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June 10, 2020
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Management controle
1 CH1: Introduction to management controle
1.1 Management control
Goal management control systems: implement organizational strategies: meet strategic objectives
efficiently and increase organizational performance.
- Strategic planning
- Budgeting
- Resource allocation
- Performance measurement, evaluation and reward
- Responsibility center allocation
- Transfer pricing
Definition: systematic process by which organizations higher level managers influence organizations
lower level managers to implement the organization’s strategies
How to design and use tools and techniques?
Why? Because of decentralization: authority to make own decisions: goal sharing and cooperation
needed.
Agency theory: principal agent
1.2 Need for control
Decentralized managers do not automatically …
1. understand goals and strategies developed by a higher level or how they can contribute.
Often: maximize shareholder value. Potential solution: strategy map
Top-down function: give clear sense of direction
Bottom-up: inform higher level of progress
2. Agree with organizational goals and strategies developed by higher level
Not automatically motivated:
- Private goals that are incompatible with organization goals (self-interest)
- Disagreement because of better information and specialized managerial skills
Top-down: motivate lower level employees
Bottom-up: facilitate higher-level to benefit from better info and specialized skills
3. Have resources needed to act with organizational goals and strategies developed by a higher
level.
Not automatically to achieve goals: organizational resources and personal skills needed
Top-down: ensure that decentralized managers have skills and resources needed
Bottom-up: enable LL managers to acquire support to develop skills and resources needed to
execute responsibilities.
1.3 Firm size
Small and centralized firms: no need for systematic, complex and expensive design of management
control systems. Communication more direct and informal.
Large and decentralized firms: need formal management control systems to establish clear sense of
what decisions to take and what results to achieve.
Communication channels grow exponentially with firm size: need for formal organization of
communication channels between hierarchically organized units to reduce number of channels. (AFB
slide 11)
Kader
,1.4 Management and control
Management control als een onderdeel van management: kan gezien orden als een deel van de
management functie:
1. Planning: decisions about what organizational participants need to do in the future.
2. Organizing: use of resources so that plans can become operational
3. Staffing: employ right people to perform actions
4. Leading: ensuring that plans are followed
5. Controlling: establish whether actions are performed according to plan
1.5 Accounting and control
Management control is an activity that used management accounting information:
Functions of management accounting:
1. Scorecard keeping: know what is going on in the organization
2. Attention directing: identify areas of potential improvement
3. Problem solving: support decision making
Dimensies:
- Kennis
- Informatie : rapporten maken vanuit data: met management accounting, management
accounting informatie
- Data: inputdata gaan verzamelen, ERP systemen etc om dit te verzamelen
Relevantie financiële informatie voor management control: reden voor sterke connectie:
1. Belang van geld voor meten van performantie organisatie
2. Belang van accounting systeem om informatienoden van stakeholders organizatie te
voldoen.
1.6 Human behavior
Goal management control: eliciting desired behaviors by decentralized managers. Understanding of
people in organization needed:
Dimensies: Managers are motivated by
1. the goals they are asked to achieve
2. the rewards that they may get from their efforts
3. the social context in which they work
Dimensions of motivation:
- Effort: tijd en energie die werknemers in activiteit willen steken. Doel moet duidelijk, niet te
ver zijn en het behalen een achievement.
- Direction of effort
- Persistence of effort: duration of effort
Elementen van human behaviour: je kan werken met incentive systemen, targets en sociale context.
1.6.1 Motivation by goals
Positive effect on effort:
- When clear and directional
- When not too distant
- When achievement valued positively
Attention points:
- should be aligned with strategy
, - Multiple goals can reduce clarity and direction
- Goals may be seen as a threat
1.6.2 Motivation by rewards
Veel onderzoek naar invloed van rewards : Bv moet je de CFO een bonus geven? Sales mensen
anders motiveren dan bv finance?
Price paid for products and services of managers:
1. Variation in dependence on output: variable salary larger for managers
2. Controlled by labor laws
3. Variety across firms and functions
Attention points:
- Should not be seen as fixed salary
- May enhance internal competition
- Performance and rewards should ideally be matched in time
1.6.3 Motivation by social context
We bedoelen zowel intern als extern:
Extern: work ethics: regio, land, sector… Dit beïnvloedt het allemaal. BV silicon valley, Zweden vs
Amerika
Intern: Organizational culture, management style, tone at the top…
Bepalen desirable behaviour
Culture explains control differences: zelfde mgm controlesystemen gaan een heel andere invloed
hebben in verschillende contexten: bv zelfde systemen gaan heel anders gedrag uitlokken in bv azie
vs amerika: daarom moet je het gebruikte systeem aanpassen aan de cultuur van een bedrijf;
Cultuur belangrijk:
- Explains control differences: ookal zelfde formeel systeem, actual control may differ
- Explains that organizations are not easily changed: chaning practices is always met with
resistance, also informal communication channels
- Culture can be changed and made into a tool of management control that helps
organizations achieve objectives
2 CH 2: Designing management control systems
2.1 Objects of control
Various objects of control:
- Of individual manager
- Of management team that manager is part of
- Of unit that management team supervises
- Of all units with management teams
- Of the whole organization
2.2 Elements of control
Every controlled system has at least five elements:
- Detector or sensor: measures what is happening in the process that is being controlled
- Assessor: comparison with standard to determine the significance of what is happening
- Effector: device that alters behavior if assessor indicates need
, - Communications network: transmit info between detector and assessor and assessor and
effector
- Predictive model: knowledge about effects of changes made by effector
2.3 Control model
Many management actions are unsystematic: situations for which rules are not well defined that
require judgment
2.3.1 Management control by control of managerial input
Managerial inputs: capabilities, characteristics, knowledge and intentions:
Human resource management activities: applicable controls:
- Staffing: designing jobs and roles in the organization
- Development: basic conditions that enable managers to be informed about goals and behave
in line with them: intro programs, training…
- Culture building: leading: showing the right kinds of behaviors, management style and tone-
at-the-top
2.3.2 By controlling decisions
Decisions: all observable actions and choices managers make as part of their responsibilities.
Do not automatically act and choose in line with organizational objectives
Controlling decisions: limit discretion of managers to decisions in line with objectives organization
- Delegation of authority to lower levels
- Delegation of responsibility: specification of responsibilities that managers carry
- Prescribing behaviors: formal procedures, do’s and don’ts
2.3.3 By controlling managerial outputs
Make managers accountable for results: target setting, MBO, balanced scorecard, linking managerial
compensation to achievement of goals
- Stating performance targets
- Linking performance to rewards
- Linking performance to promotion
2.4 Strategy, management control and task control
2.4.1 Management control activities
- Planning what the organization should do
- Coordinating the activities of several parts of the organization
- Communicating information
- Evaluating information
- Deciding what if any action should be taken
- Influencing people to change their behavior
Strategy formulation Management control task control
Strategy implementation framework!
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