Samenvatting
Summary Managament Accounting and Control
Summary Managament Accounting and Control
[Meer zien]Voorbeeld 4 van de 68 pagina's
Voorbeeld 4 van de 68 pagina's
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Voorbeeld van de inhoud
Management Accounting and ControlInhoudsopgave
Lecture 1 – Setting the Stage..........................................................................2
Lecture 2 – The Three-Legged Stool................................................................6
Lecture 3 – Designing Your Organization........................................................10
Lecture 4 – Performance Measures................................................................14
Lecture 5 – Subjectivity................................................................................22
Lecture 6 – Target Setting.............................................................................28
Lecture 7 – Measure Management.................................................................34
Lecture 8 – Employee Selection.....................................................................41
Lecture 9 – Leadership..................................................................................46
Lecture 10 – Honesty of Reporting.................................................................52
Lecture 11 – Reporting Information...............................................................58
Lecture 12 – Updating Management Control Systems.....................................63
Planning
- Setting the stage
o Lecture 1: The kickoff
o Lecture 2: The three-legged stool
- The basics: core building blocks to develop your three-legged stool
o Lecture 3: Designing your organization
o Lecture 4: performance measures
o Lecture 5: Subjectivity
o Lecture 6: Target setting
o Lecture 7: Measure management
o Lecture 8: Selecting the right employee
- Capita selecta: concepts to finetune your three-legged stool
o Lecture 9: Leadership
o Lecture 10: Honesty of managerial reporting
o Lecture 11: Feedback and reporting systems
o Lecture 12: Updating management control systems
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,Lecture 1 – Setting the Stage
Concepts of this lecture:
- A MRS in a firm is as the human brain in our body.
- Decision-facilitating, decision-influencing, and coordination-
facilitating function of MRS
- Diagnostic & interactive use of MRS
- The controller as an administrator and/or business partner
- Macro-level diagram on strategy implementation
- 3 (micro-level) control problems: lack of direction, lack of ability, lack
of effort
- The analytical level: the principal-agent problem
- Conceptualization of the employee
A managerial reporting system in a firm is as our brain in our body.
The functions of our human brain vs. the functions of a managerial
reporting system in a firm:
- Remembering things decision-facilitating function
- Instructing body parts decision-influencing function
- Coordinating between body parts coordinating-facilitating function
Overall goal of this course: develop a sophisticated understanding of the
powerful role(s) of managerial reporting systems to achieve organizational
objectives in a timely, efficient, and effective manner:
1. Remembering/decision-facilitating role of MRS: enabling
employees to take value-generating strategic and operational
decisions. Based on data kept in MRS we remember things and firms
can make decisions (bonus or not). (lecture 10, 11, and 12)
2. Instructing/decision-influencing role of MRS: aligning behavior
with organizational objectives. Based on data in MRS we influence
employees to move in a certain direction making decisions in
interest of company. (lecture 3, 4, 5, 6, 7, 8, 9, and10)
3. Coordinating/coordination-facilitating role of MRS: facilitating
cooperation between entities. Based on data kept in MRS we can
find out the problem and coordinate between departments to solve
the problem. (lecture 4, 5, 6, 10, and 11)
Relation of the course to practice
- Reflection: The MRS is the only way through which organizations can
observe ‘the real world’. A good controller does not only work with
data but also must know the business.
- Diagnostic use of MRS: MRS facilitate the implementation of the
current strategy (for example design a cost system to better
understand the drivers of the cost and to see the negative effects of
outsourcing)
- Interactive use of MRS: MRS allows to develop a better
understanding of the strategic uncertainties that could instigate a
2
, change in current strategy (for example based on new cost system
you advise management on revising outsourcing)
Human brain
- Remembering, instructing, coordinating
- Not visible from the outside
- Motivation to train the human brain is rather low
- Malfunctions in the human brain strongly decrease quality of life
- Other body parts do not function without the human brain
- Surgery on the human brain is difficult and delicate.
Management reporting system
- Decision-facilitating, decision-influencing, coordinating-facilitating
- Not visible for outsiders
- Willingness to invest in properly functioning MRS is rather low
- Weak MRS limit (both financial and societal) value creation
- Other functions in the firm do not function properly without MRS
- Improving MRS is difficult and delicate.
The macro-level problem
Main question of the course: how should we design the management
control system (MCS) in general and the management reporting system
(MRS) in particular to reduce the impact of internal and external risks on
the strategy implementation?
Step 1: strategies are implemented to reach expected outcomes.
Step 2: with strategy implementation you first try to reach control
objectives.
Step 3: these control objective in turn leads to expected outcomes.
Step 4: whether these actions lead to expected outcomes depends on the
risks.
Step 5: with a MCS you try to mitigate those risks
A control objective is a desired outcome for an action or a set of actions.
External risks are any risks external to the firm because of competitor
behavior, regulation, geopolitical issues. Internal employee-related
risks consist of employee behavior (i.e., actions and decisions) that hinder
the firm in realizing the outcomes.
Management control system (MCS): helps the firm remember what
happened in past
3
, - MCS that embodies the elements of an organization that support
people in the achievement of the organization’s objectives
- MCS that reduces the probability of a risk happening, the impact
when a risk occurs or both. For example, based on COVID data you
can anticipate on upcoming regulations.
Example:
- Strategic focus point: fast delivery
- Activity: stock and order picking
- Expected outcome: customer satisfaction
- External risk: traffic affects transportation
- Internal employee-related risk: employee does not understand the
business
The micro-level problem
How should we design the MCS so that employees know what is expected
from them, we attract the right employee, and that they provide effort
level that approximates the effort level of the manager?
Internal-employee related risks:
- Lack of effort: employees do not deliver the same level of effort that
you would deliver. Employees do not work hard enough (both
quantity and quality).
- Lack of direction: employees do not know what the strategy is and
what the control objectives are. Employees do not know what is
expected from them.
- Lack of ability: employees do not have the right ability to implement
the strategy and reach the control objectives. Employees do not
have the right ability to do what is expected from them.
So, the macro level problem: ‘How should we design the management
control system in general and the management reporting system in
particular to reduce the impact of internal and external risks on the
strategy implementation?’
And the micro level problem: ‘How should we design the management
control system in general and the management reporting system in
particular so that employees (1) provide enough effort, (2) know what is
expected from them and (3) have the right ability?’
Analytical problem: ‘How should we design and use performance measures
that carry information about the ability and effort of managers and
employees and provide information about the direction in which the firm
wants to go?’
The agency problem
An agency relationship is a situation in which one individual (the agent of
the employee) acts on behalf of another individual (the principal or
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