The Control Function of Management Flashcards
Describe the two basic functions of control systems.
- Strategic Control: is our strategy valid?
- Management Control: are our employees likely to behave accordingly?
Describe the behavioral emphasis of management control.
Mangers taking steps to ensure employees are acting in accordance to organizational values. Guard organization from unable or unwilling employees.
When is management control “good”?
When major unpleasant surprises are unlikely to happen.
How can we assess if good control has been achieved?
assessing good control must be future-oriented and objectives driven
Name the different strategies to avoid control problems.
Avoidance
Automation
Risk Sharing
Centralization
What are the major control alternatives besides MCS?
- incentives that are highly leveraged
- subjective evaluation
- performance-based incentives
- internal audit staff
- policies and procedures
Name the steps to implement results controls.
- Define measurement dimensions
- Measure:
- Set Targets
- Provide Rewards
What is critical in choosing performance measures?
“what you measure is what you get”
balancing responsibilities to all stakeholders
What conditions have to be present to make results controls work best? Describe them.
- Knowledge of the desired results
- ability to influence desired results: in material way an in time
- ability to measure controllable results
Name and describe the characteristics results measures should have to evoke the right behaviors.
- congruent and controllable
- precise: actual (true) value
- understandable
- timely: motivational aspect, value of intervention is higher
- cost efficient
Name and describe the different forms of action controls.
- Behavioral constraints
- Pre-action reviews
- Redundancy
- Action accountability
What criteria should be employed to judge the effectiveness of action tracking?
- Precision
- Understandability
- Timeliness
- Objectivity
What are the three most common drivers to adopt codes of conduct?
- legal requirements
- firm reputation
- shared company culture
What do group-based incentive plans create?
culture of “ownership” and “engagement”
What are the factors that influence the achievement of tight result control?
- Definition of the desired Results Areas
- Performance Measures
What makes results controls tight?
- Definition of the desired Results Areas: Congruence, Specificity, Communication, Completeness
- Performance Measures: rewards directly linked to results
Name the different types of indirect costs and define them.
- Behavioral Displacement: when MCS encourages non congruent behavior
- Gamesmanship: creation of slack, data manipulation
- Operating Delays: e.g. due to pre-action reviews
- Negative attitudes
When does behavioral displacement occur with action controls?
- “means-end-inversion”: loosing sight of what to accomplish
- passiveness due to high bureaucracy
When does behavioral displacement occur with action controls?
- “means-end-inversion”: loosing sight of what to accomplish
- passiveness due to high bureaucracy
Describe the term “gamesmanship”.
actions that employees take to improve their performance indicators
In what ways can results controls produce negative attitudes?
- lack of commitment to targets (too difficult, not controllable, …)
- problems in the measurement system
- punishment
- evaluation process is insensitive
How can action controls produce negative attitudes?
Pre-action reviews can be frustrating
What are the two basic questions that should be addressed in designing and improving MCS?
What is Desired?
What is likely to happen?
(What type of controls should be applied?)
(How tight should those controls be applied?)
Describe the advantages and disadvantages of action controls?
- Advantages:
- most direct form of control
- lead to documentation and accumulation of knowledge
- form of organizational memory
- Disadvantages:
- cost
- feasibility
- can cause sloppiness and negative attitudes
- discourage creativity
Describe the advantages and disadvantages/limitations of results controls?
- Advantages:
- cost
- feasibility
- employee autonomy
- Disadvantages:
- risk on employees
- less than perfect indicator when measure fails to meet qualities: congruence, precision, understandability, timeliness, objectivity
