Management control systems and economic responsibilities Flashcards
What does IPO stands for? + explain each type of control
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
What does the behavioral control consists of?
- Behavioral constraints
- Preaction reviews
- Action accountability
Focus should be on prevention rather than detection controls
What does social control consists of?
Selecting people to behave a certain way to be part of a community.
What are the stages of results control?
- 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
What are the harmful side-effects of action controls?
Discourages creativity
What are the harmful side-effects of personnel controls?
Lack of congruence where group goals don’t coincide with firm goals
What are the harmful side-effects of result controls?
- 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
What are the three spheres of the org reward system?
- Organizational goals
- Formal measurement system
- Individual manager’s goals
What are the advantages and disadvantages of action controls?
- 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
What are the advantages and disadvantages of personnel controls?
- 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)
What are the advantages and disadvantages of result controls?
- 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.
Why is financial control predominant in most organizations?
- 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
What are the four types of responsibility centers?
They are accountable for. Autonomy and delegation level is also the following (in reverse order)
- Costs
- Revenues
- profit
- investments
What are the core elements of MACs?
- Formal planning processes
- Responsibility accounting
What are the processes of MACs?
- Set performance targets
- Measuring performance
- Comparing performance against target
- Analysing variances and taking remedial actions