Homework Assignment for 4D1165

Behavioural Management Control Year 200

!art "# $he Homework %uestions
This, the frst section, of my homework assignment contains the twenty
homework questions that have been handed out to us students
throughout the course, along with the answers Ive composed in order of
answering these.
1& 'ne of the (auses of management (ontrol )ro*lems is lack of
direction& +h, -oes this )ro*lem e.ist/
Lack of direction, a fundamental element in many dysfunctional
organizations, constitutes one of the primary needs for management
control. Employees are likely to perform in an unsatisfactory manner
unless expectations and functions are clarifed. Flaws in encouragement
and surveillance may loosen the strings between employee and
employees, resulting in confusion. Confusion, in this context, involves
having people do the wrong things conse!uentially leading to decreased
productivity.
Leos our!"le# Theatre, the frst case discussed in class, illustrates the
severe e"ects that a lack of direction may cause. #s the personnel of the
theatre were unaware of procedures, uninformed about regulations and
seemingly, not well instructed on how to perform simple tasks, mistakes
occurred. $wo lines from the case text make this obvious% &'( The cash
counts revealed, almost invariably, less cash than the amounts that
should have been collected.
$
&)( Tickets of the wrong color or with the
wrong dates in the stub bo#es.
*ill +eilly, the manager of Leos our!"le# Theatre, could have solved
many of the proftability issues stemming from lack of direction, by the
implementation of a relatively cheap control system &as a method to
inform and direct the workers(.
2& +hat is the controllability principle/
The controllability principle ,-. states that people should be held
accountable for what they control
)
. /eople at decision making positions,
where rewards &monetary or non0monetary( and punishments are the
results of the organization1s performance, pro2ect or individual
performance, should, according to the above sentence, not be a"ected by
activities which they cannot a"ect. +esults control may be e"ective in
enhancing individuals will to achieve goals and can hence increase the
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overall e"ectiveness of many workplaces. $he controllability principle can
be interpreted as the criteria for success of these programs. 3t1s most
important that the areas measured are controllable and provide
information about what actions were taken to produce the ac!uired
results. $he logic behind the principle is clear, since people being
punished for actions beyond their control will soon lose interest and
motivation in the organization.
$he case of #lcon 4aboratories, 3nc., presented at lecture three,
demonstrates a situation where the results don1t provide information
su"icient for e"ective results control. $his is largely due to the immense
+56 sector of the organization.
0& Dis(uss one of the four t,)es of a(tion (ontrol in terms of
)revention an- -ete(tion&
#ction accountability, a type of action control which involves holding
employees accountable for actions they take
%
, have a great advantage &to
other action control methods( as it can be used for both detection and
prevention of unsatisfactory behaviour. "revention, or preventing, is
similar to assessing the problems before they occur, while detection
refers to discovering and dealing with problems at a latter stage.

#ction accountability can, in some extent, serve as a cure to all basic
control problems, if carried out e"ectively. $he system aims at motivating
people by defning, communication and rewarding &punishing(
goals7actions. #s to increase control, companies fre!uently choose to put
the focus on the punishment resulting from bad results &negative
reinforcements(
8
. 9evertheless, rewards and punishments can, or at least
should not, be distributed before thorough evaluation have taken place.
Evaluation and evidence gathering may hence, if concurrent with the
activity ,-., approach the desired state of prevention of undesired
actions
&
.
4& How (an (ultural (ontrols sometimes *e (onsi-ere- as tight/
:abash 9ational Corporation, combines the practice of walk and talk
interviews, with group incentive plans and mandatory
education7training
;
. Conse!uently, they1ve managed to build and
reinforce a tight control system based on the culture within the
corporation. Tight control methods of this type, related to personnel
aspects and communication, are typically found in small, family0run
businesses, where roles are predefned and not likely to be !uestioned or
given much thought. $he existences of a strong culture in addition to a
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certain level of stability, seem to be likely prere!uisites for
personnel7culture control being tight.
9ote% the higher the tightness, the more likely it is that employees will do
what they1re supposed to do.
