Chapter 2:

Results Controls
 Learning Objectives
Mahasiswa mampu menjelaskan result
control dan kondisi yang menyebabkan
efektifitas pada result control
 Outlines
• Prevalence of results controls
• Result controls and the control problems
• Elements of results controls
• Conditions determining the effectiveness of
results controls
 Results
•
controls
Involves rewarding individuals for generating good results
(or punishing them for poor results)
• Results accountability

• It influences actions because it causes employees to be

concerned about the consequences of the actions they
take
• However, employees’ actions are not constrained
• On the contrary, employees are empowered to
take whatever actions they believe will best
produce the desired results
 Prevalence of results controls
Desentralization to managers and the
design of incentives systems to motivate
these managers to generate the desire
results are two critical organizational design
choices in results control context; They are
part of what organizational theorists call the
ORGANIZATIONAL ARCHITECTURE
 Result controls and the control
problems

Result controls provide several preventives

type benefit :
• giving direction what should do to get
• motivate for extra effort
• retain and attract employee
 Key results control elements
• Defining the performance dimensions
• What you measure is what you get; hence,
• If not congruent with the organization’s objectives, the controls
will actually encourage employees to do the wrong things!
• Measuring performance on these dimensions
• Objective > financial > market-based: for example, stock price
• > accounting-based: for example, return on
assets
• > non-financial: for example, market share, customer
satisfaction
• Subjective: for example, managerial characteristics (“being a
team player”)
• Setting performance targets
• Motivational effects
• Providing rewards (or punishments)
• “Incentives” – monetary and non-monetary
Conditions for effective results
control
• Results controls work best only when all
of
the following three conditions are
present:
– Superiors/managers must know what results are
desired in the areas being controlled

– The individuals whose behaviors are being controlled

must have significant influence on the results in the
desired performance dimensions
 Ability to influence
results
• The person whose behaviors are controlled must be able to
affect the results in a material way in a given time span
• Controllability principle

• Results controls are useful only to the extent that they provide
information about the desirability of
the actions that were taken
• If the results are uncontrollable, the controls tell us little
about the actions that were taken:
– Good actions will not necessarily produce good
results
– Bad actions may similarly be obscured
Ability to measure results effectively
• The effectiveness of results measures must be judged by their
...
• Ability to evoke the desired behaviors

• Measurement properties
• Congruence
• Controllability
• Precision
• Objectivity
• Timeliness
• Understandability
• Cost efficiency
 Conclusion
PRO
• Behavior can be influenced
while allowing significant
autonomy
• They yield greater employee
commitment and motivation
• They are often “inexpensive”
– For example, performance
measures are often already
collected for reasons not
directly related to management
control (e.g., financial
reporting)
CON
• Often less-than-perfect indicators
of whether good actions have been
taken
• They shift risk to employees (due
to uncontrollable factors); hence,
they often require a risk premium
for risk averse employees
• Sometimes conflicting functions:
– Motivation to achieve
• targets should be “challenging”
– Communication among entities
• targets should be slightly
conservative