Midterm Notes

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- MCS influence human behaviour

- Good MCS influences human behaviour in a Goal congruent manner

Goal congruence

- Organizational goals vs personal goals

- Central purpose of management controls systems is to create goal congruence

- When evaluating MCS ask

- What actions does it motivate people to take in their own self-interest?

- Are these actions in the best interest of the organization

Informal Factors that influence goal congruence

- Work ethic, management style, culture

- External factors

- Norms of desirable behaviour that exists in the society in which the organization operates

- Work ethic: loyalty to the organization , their diligence, their spirit, their pride in doing a good job

- Some of these attitudes are local to a region

- Also can be industry specific and national

- Internal factors

- Culture: common beliefs, shared values, norms of behaviour, and assumptions that are accepted and present within the organization

Attempts to change practices are almost always met with resistance in mature organizations

- Management Style: subordinate’s attitudes reflect what they perceive their superiors attitudes to be

- Informal Organization: lines of communication (friends , support units, other managers), which are not a part of the formal reporting structure may influence the management control process

- Perception and Communication :

- Goals cannot be stated with absolute clarity in the best of circumstances

- messages received from different sources may conflict with one another

The Formal Control System

- Classified as two types

1) Management control system itself

- Rules

- Standing instructions, job descriptions, standard operating procedures, manuals, and ethical guidelines

- Some rules are guides others are requirements

- Physical controls

- Security guards, locked storage rooms, vaults, computer passwords, television surveillance

- Manuals

- Should be re-examined periodically

- Obsolete rules for situations that no longer exist can undermine the integrity of the manual as a whole

- System Safeguards

- Ensure information flowing through the system is accurate, and prevent fraud

- Signatures, cross checking, separate duties, counting cash and assets

- Task control systems

- Ensuring tasks are carried out efficiently and effectively

- Automotive system itself provides control

- Formal control process

- Look at exhibit 3.1 on page 105

Types of organizations

- Their structure can be grouped into 3 categories

- A functional Structure: each manager is responsible for a specified function

- A business unit structure: business unit managers are responsible for most activities of their particular unit (semi- independent part of the company)

- A Matrix structure, in which functional units have dual responsibilities

- Functional organizations

- Managers bring specialized knowledge to bear on decisions related to a specific function

- Important advantage is efficiency

- Disadvantages

- No unambiguous way of determining the effectiveness of the separate functional managers- each function contributes jointly

- Dispute between managers of different divisions (interdependent )can only be resolved at the top

- Time consuming and frustrating

- Functional structures are Inadequate for a firm with diversified products and marketing

- Tend to create “silos” (isolate) for each function preventing cross-functional coordination in areas such as new product development

- Can mitigate this by creating cross functional job rotation and team based rewards

- Business Units

- Business units act as if their units are separate companies

- their performance is measured by the profitability of the business function

- headquarters is responsible for obtaining funds and allocating it for best use

- also approves budgets and judges performance of unit managers

- HQ also establishes company wide policies

- Provides training ground for general management

- Manager may make sounder production and marketing decisions than headquarters might

- Unit as a whole can react to threats and opportunities more quickly

- May duplicate some work

- May be disputes between business units- one business unit infringing upon the charter of another

- Implications for system Design

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