5& How (an negative attitudes *e avoi-e- when a results (ontrol
s,stem is in use/
$ight results control is, due to sometimes ill defned targets,
uncontrollability, incongruent measurements et cetera, likely to cause
negative attitudes among the employees as was once the case for <nited
/arcel =ystems &<*=(
>
. 'any authors suggest that results controls that
are applied in con(unction with a people!insensitive, non!supportive, or
negative leadership may tend to lower commitment to achieve
performance targets and to cause negative attitudinal reactions
)
. $o avoid
negative attitudes, the system must hence be implemented and developed
with care, in dialogue with the personnel. 3nvolvement ? discussing
targets, rewards and punishments with the a"iliates ? is hence, in the
case of results control, the key for preventing negative attitudes.
6& +h, are key recurring activities im)ortant to (onsi-er when
-esigning a management (ontrol s,stem/
3dentifying key recurring activities is a method likely to help the company
understand what it1s actually doing. # list of key recurring activities gives
the company the ability to distinguishing elements within their business
where changes could be made. *ey recurring activities may thus tell an
organization what1s got to be done in order to provide the greatest
probability of success
+
. Compiled lists of the mentioned kind, is hence
important for assisting managers in choosing behavioural systems and
strategies, and when dealing with the implementation and development
of these bringing the company to its ob2ectives. #n implemented system
could always be outlined by the activity list, and this is obviously a frst0
class starting point for further developments of the business.
& +hat are the )ros an- (ons with negotiated transfer prices/
,egotiated transfer prices is one of the fve ma2or transfer pricing
alternatives and is hence being used in purpose of providing economic
signals, delivering information useful for performance evaluations and7or
to purposely move profts between company entities and locations
$-
.
:hile other systems are based on costs, margins or the actual market,
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negotiated transfer prices allow for discussions between di"erent proft
centres. $his can be most e"ective, given that managers in both selling
and buying positions have some degree of bargaining power. *argaining
power implies that the manager, or rather the proft centre, has authority
to trade with external actors. Conse!uent to this is a situation of
negotiations between managers of the internal proft centres, who are
assumed to accept only the best deals, and what follows this competitive
method may thus be increased production within the organization
resulting in higher profts.
=ystems using negotiated transfer prices tend to cost. $he approach
re!uires time as well as e"ort to be e"ective and could generate con@icts
between department heads. #n issue which, according to the textbook
'anagement .ontrol /ystems, should be taken into consideration before
implementation of these systems is that balance might be lacking
between the di"erent proft centres% the outcome often depends on the
negotiating skills and bargaining power of the managers involved, and
the fnal outcome may not be close to being economically optimal
$$
. 3
don1t believe that perfect balance is a prere!uisite for successful use of
negotiated transfer prices but am willing to agree that power di"erences
could be a potential problem in situations where managers7negotiators
prioritize their proft centres to the wealth of the corporation.
1& How (an )lans an- *u-gets solve the (oor-ination )ro*lem/
Coordination is often a sub2ect to lacking communication. *udgets and
plans prepare employees for what may come they establish goals and
give hints about opportunities, resource needs, constraints, and risks
$0
.
3nformation of the described kind motivates increased communication
&top0down, bottom0up and sideways communication(. # natural result of
this is improved involvement. 3nvolvement re!uires knowledge about the
process, action, goals and events and employees with desire to learn will
keep active and coordinated.
/lans vary in length and timing and may not solve all coordination
problems but can be an extremely helpful tool, especially when combined
with budgets, good routines, clearly defned goals, guidelines and
motivated managers.
2& How (an 3nan(ial )erforman(e targets *e e.ternall, -erive-/
Financial performance targets, a foundation for performance evaluations,
serve an essential part in motivating the workforce and should hence be
given much attention in every ma2or organization. #s was discussed in
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lecture number nine, where references were made to the case of 1ouston
earless 23, Inc., fnancial performance targets can di"er in a number of
ways. They can be model!based, historical, or negotiated, internally or
e#ternally derived, and f#ed or 4e#ible
$%
.
External derivation of the fnancial targets have grown increasingly
popular and include target costing and benchmarking. $he frst method
involves setting cost goals which, if achieved, will guarantee not only that
related products will be sold with desired proft margins, but also that the
company can retain or ac!uire a competitive position in the market.
