Management control systems and economic responsibilities Flashcards

1
Q

What does IPO stands for? + explain each type of control

A

Inputs/processes/outputs
1- Inputs = ppl control, that is action/behavioral control
2- Processes = create rules to be followed and selecting the right ppl
3- outputs = focus on results

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2
Q

What does the behavioral control consists of?

A
  • Behavioral constraints
  • Preaction reviews
  • Action accountability

Focus should be on prevention rather than detection controls

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3
Q

What does social control consists of?

A

Selecting people to behave a certain way to be part of a community.

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4
Q

What are the stages of results control?

A
  • The way we measure performances, establishing performance measures (what we want to measure as a result)
  • Establish performance targets (setting value, what is the target)
  • Measure performance
  • Provide rewards or punishments
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5
Q

What are the harmful side-effects of action controls?

A

Discourages creativity

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6
Q

What are the harmful side-effects of personnel controls?

A

Lack of congruence where group goals don’t coincide with firm goals

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7
Q

What are the harmful side-effects of result controls?

A
  • Focus is only on what is measured
  • Focus only on what can be measurable
  • Subject to data manipulation
  • Can lead to negative attitudes towards the control system, have unfair behaviors to get the desirable result
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8
Q

What are the three spheres of the org reward system?

A
  • Organizational goals
  • Formal measurement system
  • Individual manager’s goals
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9
Q

What are the advantages and disadvantages of action controls?

A
  • Direct link between control mechanism and the action
  • Measurement problems do not apply (we need the action to be measurable, or it’s impossible to control)
  • Cause and effect relationships are not well understood (input’s effect on output is not easily observable) (if i do this, i will get that - is unknown), action control can happen when we have clear connection between input and output. (this is about the input not the process)
  • Best suited to stable situations
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10
Q

What are the advantages and disadvantages of personnel controls?

A
  • Few harmful side-effects
  • Inexpensive to operate
  • Appropriate only in certain circumstances (when we need a set of skills and when activities are complex we can use this)
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11
Q

What are the advantages and disadvantages of result controls?

A
  • Can be applied where knowledge of actions is lacking
  • Focuses on outcomes –> we just expect the result and ppl can behave as they like. They can select the way they want to solve the problem.
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12
Q

Why is financial control predominant in most organizations?

A
  • Monetary measures aggregate results from different activities
  • Financial health is vital for a company’s survival
  • They enable a common decision rule
  • Allows for more autonomy
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13
Q

What are the four types of responsibility centers?

A

They are accountable for. Autonomy and delegation level is also the following (in reverse order)

  • Costs
  • Revenues
  • profit
  • investments
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14
Q

What are the core elements of MACs?

A
  • Formal planning processes

- Responsibility accounting

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15
Q

What are the processes of MACs?

A
  • Set performance targets
  • Measuring performance
  • Comparing performance against target
  • Analysing variances and taking remedial actions
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16
Q

What is the controllability principle?

A

It says that it’s appropriate to charge to a responsibility center only those costs that can be influenced by the manager of the responsibility center

17
Q

What are the types of uncontrollable factors?

A
  • Economic and competitive factors
  • Acts of nature
  • Interdependencies where outcomes are affected by other units within the organization:
    • Pooled interdependencies (common resources)
    • Sequential interdependencies (input –> output)
    • Reciprocal interdependence
18
Q

What are the adjustments before the measurement period?

A
  • Specify which budget are uncontrollable

- Insurance on them

19
Q

What are the adjustments after the measurement period?

A
  • Variance analysis
  • Flexible performance standards
  • Relative performance evaluations
  • Subject performance evaluations
20
Q

What are some effects of over difficult achievable budgets?

A
  • Conflict between planning and motivational purposes
  • Psychological benefits
  • Shields managers from adverse impact of environmental changes.
21
Q

Why is it important to have participation?

A
  • Targets are more likely to be accepted
  • Reduces info asymmetry and will be able to influence the target
  • Reduces negative attitudes and dysfunctional behavior
22
Q

What are the factors that influence the effectiveness of participation?

A
  • Personality
  • Work situation
  • Job difficulty