Week 1 - introduction to organisational control Flashcards
Define the following key concepts regarding organisations:
Organisations
Structure
Resources
Culture
Organisations - group f people working together toward a common goal
Structure - hierarchical arrangment of authority, communications and duties within and organisation
Resources - an economic or productive factor required to accomplish an activity to achieve a goal
Culture - values, behaviours and norms that make up an organisational environment.
Define the following key concepts regarding Managing decisions:
Strategy
Systems
Information
Strategy - tactics that guide long term decidsions
systems - step by step process that regulate a task
Information - data organised within a specific context to give it purpose
Define the following key concepts regarding Organisational control:
Strategy formulation
Task control
Management control
Strategy formulation - Forming organisational goals and strategies to attain them.
Task control - assuring day to day operations are carried out and aligned with org strategy
Management control - the implement of strategies to achieve goals. Steps: Vision, strategy, implementation, operating/ measurement, evaluation/ reporting.
Define the following key concepts regarding organisational controls:
Administrative
Social
Self monitoring
Administrative - structures, mechanisms & processes established to control behaviour at individual/team / org level
Social - admin controls used when subordinates work is not understood or difficult to measure
Self monitoring - motivated by intrinsic values and rewards.
List the types of decisions managers make for oganisations
Vision - The core purpose (shaped and shaped by core comps).
Organisational core competencies - the entity’s strengths relative to competitors
Organisational strategies - tactics used to acyieve vision while taking advantage of core comps. Long term, eg cost leader, product differentiation.
Operating plans - short term specific plans aligning day to day activities toward org strategies. Incl performance objectives, est revenue and costs.
Actual operations - actions taken and results achieved over a period of time measured using info system
Why do managers measure, monitor and motivate performance?
To ensure actual performance is in line with organisational goals.
Define these terms:
Cost accounting
Management accounting
Financial accounting
Reports
Cost accounting information: a technique or method for determining the cost of a project, process or thing
Management accounting: the process of gathering, summarising and reporting financial and non-financial information used internally by managers to make decisions
Financial accounting: the process of preparing and reporting financial information used most frequently by decision makers outside of the entity, such as shareholders and creditors
Reports: Generating documents that summarise or highlight information to facilitate internal decision making and meet external reporting requirements.
Discuss the 2 aspects of quality information and the impact of relevance on decision making.
2 aspects of quality information:
The quality and relevance of management accounting info
The quality of decision making process in use in the org
Relevance of information is contingent on the decision at hand and the goal to be achieve however:
- Relevant information that helps the decision maker to evaluate and choose among alternative courses of action
- Irrelevant information that does not vary with the action taken and therefore is not useful for decision making
Allowing that opportunity must be take into account and information collected must pass a cost benefit analysis, list the path to better quality decision making.
Higher quality info (certain, complete, relevant, timely, valuable)
leads to
Higher quality reports (relevant, understandable, available)
leads to
Higher quality decision making processes (thorough, unbiased, focused, strategic, creative, visionary).
= Better Decision Making.
Opportunity cost must be taken
Define the value chain and the supply chain
Value chain - The set of activities that the organisation undertakes or organizes to deliver the product to the customer. Usually presented as a mix of primary activities and support activities.
Supply chain - the flow of resources from the initial suppliers through the delivery of goods and services to customers
Cost objects and drivers are fundamental to the idea of management accounting. Define them.
- Cost object a thing or activity for which we measure costs, e.g. a product, service, customer, department, business unit or geographic region
- Cost driver an input or activity that causes changes in total cost for a cost object At the organisational level they are often classified as structural or executional costs:
o Structural cost drivers are those that relate to the underlying economic structure of the organisation
o Executional cost drivers relate to the ability of the organisation to do what it does successfully.
What are organisational control systems and why are they important?
Control systems are designed to preserve an org’s unique advantages over individual action or other forms of co-operation.
Why are they important
Provide 3 specific advantages that keep orgs viable
- Provide tool for a community to pursue values and beliefs.
- Create outcomes not attainable through individual action
- Provide settings in which exchanges can be performed more efficiently
Name the 3 levels of control systems
Symbolic - Manages relationship with organization and community. Identifies values and beliefs translates them into relevant organizational actions.
Behavioural - organises interlocked behaviour, provides
incentives for co-operation to continue.
Resource allocation policy - overcomes the difficulties of dealing with partners by acquiring activities best preformed in the org and divesting those best performed outside of the org.
Name 3 reasons why control systems fail
Inadequately performance - incompleteness, inconsistency, one dimensional
Improper design: failing to legitimse (symbolic). Failing to create collectivist structure (Behavioural). Failing to evaluate activities to keep or lose (Resource allocation level)
Missing synergy
Failure at the symbolic level means an absence of culture that impacts on the other 2 levels.
