Management Control System

Topics: Internal control, Control theory, Internal audit Pages: 20 (5618 words) Published: August 28, 2013
Chap 1 : MANAGEMENT AND CONTROL 1) Causes of Management -Lack of Direction -Motivational Problems -Personal Limitation 2) Avoidance -Activity elimination : Eliminate what is not working properly -Automation -Centralization -Risk Sharing Chapter 2 SECTION II 3) Result Control : Preventive type Control Helps Mgr to address strategy, org, employees are performing - Steps : 1. Define Performance dimension 2. Measure Performance 3. Setting Target 4. Provide Reward Requirement for Effective Result control : - Knowledge of desired result : Org should know what result are desired - Ability to influence desired result : Employee have influence on result (Controllable) -Ability to measure Controllable result effectively : Org can measure result effectively (Measurable)  Result measure should be : Precise, Objective, Timely, Understandable

Chapter 3 4) Action Control : To ensure employees act in org’s best interest a. Form of Action control - Behavioral constraints – Negative Form (You can’t do this You can’t do that) - Pre action Review – Scrutiny(详查정밀조사) of action plan (What will they do?) - Action Accountability – (의무義務) Hold employees for action required (You should do this and that)  Requires : Define actions acceptable or unacceptable Communicate definitions to employees Observe what happens (reaction) Reward or Punish - Redundancy (과잉過剩) : Set more Human resource than what they need (Backup) b. Requirement for effective action control : - Knowledge of desired action - Ability to ensure that desired actions are taken 5) Personnel Control: Build employees’ natural tendency to control / motivate themselves a. Purpose: Make people understand what company is doing Ensure people is doing good job

The summary of Management Control Systems – Kenneth A. Merchant [Prentice Hall] Summarized by Mooyoung Son Linkoping University SMIO 2009

Engage self-monitoring (Naturally present force that want to do good job) (I want A for exam!) b. Major methods: Selection and Placement (Hire right person and place on right position) Training Job design and Provision of necessary resources (Interesting job process) 6) Cultural Control: Most effective way to tie members in emotional way a. Methods of shaping culture: - Code of Conduct (Cultural code / style of group acting) Credos, Vision, Statement, Mission, Philosophy - Group Reward Bonus, Profit-sharing, Ownership of stock - Transfer, Rotation: Rotate employees so that culture code can be spread - Physical Arrangement: Design, Arrangement of table, costume, words) - Tone at the TOP: 言行一致 of Leader Chapter 4 7) Tightness: Tighter MCS provide a higher degree of certainty that employees will act as org wishes (  Looseness ) a. Tight Result Control - Desired result: Definition of RESULT should be specific, exact based on true - Requirement: - Congruence: Mgr didn’t understand objective (Is objective of government service? Or cost saving?) Monitoring(Measurement) doesn’t reflect objective (is Success of Museum number of visitor?) - Specificity & Timeliness: (TARGET: increase satisfaction (X) / Increase 1% (O)) - Communication & Internalization: Performance target should be communicated & internalized  result control can influence - Completeness: Result area includes all areas which org desires (Cost focused purchasing will forget quality slip) - Performance Measurement: Effective measurement - Incentive: Reward should be linked to desired result b. Tight Action control - Behavioral Constraint: Physical Constraint (Lock at the door) Administrative Constraint (Right to decide) - Pre action Review : Should be frequent, detailed, performed by diligent and knowledgeable person (Don’t buy a pencil without approval of CEO) - Action accountability: Requirement: - Definition of action: Should be congruent, specific, well communicated, complete - Action Tracking: constant direct supervision, detailed audit - Action reinforcement: Reward / Punishment c. Personnel Control:...
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