Management Control Systems

Chapters 1 & 2,
Management Control Systems, 12th Ed.,
Anthony and Govindarajan

Strategy

Corporate Strategy

To maximize use of resources

Business Strategy

To compete in selected markets

Goals and Strategy

Strategy Formulation

Goals
How to attain

Strategy Implementation (Execution)

Objectives
Management Control Systems

Management Control

The process by which managers influence

other members of the organization to
implement the organizations strategies.

Management Control

Activities include:

Planning
Coordinating
Communicating
Evaluating
Deciding
Influencing

Management Control Systems

Facilitate management control

Primarily focus on strategy execution
Encompass both quantitative and
qualitative performance measures
Concerned with broadly defined activities

Conflict of Interests

Goal congruence implies that individual

goals and organizational goals are
consistent

Agency Theory implies the opposite

Good Management Control

Achieves goal congruence by aligning

Organizational goals
Individual goals

Goal Congruence

Influenced by

Informal factors
External work ethic
Internal culture, management style, informal
organization, perception, communication

Formal factors
Rules
Formal control system

Organizational Structure

Functional organization

Highly centralized

Matrix organization
Business unit organization

Highly decentralized

Lines of Control within the

Organization

Solid lines

Direct reporting

Dotted lines

Coordination / reporting

The Controller

Responsible for

Design of the Management Control System

Operation of the Management Control
System

Normally the CFO