Chapter 9 Lecture Slides

Question 1

The Meaning of Control

Question 2

Identify the characteristics of well-designed management accounting and control systems

Question 3

Discuss key behavioral considerations in the design of a management accounting and control system.

Question 4

Explain the human resources management model of motivation

Question 5

Discuss task and results control methods

Question 6

Management Accounting & Control Systems

(MACS)

Question 7

Characteristics of Well-Designed MACS

Answer 7

• Technical Considerations
  
  • Relevance of the info generated
    
    • Timely
    • Accurate
    • Consistent
    • Fleixible
  • Scope of the system - Comprehensive - inclusive of entire value-chain
• Behavioral Considerations

Question 8

Behavioral Characteristics of a Well-Designed MACS

Answer 8

• Determining the method of control (Task vs. Results)
• Using a mix of short and long-term qualitative and quantitative performance measures
• Empowering employees to be involved in decision making and MACS design
• Developing and appropriate incentive system to reward performance

Question 9

Impact of MACS on Behavior

Answer 9

• W/out careful attention to behavioral factors…
  
  • Goal congruence ay not occur (alignment of employees’ goals w/ the organization’s goals)
  • Motivation may be low
  • Employees may be encouraged to engage in dysfunctional behavior

Question 10

The Role of Management

Answer 10

t

Question 11

Scientific Mgt School

(Taylorism)

Answer 11

• People find work objectionable and do not want to make decisions or exercise creativity on the job
• $ is the major driver of performance
• Employees should follow highly detailed, prescribed procedures developed by experts
• Break down tasks to small parts; “science” for each part; time and motion studies
• Behavior should be monitored and controlled very carefully
• Provide incentives to perform job in the designated “best way”

Question 12

Human Resources Model of Motivation

(HRMM)

Answer 12

• Contemporary management view of motivation
• Reflects influence of Japaneses management practices, and initiatives to improve the quality of working life
• Introduces a high level of employee responsibilty for and participation in decisions in the work environment
• Serves as the basis for the presentation of the four behavioral considerations in MACS design

Question 13

Central HRMM Assumptions

Answer 13

• Organizations operate under a system of beliefs about the values, purpose, and direction of their organization
• People find work enjoyable and desire to participate in:
  
  • Developing objectives
  • Making decisions
  • attaining goals in their work environment
• Individuals are motivated by both financial and nonfinancial means of compensation

Question 14

Central HRMM Assumptions Cont.

Answer 14

• Employees have a great deal of knowledge and information about thier jobs, and can therefore improve the way they perform tasks and benefit the organization as a whole
• Individuals are highly creative, ethical, and responsible
• Employees desire opportunities to produce constructive changes in their organizations

Question 15

MACS Design: Task Control

Answer 15

• process of finding ways to control behavior so that a job is completed in a pre-specified manner
• Preventive control
  
  • LIttle discretion in performing a task; possibly performed by machine or computer (i.e. provide receipt)
• Moitoring (i.e. surveillance)
  
  • Inspecting the work or behavior of employees while they are doing task
  • Potential neg consequences

Question 16

MACS Design: Results Control

Answer 16

• measuring employee performance against stated objectives
• Organization must clearly define objectives, communicate them to appropriate organization members, and design performance measures consistent with the objectives
  
  • Sales people may be evaluated ont he volume of sales they made during a specific time; discretion given to Nordstrom sales staff

Question 17

Non-Goal-Congruent Behavior

Question 18

MACS Design:

Multiple Performance Measures

Answer 18

• Using multiple measures of performance helps employees focus on several dimensions of their job rather than just one
• May use financial and nonfinancial measures; measure quality, speed to market, cycle time, flexibility, innovation, and productivity
• Can reduce risks of “dysfunctional’ behavior such as performance gaming

Question 19

MACS Design:

Empowering Employees

Question 20

Empowering Employees in Designing the Budget Process

Answer 20

• Authoritative Budgeting: imposedfrom superior to subordinate
• Participative budgeting: joint decision making process in which all parties agree about the budget targets
• Consultative budgeting: managers ask subordinates for ideas but no joint decision making about budget targets

Question 21

Authoritative Budgeting

Answer 21

• occurs when a superior informs subordinates what their budget willb e without requesting input
• Benefit: the process is straightforward and effiecient
• Disadvantage: superiors usually have less information about the process being budgeted than the subordinate

Question 22

Participative Budgeting

Answer 22

• an approach to budget setting that uses a joint decisionmaking process in which all parties agree about setting the budget targets
• Benefit: greater feelings of commitment to the budget, and therefore, a higher level of motivation to attain goals and keep within the budget

Question 23

Consultative Budgeting

Question 24

Targets in Designing the Budet Process

Question 25

Influencing the Budget Process

Answer 25

• Budget Slack
  
  • the influence of behavior to “pad” a budget via misstating expenses and/or revenues
• Misallocation of resources within company
• Distoring performance information
• Mitigated by: lengthy budget cycles in which all employees participate, provide higher level bonuses based on attaining high targets

Question 26

MACS Design: Incentive Systems

Answer 26

Intrinsic rewards (not affected by MACS): reflect…

• Satisfaction from doing the job
• Growth opportunities the job provides
• Feeling of accomplishment and respect

Extrinsic rewards: motivate desired behavior by providing an explicit (often financial) reward based on assessed performance

Question 27

Incentive Compensation

Answer 27

• Incentive compensation (pay-for-performance) systems, are rewards systems that provide monetary (extrinsic) rewards based on achieving or exceeding measured results
• Require performance measurement systems that gather relevant and reliable performance information

Question 28

Types of Incentive Plans