Lektion 1 - Introduction Flashcards

1
Q

What is the definition of management control systems

A

‘’Comprising a combination of control practices designed and implemented by top managers to increase the probability that lower-level managers and employees will behave in ways consistent with the organization’s mission, goals and strategies’’

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2
Q

(!) Why use management control systems?

A

MCS enable innovative activities using input and output controls

MCS has an important ‘enabling’ role designing control practices that help maintain or enhance the skill set, job motivation and organizational commitment of lower-level managers and employees

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3
Q

Describe the difference between small and large organizations

A

Small organisations

- Little need for systematic
- Less complex
- Less need for costly management control systems
- Direct, informal communication

Large organisations

  • Lower-level managers make decisions on their own
  • Formal control practices required
  • (Budgets, mission statements, transfer pricing arrangements, performance measures and reward systems)
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4
Q

(!) Explain the differences between the top-down and bottom-up functions of management control systems

A

Top-down MCS

General:
- Control practices implemented of the topmanager

Other things:

  • Clear sense of decision making
  • Clear results to achieve
  • Clarity about use of ressources

____________

Bottom-up MCS:

General:
- Control practices to ensure consistency

Other things:

  • Reports on achievements
  • Enable employees to acquire support to develop skills
  • Enable employees to acquire the organizational resources to execute their responsibilities
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5
Q

Give some examples on when there could be need of management control

A

Lack of understanding the mission, goals, and strategies and how to be contributing to it:

  • Top-down: Explain mission, goals, and strategies in an operational way and support coordination across business functions.
  • Bottom-up: Report on achievement and enable coordination and cooperation between business units

______________

Lack of agreement with the mission, goals, and strategies:

  • Top-down: Motivate striving for it
  • Bottom-up: Facilitate top managers to benefit from the specialized skills and knowledge of lower-level managers and employees

__________

Lack of resources needed for contributing to the mission, goals, and strategies:

  • Top-down: Resource allocation and skill development
  • Bottom-up: Enable acquiring the support and resources to execute responsibilities
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6
Q

(!) Discuss the enabling- and coercive role of a management control system

A

Enabling role

  • Control practices perceived as support
  • Lower-level manager and employee understanding
  • Communication and visualization
  • Involvement during implementation
  • Control practices that helps maintain or develop skills, job motivation and organizational commitment.

Coercive

  • Control practices viewed as structural devices to force or check in on the employees
  • Certain indisputable rules
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7
Q

(!) Explain the three types of control practices

A

Input controls:

General:

  • Cognitive abilities
  • Skills
  • Personal values

Control practices:

  • Employee selection processes: Screening candidates
  • Value statement: Formal mission statement
  • Employee socialization processes: Introduction, training and culture programs

______________

Throughput controls:

General:
- Actual work and organization

Control practices:

  • The organizations’ set of rules: Code of conduct
  • The organizational architecture: Organizational structure (Responsibility centre)

______________

Output controls:

General:

  • Performance
  • Results
Control practices:
- Budgets
- Risk management: Scenario analysis
- Financial and non financial performance measures: Sales, profit, customer satisfaction, productivity
(Often combined with reward systems)
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8
Q

Explain the saying; ‘‘Tone at the top’’

A

The ‘‘tone at the top’’ refers to the belief that the behavior in top of the organizational hierarchy will affect the behavior in the rest of the organisation

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9
Q

Relate the topic to the Enron case

A

Identify the ways in which Enron was out of control?
- Hiding risky investments & having billions of debt not in best interest of organisation

What was dysfunctional?
- Aggressive performance targets and high rewards

Appropriate way to avoid problem?
- Maybe bottom up

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10
Q

Relate the topic to the Wal-Mart case

A

General:

  • Every store investment centre
  • Profit sharing
  • Frugality as part of DNA

_____________

What is Wal-Mart’s strategy? What is the basis on which Wal-Mart builds its competitive advantage?

  • No dependence on suppliers
  • ‘’Everyday low prices’’: Cost leadership
  • Very efficient processes
  • Distributions centers max one day drive

_____________

What are essential MSC that Wal-Mart needs here?
- E.g. Output control to performance evaluate employees

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