ACCOUNTING FOR FLEXIBILITY & EFFICIENCY: A FIELD STUDY OF MANAGEMENT CONTROL SYSTEMS IN A RESTAURANT CHAIN

PREPARED BY: SITI NUR DINI BT FAUZI 2011393491

OBJECTIVES
To distinguish between enabling and coercive uses of management control systems To illustrate how management pursued the objectives of efficiency and flexibility by using management control systems in enabling ways

Management Control System

COERCIVE
Stereotypical top-down control approach Emphasize on centralization & preplanning Give workers limited options for action

ENABLING

Put employees in a position to deal directly with the inevitable contingencies in their work Consider the opinions and views of workers

 Anthony (1965)- management control rely on ideas of cybernatic control and management by exception. Brownell (1978)- cybernatic control associated with delivering efficiency in mechanistic organizations characterized by formal rules, standardized operation procedures, and routines contrary with organic organizations.

MECHANISTIC Formal rules Standardized operation procedures and routines

ORGANIC Flexibility and intensive Free-flowing communication

 Chapman (1997)- it has repeatedly been found not to hold true that the management control systems in mechanistics organization would contribute a little benefit in organic organization IN ADDITION Brown and Eisenhardt (1997)- successful innovation in organic organizations required more than the insentive communication. For organic communication to be successful, it need to combine with more mechanistics elements. They conclude- organic and mechanistic organizations do not exist as pure types.

ENABLING MANAGEMENT CONTROL SYSTEM

Adler & Boryss (1996)- aids in identifying how and why MCS might be used to support rather than constraint with 4 design principles of enabling approach
1. Repair with the breakdown of control processes and provide capabilities to fix them (preferred by users of control system) 2. Internal transparency an understanding of the working of local processes 3. Global transparency an understanding of where and how these local processes fit into the organization as a whole 4. Flexibility organizational members discretion over the use of control system to the extent that they can even turn them off

RESTAURANT DIVISION
One of the largest full-service chain restaurants in the UK Wholly owned by the company and run by salaried man National branding and marketing was managed centrally from head office

Restaurant Division organization chart

 Individual restaurant budget estimation of the achievable level of sales growth from the central menu Restaurant controllable cost; food raw materials and labour costs applied uniformly to all restaurant divisions outlet. Restaurant sourced food and drink centralized supply chain

Performance Measurement Systems

PERSONNEL Divisional head office devoted considerable effort to the development of human resource policy of operational staff of all grades Recruitment, training, retention BRANDING Measured through brand audits Check on service standards and adherence to dish specifications

Enabling accounting control in Restaurant Division

Business model was built around the concept of a branded restaurant chain Uniform dishes be served to the to the same exacting standards throughout the restaurant chain Senior head office management aware that the dish and services standards were not end in themselves but means to achieve customer satisfaction

 The role of restaurant managers was not to merely to heads office rules but to employ the company guidelines towards customer satisfaction They had to be able to recognize the needs of client in each visit Managers needed to flexibly respond to local circumstances without stretching the efficiency and supporting food preparation and dish specification standards

Conclusion

1
Supported Brown & Eisenhardts (1997) purely organic or mechanistic management control system are rarely found in practice Processes of coercive formalization existed side by side with processes of enabling formalization

2
Relationship between head office and most restaurant managers was frequently characterized by mistrust Head office staff concern with limiting what they regards as inappropriate opportunism in restaurant Managers attacked the administrative functioning of the system and appropriateness of standards Thus, control workshop is needed to develop an understanding of management control systems that covered both efficiency and flexibility control

3
This study propose that enabling systems presents a useful framework for attempting to resolve between mechanistics controls aimed at efficiency and organic controls aimed at flexibility