Management Control Systems Chapters 1 2 Management Control

Management Control Systems Chapters 1 & 2, Management Control Systems, 12 th Ed. , Anthony and Govindarajan

Strategy n Corporate Strategy n n To maximize use of resources Business Strategy n To compete in selected markets

Goals and Strategy n Strategy Formulation n Goals How to attain Strategy Implementation (Execution) n n Objectives Management Control Systems

Management Control n The process by which managers influence other members of the organization to implement the organization’s strategies.

Management Control n Activities include: n n n Planning Coordinating Communicating Evaluating Deciding Influencing

Management Control Systems n n Facilitate management control Primarily focus on strategy execution Encompass both quantitative and qualitative performance measures Concerned with broadly defined activities

Conflict of Interests n Goal congruence implies that individual goals and organizational goals are consistent n Agency Theory implies the opposite

Good Management Control n Achieves goal congruence by aligning n n Organizational goals Individual goals

Goal Congruence n Influenced by n Informal factors n External – work ethic n Internal – culture, management style, informal organization, perception, communication n Formal factors n Rules n Formal control system

Organizational Structure n Functional organization n Highly centralized Matrix organization Business unit organization n Highly decentralized

Lines of Control within the Organization n Solid lines n n Direct reporting Dotted lines n Coordination / reporting

The Controller n Responsible for n n n Design of the Management Control System Operation of the Management Control System Normally the CFO