A comprehensive summary of all the relevant lectures, theory and examples as a preparation for the exam!! Everything that needs to be studies is included
- Knowledge of objectives is necessary prerequisite for design of MCS
- Objectives don’t have to be quantified or financial
- Objectives in organization are known, however, not everyone agrees
- Compromise mechanisms to prevent conflicts, results in some level of agreement
2- Strategy formulation
- Strategies define how resources should be used to meet the proposed objectives
- Act as guidelines for employees
- Intended strategy is when organizations develop formal strategies
- Unintended strategy is when organizations anticipate to opportunities that present
themselves
Difference between actual and formal strategy originates from employees taking different
(better or worse) actions
3- Management control
Definition: Process by which management ensures that the organizational objectives and
strategies are carried out
Function: Influence behaviour in desirable way
Benefit: Increased probability of achieving organization’s objectives
Causes management control issues
1- Lack of direction
- Employees do not know what company wants from them
Solution: Communication + reinforcement
2- Lack of motivation
- Conflicts of interest, self-interested behavior, effort aversion
Solution: Effective incentive systems
3- Lack of abilities
- Employees can be motivated and knowledgeable but still are unable to do the job
Solution: Training, job assignment/design, promotion
,Important characteristics of good management control
1- Future-oriented
Low probability of major unpleasant surprises
2- Objectives driven
High probability of achieving firm’s objectives
3- Cost effectiveness
a. Control losses < control implementation costs
b. Optimal MCS: Control losses = Implementation costs
Out of control = situation in which there is a high probability of low performance
Management control process
= the primary method of ensuring that the organization takes the right actions to execute its
strategy and create value
- Focuses on incentives to take actions in the best interests of the organization’s desired
goals/objectives
o Goals and objectives can be
▪ (non)financial
▪ Economic, social, and environmental
- Focuses on information used to set targets and to evaluate employee performance
Management accounting and control
= aspect of management control that uses management accounting information
- Management accounting system provides tools for MC
- ccounting techniques contribute to control:
o Enables managers to exchange information about strategies between hierarchical
levels
o To coordinate actions
o To formulate motivating strategic targets
o To evaluate and reward performance
, Lecture 2 – Controlling behaviour
Overview control framework
Control problem avoidance strategies
= eliminating the possibility of control problem occurring
Types of avoidance strategies:
- Activity elimination
o = elimination of the uncontrollable activity
o When managers are not able to control certain activities, potential risks and relate
profits outsourced to third parties
- Automation
o = use of automated devices
o Automated devices perform more consistently and can be set to behave as
required
o Downside: automation often partial control solution
▪ Major investments required
▪ May introduce new control issues = cyber security risks
▪ Lack of human intuitive judgement
- Risk sharing
o = reduce potential losses
o Examples
▪ Buying insurances (fidelity bonds)
▪ Joint venture agreements
- Centralization
o = reclaim decision making authority
o High degree of centralization means key decisions are made at top management
level
o Top management has the potential to avoid lower-level employees making poor
decision
o Degree of centralization depends on business operation and firm size
Voordelen van het kopen van samenvattingen bij Stuvia op een rij:
Verzekerd van kwaliteit door reviews
Stuvia-klanten hebben meer dan 700.000 samenvattingen beoordeeld. Zo weet je zeker dat je de beste documenten koopt!
Snel en makkelijk kopen
Je betaalt supersnel en eenmalig met iDeal, creditcard of Stuvia-tegoed voor de samenvatting. Zonder lidmaatschap.
Focus op de essentie
Samenvattingen worden geschreven voor en door anderen. Daarom zijn de samenvattingen altijd betrouwbaar en actueel. Zo kom je snel tot de kern!
Veelgestelde vragen
Wat krijg ik als ik dit document koop?
Je krijgt een PDF, die direct beschikbaar is na je aankoop. Het gekochte document is altijd, overal en oneindig toegankelijk via je profiel.
Tevredenheidsgarantie: hoe werkt dat?
Onze tevredenheidsgarantie zorgt ervoor dat je altijd een studiedocument vindt dat goed bij je past. Je vult een formulier in en onze klantenservice regelt de rest.
Van wie koop ik deze samenvatting?
Stuvia is een marktplaats, je koop dit document dus niet van ons, maar van verkoper Lina36. Stuvia faciliteert de betaling aan de verkoper.
Zit ik meteen vast aan een abonnement?
Nee, je koopt alleen deze samenvatting voor €20,49. Je zit daarna nergens aan vast.