Aanagement Control =ystems clearly states that target costing is often to
be preferred to internal target costing &illustrated by the Bouston
Fearless case(. #nyhow, the latter method, benchmarking, is constructed
on the theory that if one aspires to become the best, performance should
be compared with the best
$5
. *enchmarking is often best performed if
handled in a cooperative manner, but as this may be as tricky as time
consuming, benchmarking is often approached unilaterally meaning that
the measuring company will attempt to learn as much as possible about
the best performers &of di"erent functions( by independent research.
10& +hat are the )ossi*le )ro*lems with grou) rewar-s/
3 didn1t have the opportunity to attend the class discussion that dealt with
.atalytic /olutions, Inc. &chapter 'C( but my interpretation of the case is
that too much weight was given the group rewards. Droup rewards may
well be e"ective in pro2ect forces, task teams or in smaller companies
where those being rewarded for the same results have the same goals.
Employees who are feeling involved in the business are likely to feel
motivated, and may due to the rewards system in place encourage
colleagues to perform at their best. Droup rewards may however have a
contrary e"ect when a crowd, being compensated for its collective
performance, grows in number. $he increase of group members will
naturally reduce the employees1 odds of a"ecting their bonuses, and with
this follows a decrease in motivation. $he immense boost in number of
employees seen in the case, exemplifes the issue
'E
. .atalytic /olutions,
Inc. is doing good but prospective motivational problems are likely to hit
the corporation unless the free rider problem is eliminated. 3 hence
suggest the company to implement a system &alternatively modifying the
existing one( to make employees feel as if they are, at least in some
aspects, being rewarded for their individual performances.
Aost of my answer7discussion has been based on the Catalytic =olutions
case. /arallels could as well have been drawn to 6isctech, discussed
during the ffth lecture, where more group rewards was one of the
solutions we suggested. Droup rewards can have a positive e6ect on
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motivation and performance
$3
and may raise the collective achievement
level, but are not always to be preferred. 3n conclusion, group rewards
are not bad per se, but the system may &especially when implemented in
larger groups( result in reduced employee motivation along with free
rider issues, and should therefore be applied only subse!uent to careful
reward system considerations.

11& +hat is investment m,o)ia/
3 doubt that su"icient understanding of investment myopia can be
ac!uired unless the reader is ac!uainted with the expression1s latter part.
Ayopia &noun( translates into short0sightedness, lack of foresight or
intellectual insight
'>
. # good, summarizing explanation of how the term
can be used for describing business situations is to be found in chapter
ffteen of Aanagement Control =ystems% myopia occurs when companies
place high emphasis on the achievement of short!term proft targets even
though some proft!increasing activities 7such as reducing investments in
research and development8 diminish shareholder value
$)
. Ayopia could
conse!uently be said to be a reality in situations where no steady balance
exists between short0term and long0term goals.
3nvestment myopia is unsurprisingly a kind of myopia. 3t could be
exemplifed by situations where managers postpone or reduce
investments that promise payo6s in future periods, even when those
investments clearly have a positive net present value
$+
, and is typically
found in organizations that use accounting measures of employee
performance &types of fnancial control systems(. #ccounting systems are
based on transactions and does not necessarily re@ect the economic
income of the company. $hey tend to ignore intangible assets and may
have managers focusing on making short term sales even though
investment in research or development &long0term( would be better for
the business as a whole. $he sizes and dates for di"erent gains are not
always easy to predict and as short0term oriented investments are more
likely to produce !uick income, they are more likely &than riskier
investments( to be emphasized by managers who are being measured
fre!uently. *ut what matters is long!term cash generation. Thats what
drives long!term stock performance
0-
. Ayopia may, in addition to this
short0term accentuation, result in time7earnings manipulation and should,
which is evident according to what have been said, be avoided.
12& How (oul- preaction reviews solve the m,o)ia )ro*lem/
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4ast !uestion discussed myopia, or rather, investment myopia. #nother
distinctive form of myopia is operating myopia, which involves boosting
sales by lowering prices. $his may be done in order to increase the
earnings for a specifc time period and is not in line doing what1s best for
the company. /reaction reviews is not a perfect tool but can solve some
myopia problems.
