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8/15/2019 Slides h03
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Management Control Systems
Chapter 3: Action,
Personnel & Cultural Controls
Merchant and Van der Stede: Management Control Systems © Pearson Education Limited !!3
8/15/2019 Slides h03
2/20
-Merchant and Van der Stede: Management Control Systems © Pearson Education Limited !!3
"ecall that ###
Management Control is a$out ta%ing steps to help
ensure that the employees do hat is $est 'or the
organi(ation#
)hree issues:* +o they understand hat e epect o' them ###
Lack of direction
* -ill they or% consistently hard and try to do hat
is epected o' them ###
Lack of motivation
* Are they capa$le o' doing hat is epected o' them ###
Personal limitations
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-Merchant and Van der Stede: Management Control Systems © Pearson Education Limited !!3
Control alternati.es /
Controls can 'ocus on:
0 the actions ta%en
0 the results produced
0 the types o' people
employed and their
shared .alues and
norms#
ACTION CONTROLS
"ES1L)S C2)"2LS"ES1L)S C2)"2LS
PE2PLE C2)"2LSPE2PLE C2)"2LS
2r any com$ination o' those ###2r any com$ination o' those ###
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-Merchant and Van der Stede: Management Control Systems © Pearson Education Limited !!3
Action controls /
Ensure that employees per'orm 4or do not per'orm5
certain actions %non to $e $ene'icial 4or harm'ul5
to the organi(ation#
Prevention / detection
0 Most action controls are aimed at pre.enting
undesira$le $eha.iors#
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E''ecti.eness o' action controls ###
)hey are usa$le and e''ecti.e only hen managers:
0 Know what actions are desirable
* +i''icult in highly comple and uncertain tas% en.ironments#
4e#g#, research engineers or top6le.el managers5
0 !ave the abilit" to make s#re that the
desirable actions occ#r
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7eha.ioral constraints ###
Ph"sical constraints
0 Loc%s, passords, limited access, /
Administrative constraints 0 "estriction o' decision6ma%ing authority8 0 Separation o' duties#
* Primarily directed at one control pro$lem:eliminate moti.ational pro$lems#
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Preaction re.ies ###
Scrutiny o' action plans, $udgets#
0 "e.ie 9 modi'ication 9 appro.al#
Can potentially address all three control pro$lems:
0 Alle.iate lac% o' direction8
0 Pro.ide moti.ation8
0 Mitigate personal limitations#
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-Merchant and Van der Stede: Management Control Systems © Pearson Education Limited !!3
olding employees accounta$le 'or the actions they ta%e#
;t re
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"edundancy ###
Assigning more people 4or machines5 to
a tas% than necessary#
0 e#g#, $ac%up people 9 computing 'acilities
Limited in addressing the control pro$lems:
0 Pro.ide moti.ation8
0 2.ercome personal limitations# 0 also: rather costly
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)he most direct 'orm o' control
)end to lead to documentation
o' the accumulation o' %noledgeas to hat or%s $est#
0 2rgani(ational memory
An e''icient ay o' coordination:
0 i#e#, they increase the predicta$ility o' actions and reduce the amount
o' inter6organi(ational in'ormation
'los to achie.e a coordinated
e''ort#
2nly 'or highly routini(ed o$s
May discourage creati.ity,
inno.ation, and adaptation
May cause sloppiness
May cause negati.e attitudes
0 e#g#, little opportunity 'or
creati.ity and sel'6
actuali(ation
Sometimes .ery costly
Pros and cons o' action controls ###
PRO CON
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-Merchant and Van der Stede: Management Control Systems © Pearson Education Limited !!3
Control alternati.es /
Controls can 'ocus on:
0 the actions ta%en
0 the results produced
0 the types o' people
employed and their
shared .alues and
norms#
AC);2 C2)"2LS AC);2 C2)"2LS
"ES1L)S C2)"2LS"ES1L)S C2)"2LS
P$OPL$ CONTROLS
