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Chapter 1:
Management and Control
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.2
Management control
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.3
Purpose/function
get done what management wants done;
influence behavior in desirable ways.
Benefit
increased probability that the organizations
objectives will be achieved.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.4
Strategy Formulation
Management Control
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.5
Objective setting
Objectives are
a necessary prerequisite for any purposeful activities.
Objectives can be
financial versus non-financial;
quantified, explicit versus implicit;
economic, social, environmental, societal.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.6
Strategy formulation
Hence,
strategies put constraints on employees to
focus activities on what the organization does
best or areas where it has an advantage over
competitors.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.7
Key questions
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.8
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.9
Three issues:
Do they understand what we expect of them
Lack of direction
Lack of motivation
Personal limitations
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.10
Lack of direction
COMMUNICATION + REINFORCEMENT !
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.11
Motivational problems
Because
Lack of goal congruence
Individual goals do not coincide with organizational goals.
Self-interested behavior
Generally, individuals are prone to being lazy
Slide 1.12
Personal limitations
Some examples/causes:
lack of requisite knowledge, training, experience;
employees are promoted above their level of competence;
some jobs are not designed properly;
etc.
TRAINING
JOB ASSIGNMENT
JOB DESIGN
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.13
Note that
measure performance;
compare with pre-set standard;
take corrective action.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.14
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.15
Control-problem avoidance
Three possibilities:
Activity elimination
e.g., subcontracts, licensing agreements, divestment.
Automation
Computers/robots eliminate the human problems
of inaccuracy, inconsistency, and lack of motivation;
Only applicable to relatively easy decision situations;
Automation can be very costly.
Centralization
Superiors reserve for themselves the most critical
decisions.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.16
Control alternatives
ACTION CONTROLS
RESULTS CONTROLS
PEOPLE CONTROLS
Or any combination
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.17
Depending on
Excellent
Action Control
and/or
Results Control
Results Control
Poor
High
Action Control
(e.g. large projects)
People Control
(e.g. research lab)
Low
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007
Slide 1.18
Overview
Can people be avoided?
(e.g. automation, centralization)
Yes
No
Yes
Yes
Control-problem
avoidance
People controls
No
No
Action controls
Yes
Results controls
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition Pearson Education Limited 2007