Chapter 1 - Management and Control

management control

process by which management ensures employees carry out organizational objectives and strategies

management control systems

all devices/mechanisms used to ensure employee behaviours and decisions are consistent with organizational objectives and strategies

purpose of MCS

1) encourage, enable or force employees to act in the org’s best interest 2) influence employee behaviour in desirable ways 3) increase likelihood that organizational objectives are achieved

why is MCS important

has behavioural orientation, meaning it focuses on influencing employee’s actions and decisions

performance management systems

broader system designed to achieve organizational mission and vision

3 components of management

objective setting, strategy formulation, management control

objective setting

determine what the organization wants to achieve

strategy formulation

determine how organizational resources will be used to achieve objectives

management control

ensure employees perform appropriate actions to implement the strategy

3 basic control problems

lack of direction, lack of motivation, personal limitations

lack of direction

employees don’t know what’s expected

lack of motivation

employees choose not to perform as expected

personal limitations

employees are unable to perform effectively

LD solution

clearly communicate expectations and reinforce through feedback

LM solution

align rewards with organizational goals through incentives and accountability

PL solution

training, appropriate job assignments and job redesign

reactive controls

detector, assessor, effector

detector

measure performance

assessor

compare against standards

effector

corrective action

proactive control

prevents control problems before they occur

2 types of control alternatives

control problem avoidance, management control systems

3 types of control problem avoidance

activity elimination, automation, centralization

activity elimination

removes problematic activities through outsourcing, licensing, divestment

automation

replace human activities with computers/robots to reduce errors, inconsistencies and motivation problems

centralization

reserve critical decisions for senior management

if know actions, can’t measure controls

action controls

if don’t know actions, can measure controls

result controls

if don’t know actions, can’t measure results

people controls

if know actions, can measure results

action/result controls

how to know appropriate level of management control

when expected benefits of stronger controls jusitfy costs