2r any com$ination o' those ###2r any com$ination o' those ###
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People controls ###
People controls ensure that employees ###
0 -ill control their on $eha.iors Personnel control
Self%monitorin&
0 -ill control each othersB $eha.iors
C#lt#ral controls
'#t#al%monitorin&
People controls are part o' .irtually e.ery management
control system $ecoming more important in / =flatter
and leaner organizations with empowered employees#>
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Personnel controls /
Personnel controls $uild on employeesB natural tendencies
to control themsel.es, $ecause most people /
0 ha.e a conscience that leads them to do hat is right8
0 'ind sel'6satis'action hen they do a good o$ and see theirorgani(ation succeed#
la$els ### 0 Sel'6control
0 ;ntrinsic moti.ation 0 Ethics and morality
0 )rust and atmosphere
0 Loyalty
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Methods to implement personnel controls ###
Denerally, it is a$out /() finding the right people, giving them a good
work environment and the necessary resources* )
Selection and +lacement* inding the right people to do a particular o$#
Trainin&* Di.e employees a greater sense o' pro'essionalism8
* Create interest in the o$ $y helping employees to
understand their o$ $etter#
,ob desi&n - +rovision of necessar" reso#rces* So that moti.ated and
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Cultural controls ###
Cultural controls or mutual6monitoring tap into
social pressure and group norms and values#
Cultural controls are e''ecti.e $ecause mem$ers
o' a group ha.e emotional ties to one another#
Cultures are $uilt on shared ###
0 traditions8
0 norms8
0 $elie's8
0 ideologies8
0 attitudes8
0 ays o' $eha.ing, etc#
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i.e ays to shape culture / 4;5
Codes of cond#ct
* Codes o' ethics8 corporate credos, mission statements, etc#8
* ormal ritten documents ith $road statements o' corporate
.alues, commitments to sta%eholders, and the ays in hich
top management ould li%e the 'irm to 'unction#
* undamental guiding principles o' the company#
.ro#+%based rewards
* e#g#, $onus, pro'it6sharing, employee onership o' company stoc%8* Cultural controls rather than results controls $ecause the lin%
$eteen indi.idual per'ormance and reards is ea%#
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Intra%or&aniational transfers
* ;mpro.e the sociali(ation o' indi.iduals in an organi(ation and
inhi$it the 'ormation o' incompati$le goals and perspecti.es8
* ;mpro.e identi'ication ith the organi(ation as a hole as
opposed to su$unit identi'ication#
Ph"sical and social arran&ements* e#g#, o''ice plans, interior decor, dress codes and .oca$ulary, etc#
Tone at the to+* )op management statements must $e consistent ith the culture
they are trying to create, and importantly, their $eha.iors should
$e consistent ith their statements#
i.e ays to shape culture / 4;;5
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Start ith people controls ###
People controls /
* Must alays $e relied on to a certain etent8
* a.e relati.ely 'e harm'ul side6e''ects8
* ;n.ol.e relati.ely lo out6o'6poc%et costs#
oe.er, it is rare that people controls ill $e su''icient#
;n most cases, it is necessary to supplement them ith /
* action controls8
* results controls#
May$e, you ust shouldnBt put all your trust in people FG
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Cases
;nternal "e.enue Ser.ice 4p#HH ''#5: 0 E.aluate the change o' the ;"SBs collection 'unction 'rom the
C2 organi(ation to the ACS system
0 As )im 7ron, assistant commisioner 'or Collection, hat
ould you doG 0 -hen,# i' e.er, is computer monitoring appropriateG -hat
sa'eguards to pri.acy can you en.isionG
Alcon La$oratories, ;nc# 4p#II ''#5 0 o ould you characteri(e the control strategy used in the
"&+ areaG 0 E.aluate the control strategy: hat, i' anything, ould you
suggest Alcon managers do di''erentlyG
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