Management Control Systems, Chapter 1-4

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Summaries Management Control ------------------------------------------------- Session 1: Chapters 1,2,3 & 4 Chapter 1 Management and control Management control – all devices or systems managers use to ensure that behaviors and decisions of their employees are consistent with the organizations objectives and strategies (MCS) * Back end of management process * Involves managers taking steps to help ensure that employees do what is best for the org. Primary function of MC: to influence behaviors in a desirable way Benefit of MC: increased probability that organization’s objectives will be achieved Addressing types of problems: theft, fraud, unintentional error, etc Disadvantageous of MC: suppress initiative,…show more content…
Sometimes subjective judgement is required. Link result measures to rewards. Sometimes subjective judgement is required. (1) Defining performance dimensions on which results are desired or not e.g.: Profitability, Customer Satisfaction, Product defects, etc. “What you measure is what you get!”, so define correctly * (2) Measuring performance assign numbers to performance in specific time period Financial measures: net income, EPS, ROA,… Non-fin measures: market share, growth (in units), customer satisfaction,… There’s a difference if top management or lower level employees re measured Often mngt must translate fin goals into operational goals for employees If more than one result measure per employee than weights are required * (3) Setting performance targets /standards for every perf. dimension that is measured Why important? -1) Improve motivation and stimulate action, and 2) allow employees to interpret their own performance -> key: compare actual with std performance * (4) Providing rewards or incentives – anything employee values * Extrinsic rewards: monetary and non-monetary awards (bonus, training, recognit..) * Intrinsic rewards: sense of accomplishment for achieving the desired results All these conditions must be met, for RCs to

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