$he basic idea with preaction reviews is to investigate plans before they
are implemented. Aanagers may be reluctant to make larger long0term
investments as their superiors see nothing but the expenditure. $he
implementation of a system that causes employees to discuss
developmental ideas and long0term suggestions removes this pressure as
explanations of sudden long0term costs can be made. Companies that are
using preaction reviews sometimes separate the business1 income
statement in developmental investments and short0term operation
)'
.
Conse!uently, high performance can be displayed even though high long0
term investments have 2ust been made.
/reaction reviews comes in many forms, are often considered tight &as
they tend to involve large, seldom reversible, resource allocations( and
are types of action control which can address all ma2or control problems%
lack of direction
))
, motivational problems and personal limitations
)F
.
10& How (an pooled interdependencies *e a )ro*lem for
(ontrolla*ilit,/
/ooled interdependencies refer to the uncontrollable in@uences occurring
in situations where entities are shared, or dependent on each others, for
the beneft of all participators. Entities consists of shared sta6 7for
e#ample administrative or sales8, or shared facilities 7for e#ample
manufacturing or research8 and are not completely self0contained
)8
.
#s was visualized by the case of 9eifang .huang :e ;ehicle <roup, a type
of controllability problem is imminent in circumstances where someone
has misused the shared entities. $he issue &described in the case(
stemmed from a bad decision which not all of the managers had been
able to in@uence7control. 6ecisions and entities are far from the same
thing, but they do serve well to illustrate a problem they1ve got in
common when it comes to controllability, namely, whether lower level
managers should be part of taking responsibility for shared risks or
whether the entire loss should be placed on the shoulders of linked
superiors.
14& +hat roles shoul- an au-it (ommittee ful3l/
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*elow is a compilation of what audit committees should do &and hence
what roles they should fulfl(. 9ote% this information is based on, or
directly fetched, from chapter '8 in Aanagement Control =ystems
)E
.
Exist
0 Bave at least three members, but not too many more so that all
members can be active participants.
0 6efne the members1 responsibilities and expect members who no
longer contribute appropriately to step down.
0 =end a clear instruction to the independent auditor that the board
of directors, as the shareholders1 representative, is the auditor1s
client.
Aeet
0 =chedule meetings in advance.
0 Aeet at least four times per year.
0 Geep and distribute minutes of meetings.
:ork
0 Dain support and direction from the entire board of directors.
0 #dopt a written charter, use agendas, and follow formal work
programs.
0 +eview interim, as well as annual, fnancial reports, in addition to
all fnancial information.
0 6iscuss with the independent auditor their !ualitative 2udgments
about the appropriateness, not 2ust the acceptability, of the
organization1s accounting principles and fnancial disclosures
practices.
0 *e proactive. /articipate in setting policies. +eview reports.
Aonitor the corporate code of conduct and compliance with it.
Ensure that the internal auditing involvement in the entire fnancial
reporting process is appropriate and properly coordinated with the
independent public accountant.
15& "s it ethi(al to (reate sla(k in *u-gets/
:hile it1s evident that ethics is, at least to some extent, connected with
moral correctness, it1s unclear what constitutes these principles
);
. Aoral,
the principles of right and wrong behavior
02
, is heavily dependent on the
norms governing a branch or a society and may hence vary from location
to location. 6iscussing whether a specifc act is unethical or not is not an
easy task, as it will, with no doubt, be based on the author1s
interpretation of the moral and ethics. Ay idea of ethics is that the term
should re@ect decisions which are meant do as little harm to others as
possible to others. $he often displayed, reversed elucidation of the term
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&explaining it as acts being taken in order to maximize the accumulated
good( may have the same idea, but is &according to myself( completely
unrealistic due to its emphasis on perfection. 3t can thus not be seen as a
very good interpretation.
