Lektion 14 - Control and controllership Flashcards
(!) Describe the function of a controller at different levels
Chief financial officer / CFO
General:
- Positioned within top management team
- Often when being a senior controller
Focus:
- Guide mix of input, TP & output controls to TM
- Prepare financial statement & financial reports
- Prepare tax returns
- Prepare & analyze performance reports & budgets
- Interpret reports for managers
- Analyze whole firms programs & budget proposals
- Consolidate everything into overall annual budget
- Supervise internal audit procedures to ensure validity
- Establish safeguards against theft & fraud
- Develop personnel in controller organization
- Earlier responsible for processing required information for MCS: Today the CIO
- Participate in MCS-education of management personnel
____________
Chief information officer:
General:
- Responsible for processing required MCS- info
- Either reporting to CFO or directly to CEO
Focus:
- Manage staff in IT-department
- Manage & optimize IT-infrastructure
- Help other members of TM-team, employees & LL-managers understand opportunities, risks with digitalization & big data
____________
Financial controller:
- Measure
- Report
____________
Business controller
- Help managers run responsibility centre
(!) Describe what is meant by a controller and which responsibilities a controller has
General:
- Helps managers design & use MCS
- Do not specify level in organizational hierarchy
- Both a psychological & economic human being
- Has a strong & powerful role in organizations
- Controller is a staff function
- Important for long-term strategic plans & budgets
- Shareholders benefit from their expertise
- Increase due to digitalization, globalization & big data
- Often act as both consultant & police officer: Support business and enforce rules & regulation
- Best personality traits: Contentious & emotionally stable. Reference to ‘‘The big five’’
- Controller has conservative guardian role to protect organization from individual wrong-doings
___________
Responsibilities:
- Original covered all aspects of MCS
- Design & operate system that collect & report info
- Analyze performance measures for recommendations
- Monitor limitations to spending: Set by CEO
- Control integrity of accounting system
- Safeguard assets from theft & fraud
- May take some operational decisions: E.g. Policies
- Calls attention to items deserving further inquiry
- Measure performance of organization & R-centre
- Makes suggestions to managers about performance improvements & efficiency gains
- Ensure no idle use of assets: Interest of shareholders
- Ensure behavior is in line with legal rules
- Today often including risk management & the complex and pervasive information technology
_____________
Not responsibilities:
- Using the collected & reported information
- Management decisions
Describe the different types of controllership
Involved controller:
General:
- Typical labeled as business controller
- Decision support business partner
- Risk of faulty reporting
High priority:
- Business support
- Informal & analytical needs of R-centre managers
Low priority:
- Reporting
- Internal control
Corporate control
- Low
Business support
- High
_____________
Strong controller:
General:
- Flexibility
- Risk of conflict of interest
- Ability to safeguard company assets
- Assure integrity
- Guarantee quality of performance reports
- Support responsibility centre managers
High priority:
- Support business
- Reporting
- Internal control
Corporate control:
- High
Business support:
- High
______________
Independent controller:
General:
- Typical labeled as financial controller
- Organizational conscience
- Risk of limited added value
High priority:
- Reporting
- Internal control
- Assets security
- Report integrity
Low priority:
- Business support
Corporate control
- High
Business support
- Low
______________
Fourth quadrant
General:
- Should be avoided
Corporate control:
- Low
Business support:
- Low
______________
Separate from model:
Combined type:
- Split controllership
- Combination of involved and independent controller
Describe what is meant by a responsibility centre controller and its responsibilities
General:
- Controller working for particular division or PC
- Has dual responsibilities
____________
Responsibilities:
Loyalty to CFO & rest of top management team:
- Overall design & operation of the MCS
- Coercive role
- Report about performance & activities
Loyalty to manager of responsibility centre:
- Support managers, employees strategic & operational decision making
- Enabling role
_____________
Risks of dual responsibilities:
General:
- No independence from RC weaken corporate control
- Risk of local pressure: Make it easy for unit manager
- Risk of conflict of interest
Dependencies:
- Involvement in local decision making
- Amount of social pressure
- Personality: Risk of machiavellianism (Personal benefits instead of ethical standards and norms)
- Relationship to CFO: Dotted line or solid line reporting
Describe the different kinds of reporting when it comes to relationships between controller and CFO
Dotted line reporting:
General:
- CFO is immediate boss of controller
- Manager of responsibility centre is boss of controller
- CFO has authority in hiring, training, transferring, compensation, promotion & firing
Benefits:
- Entrepreneurship of local controllers
- Enhance decentralized empowerment
Risks:
- Not completely objective reports on budgets and performance to top management
______________
Solid line reporting:
General:
- CFO is boss of controller
- Manager of R-centre is immediate boss of controller
- Direct reporting to CFO
Benefits:
- May benefit training, enhancing professional knowledge & norms, promotion opportunities & individual growth
- Create strong, cultural & professional bond between controllers
Risks:
- Reduce trust: Controller seen as spy from TM
(!) Describe the development in controllership and MCS
General:
- Controlling & MCS change slower than other organisation parts
- Companies often prioritize business instead of administrative part of business
- The controller has a personality
Fundamental changes:
- Stakeholder > shareholder perspective
- Horizontal perspective > vertical perspective
- Bottom up > top down
- Decentralization > centralization
- Beyond budgeting & balance scorecard > Budgets
- Enabling role > coercive role
- Organic systems > mechanic systems
- Sociological & psychological models > economic model
Other changes:
- Controllers as more independent thinkers with long-term & wider implications of goals & strategies
- Important financial ethics & sustainability competence
- Increased complexity due to digitalization & big data
- Integrated informations systems has changed the job
- Today hands-off handling information
- Need to show added value to organization & society
- World is changing faster than ever: VUCA: Volatile, uncertain, complex, ambiguous
- Need for flexibility and agility
- New business complexity demands shorter cycles
- Important to understand managers decision making
- Important knowledge of human behavior
- Increased focus on sustainability & CSR
- Proactive directors of change > reactive managers of stability
Important factors nowadays:
- Customer focus > Owner focus
- Intrinsic motivation > Extrinsic reward
- Trust > Monitoring
- Adaptability > Planning
Relate this topic to the case of Aluminium container corporation
General:
- Sales forecast: Bottom up
- Each district held responsible for own portion
- Problems between sale & production fixed in the field
- Controller answer questions about managers
Changes:
- Treat plants as EC instead of PC: Controllability
- Maybe introduce transfer pricing between departments
- Let managers speak themselves at meetings
