Concepts and Applications of Enterprise Budgeting Strategic Control

EPM Article

Concepts and Applications of Enterprise Budgeting Strategic Control

Concepts and Applications of Enterprise Budgeting Strategic Control
01

How Enterprise Budgeting Supports Strategic Control

Meaning of Corporate Strategic Control: Strategic control refers to the dynamic adjustment process of comparing predetermined strategic objectives with actual results, detecting the degree of deviation, evaluating whether they meet expected objective requirements, identifying problems, and taking timely measures to achieve corporate strategic objectives.

It is divided into broad and narrow senses. Broad strategic control includes three levels: strategic formulation control, management control, and operational control. Narrow strategic control is essentially management control.

Five steps of the management control process: strategic objective decomposition, control standard setting, internal control reporting, operational performance evaluation, and manager compensation.

Corporate management control models include institutional control model, budget control model, evaluation control model, and incentive control model.

The five models for corporate strategic implementation are command type, transformational type, cooperative type, cultural type, and growth type.

Command Type: Its characteristic is that top management considers how to formulate the optimal strategy. The application of this model requires the general manager to have high authority, relying on this authority to drive strategy implementation by issuing various directives; it requires alignment between the objectives of strategy formulators and implementers; it requires the company to be able to accurately and effectively collect information and promptly consolidate it for the general manaer. Its drawback is the separation of strategy formulators and implementers.

Transformational Type: Its characteristic is that senior management considers how to implement corporate strategy. This model does not address the issue of obtaining accurate information, which exists in the command type model. From a long-term perspective, companies facing environmental uncertainty should avoid adopting this model.

Cooperative Type: Its characteristic is how senior management involves other levels of management in taking on relevant strategic responsibilities from the very beginning of strategy implementation. This model overcomes the two major limitations of the command type and transformational type models, thereby increasing the likelihood of successful strategy implementation. Its drawbacks are that, because the strategy is a product of negotiation and compromise among participants with different viewpoints and objectives, it may reduce the economic rationality of the strategy. Additionally, the distinction between strategists and implementers still exists, and it still fails to fully mobilize the wisdom and enthusiasm of all managers.

Cultural Type: Its characteristic is that senior management considers how to mobilize all employees to participate in strategic implementation activities. This model breaks the boundaries between strategy formulators and implementers, striving to involve every employee in formulating and implementing corporate strategy. This ensures that personnel across all parts of the company work under common strategic objectives, leading to rapid strategy implementation, low risk, and fast corporate development. Its limitation is that it requires employees to have very high overall qualities.

Growth Type: Its characteristic is that senior management considers how to incentivize lower-level managers to be proactive and enthusiastic in formulating and implementing strategies, striving for the growth of corporate benefits. This model encourages employee initiative; corporate strategy is not imposed top-down but emerges bottom-up. The limitation of this model is that it requires the company to have an excellent strategic implementation support system; otherwise, it will be difficult to achieve the desired results.