Hn to the actual !uestion% is it ethical to create slack in budgetsI Ay
answer to this is a blunt no. =ince it1s obvious that slack budgets are
made in purpose of puzzling and confusing one &often a superior(, to
protect a second &perhaps a manager attempting to create highly
achievable targets
0)
(, this must be considered an act that1s likely to
create harm to someone else in a latter stage &given that the company
consists of more than one person(. =lack may have some positive side
e"ects as but there can be no ethical support for slack in situations meant
only to favor a manager who1s busy hiding information from his7her
superior&s(. #n honest conversation ought to be preferred between the
two.
16& +h, -oes environmental uncertainty (ause )ro*lems for
(ontrol s,stem -esign/
$he article ritidsresors hantering av tsunamin ett fall f=r 1arvard ?
published in >agens ,yheter, February )J, )CC> ? touched on the
importance of taking action against uncertainty issues, in order of
preventing and solving these. Environmental uncertainty may seldom be
as dire as the catastrophe of Kanuary )CC8 but can well be, as it &the
term( does include many types of hazards related to changes in natural
conditions, in the political and economic climate, or in the actions of
competitors, customers, suppliers 7including labor8, and regulators
0+
.
:hile it1s rarely possible for a company to completely lock0out these
risks, the personnel can and should be prepared to reduce the negative
e"ects stemming from uncertainties.
?ction controls are e6ective only if there is knowledge as to which
actions are desirable, and is not a key for dealing with environmental
uncertainties. +esults control on the other hand, could be used in
situations of this nature but such a system would not be as e"ective as it
would in other conditions. Hne reason to blame for this is that the
fnancial goals are, when uncertainty is abundant, likely to be set either
to be too easy or too di6icult. #nother reason is the di"iculty of
controllability and many more exist. :ho can be held fnancially
responsible for an earth!uakeI
Fritidsresor, the company being observed in the referred article, has
apparently made approximately seventy organizational changes due to
the tsunami. $he text does not reveal any precise information of what
these are but do suggest that most could be related to personal or
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cultural control. @If an organiAation is to show proof of courage and
determination, there must also be individuals doing soB, says Cohan
Lundgren ,author1s translation.
FC
.
1& +hat are the s)e(i3( (ontrol )ro*lems asso(iate- with a
not4for4)ro3t organi5ation/
'anagers of not!for!proft organiAations have to address the same set of
control problems ,as for0proft organizations. D lack of direction, lack of
motivation, and lack of ability 7personal limitations8
%$
. $hey do, tend to
provide more service and less products, than do their counterparts. #nd
as there1s typically little goal congruency in these organizations and as
di6usion of direction greatly complicates management
%0
, 3 assume that
the control problems not0for0proft organizations face exist mainly due to
confusion in terms of direction and measurement di"iculties. #nother
important thing to mention is that implementing an AC= in an
organization that1s not striving to generate big proft &often working with
charity, religion, science or education( may be very tricky since capital is
often re!uired and not0for0proft organizations are often better at
spending money, than making ditto.
11& Dis(uss how cultural control (oul- *e use- at a
universit, like 6$H&
$he +oyal 3nstitute of $echnology &G$B( could, to simplify the case of this
!uestion, be said to have two ma2or sorts of members, where category
number one consists of salaried employees and where member category
number two consists of the enrolled students. 3 believe that these
students could be described as being both employees &as they do
represent the school( and clients &who obtain services from the
institution( at the same time, and they should hence be included in the
ma2or part of the cultural control system.
:hat the two categories have in common is that they1re both a"iliated
with the university. # type of cultural control like physical arrangements
could hence be used for shaping the customs of both, conse!uently
resulting in a"ecting the atmosphere of the organization. $he president
of G$B, lodis, could for instance choose to encourage and persuade all
the employees to wear shorts or suits &if he so desired(. =uch a choice
would a"ect the entire salaried workforce and it1s likely that some
students would adapt to this trend. Changes a"ecting an organization in
this way, by alterations of its culture, can be made even clearer if
supported by a certain and concise tone at the top, and G$B is no
exception.
