Alternative Approaches to the evaluation of MCs

Question 1

What does Chenhall 2003 - What is a management control system?

Answer 1

They encompass management accounting system,s nut also include other controls, such as results controls, actions controls and cultural controls.

Question 2

Two well known analytical frameworks to evaluate MCSs

Answer 2

Simons 1995 Levers of Control framework

Otley 1999 Performance Management framework

Question 3

What are the fundamental problems facing managers

Answer 3

How to exercise adequate control in organisations that demand flexibility, innovation and creativity.
Competitive businesses with demanding and informed customers must rely on employee initiative to seek out opportunities
Pursuing these however can expose the company to risks and invite damaging behaviours

Question 4

What are Simons’ 1995 levels of control

4

Answer 4

Core Values - Belief Systems
Risks to be avoided - Boundary Systems
Critical perfoamnce variables - Diagnostic control systems
Strategic Uncertainties - Interactive Control Systems

Question 5

Two control systems of communication:

Answer 5

Diagnostic control systems

Interactive Control systems

Question 6

Diagnostic v Interactive Control

Answer 6

Diagnostic control systems: communicate and control objective - speedometer analogy - MANAGEMENT BY EXCEPTION
Interactive: focus on strategic uncertainties
Main difference isn’t technical design, but how they are used by managers.

Question 7

Diagnostic Control Systems can be used if it is possible to: 4

Answer 7

1. Set a goal in advance
2. Measure outputs
3. Calculate performance variances
4. Use variances as feedback to alter inputs and/or processes to bring performance back in line with preset goals and standards

This can be used if the chosen strategy is appropriate and does not change along the time - if not, interactive

Question 8

What are interactive control systems used for?

Answer 8

To deal with strategic uncertainties - threats and opportunities which challenge existing strategy
Threats / opportunities relate to changes in customer preferences / other macro factors

Question 9

The four criteria that needs to be satisfied to use ICS

Answer 9

1. Must be easy to understand
2. Must provide information about strategic uncertainties
3. Must be used by multiple mangers throughout organisation
4. Must generate new action plans

Question 10

How must interacting control systems be aligned?

Answer 10

Carefully with incentives and rewards. While rewards and bonuses can be linked to diagnostic control systems (e.h. measured for rewards) such rewards cannot be applied to interactive control systems.

Question 11

Potential problems applying incentives to ICS: 3

Answer 11

Potentially divisive
Subjectivity
Time consuming control process

Question 12

What are Belief systems?

Answer 12

Empowerment and responsibility of employees;
may pursue opportunities which harm the firm
managers must inspire commitment to a clear set of core values
Communication of core values provide guidance to employees where rules and standard operating procedures alone are insufficient

Question 13

What did Kotter 1990 show about inspirational leaders? 4

Answer 13

Kotter 1990 showed they:

1. Articulate a vision that addresses the values of the organisation
2. Allow each individual to appreciate how he or she can contribute to the achievement of that vision
3. Provide enthusiastic support for effort
4. Encourage public recognition and reward for all successes

Question 14

How does firm size affect belief systems?

Answer 14

Small firms communication of core values can be accomplished informally.
As organisations become larger, this must be formally communicated to all levels

Question 15

What is Otley’s Framework?

Answer 15

Argues that there are five main sets of issues that need to be addressed in developing a framework for managing organisational performance.

Question 16

What are Otley’s five key questions?

Answer 16

1.What are the key objectives that are central to the organisations overall future success, and how does it go about evaluating its achievements for each of these objectives
2. What strategies and plans has the organisation adopted and what are the processes and actives that it has decided will be required for it to successfully implement these.
3. What level of performance does the organisation need to achieve in each of the areas defined in the two above questions, and how does it go about setting performance targets for them?
4, What rewards managers by achieving these performance targets
5. What are the information flows that are necessary to enable the organisation to learn from its experience