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Management accounting & control
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Lecture 1 (29/08): Introduction“A managerial reporting system (MRS) in a firm is as our brain in our body.”
Remembering/thinking → decision facilitating
Communicate instructing body parts → decision influencing (tracking + motivating)
Coordination → coordination facilitating (enables to coordinate)
Controllers (corporate finance):
Designing, maintaining and improving the MRS
, Accurate reasonable cost
Measure customer satisfaction
Real-time tracking of performance measures?
How to design forecasts so that it is still reasonably?
Advisory role for operational and strategic decisions
Strategic uncertainties
Which supplies
Bonuses?
Which control system?
The more you outsource, the less you see the insights → you lose control (+ more expenses)
Solution:
Controller as administrator: diagnostic use of MRS
Controller as business partner: Interactive use of MRS
, What is the problem?
Macro-level = internal and external risks
How to design your management control system (MCS) in order to avoid risks?
Micro-level = internal risks
Lack of effort
Lack of direction (what is expected)
Lack of ability
Analytical level = agency relationship
Agent executes an action (a) that has
private, convex costs (C(a)) for the agent
This generates benefits (Y) for the principal
Higher (a) leads probabilistically to higher values of (y), but (a) in itself is not
observable for the principal.
Principal observes a signal (x) carrying information about the level of (a)
The payment (w) can be determined by (x) → w = w(x)
Payouts:
Principal = y - w(x)
Agent = w(x) - C(a)
How do you measure x?
→ X is noisy an can be manipulated by the agent
What is KPI? How is it linked to performance?
Employee in economic real-life Employee in this course
Lazy Extrinsically but also intrinsically motivated
Selfish Selfish but we also have social preferences
Rational Our decisions are sometimes/often subject to behavioral biases
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