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3 do believe that codes of conduct is a type of cultural control that1s used
to a large extent at G$B, to provide broad, general statements of
corporate values, commitments to stakeholders, and the ways in which
top management would like the organiAation to function
%%
. $his, or
perhaps these, document&s( may to some extent overlap the areas of
personal control but are worth mentioning as they may work as a
framework for the organizational culture and how its employees are
supposed to treat each others and their assignments &respect, open0
minded, prohibition of cheating et cetera(. Conversely, there seems to be
little use of intraorganiAational transfers and group!based rewards at a
workplace like G$B. $he latter kind of control could perhaps have some
e"ect in further motivating its employees, if G$B, &for example( decided
on making a serious attempt of climbing the international university
rankings, but this does not seem to be a current interest.
12& A((ounting )ro3ts are often sai- to *e conservatively
biased& +hat -oes this mean7 an- wh, is it so/
$he key aspect mentioned in the !uestion ? stating that accounting
profts are often said to be conservatively biased 0 reveals one of the
many limitations for the use of accounting proft as a measure of
performance. =ince accounting systems are transaction oriented
&established on the transactions that took placed during a specifc period(
and based on rules ,which. require slow recognition of gains and
revenues but quick recognition of e#penses and losses
%5
, measures may
already be old at the point of completion. $his problem remains despite
the fact that the measurement methods may vary signifcantly from case
to case.
20& 8esults (ontrols7 a(tion (ontrols7 )ersonnel (ontrols7 an-
(ultural (ontrols9 +hi(h is ,our favourite of these7 an- wh,
:that is; if ,ou are free to (hoose one amongst them for a
uns)e(i3e- situation7 whi(h of them woul- ,ou (hoose/<
/roft without knowledge and peopleI 3 doubt it.
3 prefer personnel control &/C( as it1s in fact the workforce of an
organization, the associates and the managers performing work at
di"erent levels within the company, who constitutes the most
fundamental block on which it is built. Aany have argued that good
employees are a company1s most vital asset, and 3 agree, although 3 admit
that this perspective might have been somewhat shaped by a course 3
took in human resource management last spring.
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/ersonnel control includes three distinct methods &selection 5 placement,
training and 2ob design 5 provision of necessary resources( and may not
be optimal in all situations, but such is the case for all types of
behavioural control that have been discussed throughout the course. $he
fnesse with /C is how it can address all control problems while still being
comparatively cheap. =election and placement &the procedure for dealing
with recruitment, screening and interviewing( is an outstanding form of
problem prevention as severe issues are eliminated through hiring of
people who are ft for the respective positions within workplace.
/C has little chance to detect and solve control problems that occurs and
should not be used alone but still given this unspecifed situation, it1s still
my given choice. =ome form of personnel control will almost always be
needed.
!art ""# $he Case
The case you should analyse is ?irTe# ?viation on page 0%). ,ow, assume
that the managers of the company want to keep /arah, and also decided
that they would implement an action control philosophy to the company,
instead of the chosen control philosophy 7decentralised results control
with some personal and cultural control8.
1& How (oul- the, (onstru(t the (ontrol s,stem/ =uggest
im)ortant (om)onents an- )rere>uisites for an a(tion
(ontrol s,stem for the (om)an,&
Aentioned during the third classroom discussion &?lcon Laboratories(
was that a prere!uisite for a successful implementation of any
behavioural control system is to identify the needs of the corporation. $o
locate what issues and problems the new system should prevent and7or
detect. $he case of #ir$ex is in my opinion one of the better cases
presented in the course material, as it provides the reader with a very
descriptive and reasonable solution for handling a business on the verge
of bankruptcy. $he new president, $ed, identifes three main tasks he
would like to see addressed. $hese are% &'( revamping the management of
?irTe#, &)( installing a control system that would both support the
management and provide information needed in order to make decisions
and, &F( wrestling de facto control of the company from /arah ?rthur
promptly
FE
. 3 think they are all very relevant but would like to point out
that several motivational problems exist &Carl Dreen1s retirement
mentality and his absence of self!start ability in addition to some of the
basic attitudes found within the organization( and that personal
limitations is a reality &the department managers know nothing about
proftability and several people, including =arah, lack actual training or
education in their respective assignments(
F;
.
3&
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3 mentioned that the issue consisting of =arah and her control was much
due to personal limitations &little knowledge( but truth is that this may be
2ust as related to the problem category called lack of direction &doing the
wrong things(. $he new managers won1t be able to do everything
themselves and thus want to provide an environment where the
departmental managers could make correct decisions on their own
%2
.
