Module 1 - Lecture 1

Question 1

What is management control?

Answer 1

The process by which management ensures that people in the organisation carry out organizational objectives and strategies

Question 2

What are the 3 basic control issues that management control systems address?

Answer 2

1) Lack of direction
2) Lack of motivation
3) Lack of ability

Question 3

What is control problem avoidance?

Answer 3

1) Activity elimination (e.g. subcontracting)
2) Automation of tasks
3) Centralisation of decisions

Question 4

What do controls focus on?

Answer 4

1) Action controls
2) Results controls
3) Personnel controls

Question 5

How are results controls put in place?

Answer 5

1) Define the performance dimensions
2) Decide how to measure these dimensions
3) Put targets in place
4) Provide rewards or punishments (Lincoln Electric Company)

Question 6

What 3 conditions are necessary for results controls to work?

Answer 6

1) The evaluator must know what results are desired
2) Evaluators must be able to measure results
3) Employees must have controllability in regard to the results that are desired

Question 7

What is the controllability principle?

Answer 7

The employee that is being evaluated must be able to affect the results that are being measured in a given time span

Question 8

What are the pros and cons of results controls

Answer 8

Pros:

• Behaviour can be influenced while still allowing for autonomy
• Greater employee commitment and motivation
• Often inexpensive

Cons:

• Not always good indicators of whether good decisions have been made to achieve targets
• They shift risk to employees and hence, risk-averse employees may require a risk premium
• Gamesmanship

Question 9

What are the 3 main forms of action controls?

Answer 9

1) Behavioral constraints
2) Preaction reviews
3) Action accountability controls

Question 10

What are the pros and cons of action controls

Answer 10

Pros:

• Direct form of control
• Creates organisational memory as what works best is usually documented
• Efficient way of coordinating

Cons:

• May discourage creativity
• Only really useful for highly-routine jobs
• Can be costly
• May cause negative attitudes (little opportunity for self-actualisation)

Question 11

What are people controls made up of and what is the difference between the two types?

Answer 11

Personnel controls - People being able to control themselves

Cultural controls - People being able to control each other as part of an overall culture

Question 12

What is “good control”?

Answer 12

Good control is where there’s a high probability that the firm’s objectives will be achieved and a low probability of surprises

Question 13

What is behavioural displacement?

Answer 13

This is where the control system produces/encourages behaviours that are not consistent with the organisation’s objectives