms of employee behavior, i.e., forbidden actions.

Internal control systems are related to protecting assets, while

Diagnostic systems theoretically provide information indicating when a system is in control or out of control.

Interactive systems focus on communicating and implementing the organization's strategy. The purpose of an interactive system is to promote debate related to the assumptions underlying the organization's strategy and ultimately to promote learning and growth.

The confusion is related to how and where the balanced scorecard fits into the levers of control. According to Kaplan & Norton, successful balance scorecard adopters use the scorecard as an interactive system (p. 350). Some balanced scorecard implementations have failed because companies used the scorecard as only a diagnostic system.

Simons' term "interactive system" seems to be essentially the same as Kaplan & Norton's term "strategic system". The message is, to obtain the potential benefits of the balanced scorecard, an organization has to use it as a strategic system.

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References:

Kaplan, R. S. and D. P. Norton. 1992. The balanced scorecard - Measures that drive performance. Harvard Business Review (January/February): 71-79. (Summary).

Kaplan, R. S. and D. P. Norton. 1996. The Balanced Scorecard: Translating Strategy into Action Boston: Harvard Business School Press. (Summary).

Kaplan, R. S. and D. P. Norton. 1996. Using the balanced scorecard as a strategic management system. Harvard Business Review (January-February): 75-85. (Summary).

Kaplan, R. S. and D. P. Norton. 2001. The Strategy-Focused Organization: How Balanced Scorecard Companies Thrive in the New Business Environment. Harvard Business School Press. (Summary).

Simons, R. 1995. Control in an age of empowerment. Harvard Business Review (March-April): 80-88. (Summary).

Simons, R. 1995. Levers of Control: How Managers Use Innovative Control Systems to Drive Strategic Renewal. Boston: Harvard Business School Press.