+esults control imposed that the company was decentralized and that
proft centres were established, with the outcome of increased authority
and responsibility being given to the department managers. $his
responsibility was conse!uently supposed to elevate the proft of the
organization. 3 will soon explain how a similar upshot could have been
created through the implementation of an action control &#C( system.
#ction control is the most direct form of management control and would 0
unlike the results control system that $ed and Frank used 0 not re!uire a
lot of training of the department managers &or personnel, as was
visualized in Leos our!"le# Theatre(. Aoreover, #C often has the
advantages of serving as an organizational memory and increasing the
coordination of ditto. $he #C tools are often divided into four categories
&behavioural constraints, preaction reviews, action accountability and
redundancy(. $hree are clearly relevant to the case ? all but redundancy ?
but &as the reader will see( 3 do believe that using two will be su"icient
for addressing all the company1s control problems. +edundancy means
using more resources than actually re!uired for making sure that a
specifc task is fulflled, but 3 haven1t been able to identify any extremely
critical bottle neck activities within the organization and hence don1t see
the need for use of tool. 3mplementing control systems is not always
cheap and 3 will do my best in the attempt of fnding a healthy balance
between e"iciency and cost. +edundancy is a very expensive and
shouldn1t be used unless necessary it will not be used for addressing the
problems of #ir$ex.
*oth preaction reviews &/+( and action accountability &##( can solve the
three control problems lack of direction, motivational problems and
personal limitations. $hey are often implemented with negative
reinforcements &punishing rather than rewarding( and strive to a"ect the
action of the workforce. /+ involve scrutiny of the action plans of the
employees being controlled, may be a good remedy for myopia &see
.hadwick and chapter twelve( and can be done both formal &approvals for
expenditures etc.( and informal &hallway chats etc.( while ## emphasizes
holding employees accountable for the actions they take
%)
. 3 do believe
that these are !uite similar and think that anyone with economical
responsibility would choose only to use one of these to a larger extent. 3
suggest that #ir$ex pick ## for controlling its department managers.
#ction accountability may typically result in more negative side e"ects
than do preaction reviews but 3 don1t consider this a grave problem, as
the workers of #ir$ex are explained to be very loyal
FL
. $he advantage of
3%
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using ##, compared to /+, is that it does not only prevent, but also detect
control problems. #s the revamped system is supposed to be based on #C,
it1s necessary to have a function that1s detecting problems. #ction
accountability is usually conducted in four steps &defning acceptable 5
unacceptable actions, communicating the actions, observing7tracking the
actions and rewarding7punishing the actions taken( and can be
communicated administratively or socially. 3 would perhaps prefer
administrative correspondence in a general situation but 3 have doubts
regarding the #ir$ex employees1 willingness to read and hence stress the
need for social communication of these actions. 3 suggest fre!uency in
the initial tracking and reduction of this when it1s been observed that the
new system is functioning.
$he fourth category of action control, behavioural constraints &*C(, might
fll a very necessary function for getting #ir$ex back on the right track.
*C involves physical and administrative constraints. 4ocks, passwords
and limits on access belong to the frst group and would be of little use
for solving the discussed issues. $he second group of *C, consisting of
administrative constraints could however be most useful for dealing with
=arah, whose control must be reduced. :hat 31m thinking of is restriction
of decision making authority and separation of duties, leading to good
internal control
8C
. 3t1s likely that the new managers could motivate =arah
to stay if they spent some time on developing her assignments to fool0
proof &or poka0yokes( instead of simply confscating all her power. :ith
her )C years of experience and willingness to work &took responsibility
for plenty till the organization was restructured(, she1s deemed to be an
asset to the company if used in the right way.
3t1s clear that action accountability and behavioural constraints should be
implemented. # timely, precise, ob2ective and understandable installation
of these would be enough to address, prevent and detect the control
problems the company may face and should not be excessively expensive.
#ction controls can be used as no unusually high risks for environmental
uncertainties exists and 31m convinced that my suggested solution has a
fne balance between being tight and loose goal achievement and
stability versus creativity and innovation. #ccounting would hence be
made rather tight but the department managers in general, would not be
overly controlled. $he system would nonetheless be tight enough not to
be called loose, much due to the action accountability system
8'
.
