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MA Lecture 2
MA Lecture 2
Chapter 1:
Management and Control
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.2
Management control
The process by which management:
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.3
Purpose/function
get done what management wants done;
influence behavior in desirable ways.
Benefit
increased probability that the organization’s
objectives will be achieved.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.4
Objective Setting
Strategy Formulation
Management Control
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.5
Objective setting
Objectives are
a necessary prerequisite for any purposeful activities.
Objectives can be
financial versus non-financial;
quantified, explicit versus implicit;
economic, social, environmental, societal.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.6
Strategy formulation
An organization must select any of innumerable
ways of seeking to attain its objectives.
Hence,
strategies put constraints on employees to
focus activities on what the organization does
best or areas where it has an advantage over
competitors.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.7
Key questions
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.8
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.9
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.10
Lack of direction
COMMUNICATION + REINFORCEMENT !
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.11
Motivational problems
When employees ‘choose’ not to perform as
their organization would have them perform.
Because
Lack of goal congruence
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.12
Personal limitations
Sometimes, people are “unable” to do a good job because of
certain personal limitations they have.
Some examples/causes:
lack of requisite knowledge, training, experience;
employees are promoted above their level of competence;
some jobs are not designed properly;
etc.
TRAINING
JOB ASSIGNMENT
JOB DESIGN
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.13
Note that
Management controls do not always involve a simple cybernetic
system like a thermostat
Detector measure performance;
Assessor compare with pre-set standard;
Effector take corrective action.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.14
Action Controls;
Results Controls;
People Controls.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.15
Control-problem avoidance
Three possibilities:
Activity elimination
e.g., subcontracts, licensing agreements, divestment.
Automation
Computers/robots eliminate the human problems
of inaccuracy, inconsistency, and lack of motivation;
Only applicable to relatively easy decision situations;
Automation can be very costly.
Centralization
Superiors reserve for themselves the most critical
decisions.
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.16
Control alternatives
Controls can focus on:
Or any combination
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.17
Depending on
Action Control
and/or Action Control
Results Control (e.g. large projects)
High Low
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
Slide 1.18
Overview
Can people be avoided? Yes Control-problem
(e.g. automation, centralization)
avoidance
No
Yes
Can you rely on people involved?
No People controls
Yes
Can you make people reliable?
No
Have knowledge about what Yes Able to assess whether
specific actions are desirable? specific action was taken?
Yes
No
Action controls
Have knowledge about what Yes
results are desirable? Able to measure results?
Yes
No
Results controls
?
Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007