2& +hat )ro*lems might o((ur7 an- how (oul- these *e solve-/
"0
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#ction accountability could in@ict problems such as behavioural
displacement, gamesmanship and negative attitudes. $he last of these is
also relevant for the second category used in my recommended case
solution behavioural control. *ehavioural control is likely to result in
operating delays as well. 3 do however believe that operating delays are
closer related to physical constraints than to administrational constraints.
=ince administrative constraints is the only form of behavioural
constraints used in #ir$ex, 3 must insist that not all four, but rather three
of the common, harmful side e"ects could exist in our organization.
Furthermore, there1s always a slight possibility that environmental
uncertainties may erupt and create confusion, but as was mentioned in
my answer for case !uestion number one, this doesn1t appear to be an
aspect that should be taken into consideration for this case.
:hile action controls may be e"icient in aiding the organizational
coordination, it could also discourage creativity, innovation and
adaptation in #ir$ex since tight controls are likely to create a non0
stimulating and passive business climate
8)
. #ction accountability can,
according to the course material, also cause sloppiness when employees
get used to the rules and regulations they are dependant on, and nor is it
unlikely that the suggested system would create negative attitudes.
:illiam :allace &Ael Dibson( of 9raveheart made clear that people desire
freedom and the opportunity of choosing or at least a"ecting what they
are doing. 3t1s obvious that few persons en2oy adapting to restrictions
controlling their every single move and this could naturally be a problem
in an action controlled #ir$ex.
*ehavioural displacement &typifed in the case of >isctech( basically
means that the wrong things are being focused. $his could perhaps take
place if people fnd out that some activities are better known or much
easier to monitor than others. 3t would be absurd to say that it couldn1t
possibly exist in #ir$ex but given that the company1s still rather small, 3
wouldn1t consider it a huge problem.
Damesmanship refer to the actions that employees take that are intended
to improve their performance indicators without producing any positive
economic e6ects and could naturally evolve from the systems change, but
3 !ualm it will be a big problem, given the vast loyalty among most of the
#ir$ex employees.
$he implementation of my proposed action control system is far from
what a perfect system could be but it does have many advantages. 3t1s
cheap, it1s feasible and it does address all general types of problems and
their various aspects. 3f problems such as gamesmanship and behavioural
problems become realities, consider extending the behavioural control to
make these activities fool0proof &tighten the controls(. 3f negative
attitudes grow, reduce the behavioural constraints and start
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communicating goals and ob2ectives with the respective department
managers &loose up the controls(.
+hat have " -one to learn the (ontent of the (ourse/
#s soon as 3 had got hold of 'anagement .ontrol /ystems, 3 started
reading. 3 read through almost the entire book during Kanuary and latter
repeated what 3 had learnt by going through the relevant cases before
each lecture. 3 didn1t have the opportunity to participate during all
lectures due to schedule overlaps with a course with mandatory
attendance, but 3 must admit that the classroom discussions have been
utmost interesting. 3 appreciate the structure of the course and en2oy the
content. 3t1s much more exciting to work with actual cases, like we did,
than 2ust studying theory. 3 wish that students of G$B were given similar
opportunities in most economy and business courses it would surely
raise the !uality of our education.
3 feel that 31ve must mention that 3 actually visited the =ands casino of
Aacau a couple of months ago &took the ferry over from Bong Gong ?
where 3 was currently studying ? during a =aturday( and although 3 didn1t
gamble, 3 did become aware of some of the many control systems in
place. Control systems of the types that have been discussed during the
lectures of this course. $he =ands casino explained in the course material
may not be exactly alike the one 3 visited since they are geographically
located on opposite sides of the world, but 31m sure they could both serve
as good examples for describing situations where the behavioural
controls are extremely tight. 3 remember that 3 became a little upset
when 3 couldn1t bring my camera inside even though 3 understood why.
=tudying this course has been really interesting for me seeing that 31ve
become aware of, and have begun thinking of, how behavioural control
systems comprises natural parts of most, if not all, organizations around
us.
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