Management Control System of the University of Southern California

Topics: Incentive, Vice President of the United States, Perverse incentive Pages: 10 (3262 words) Published: August 15, 2010
The purpose of this case study is to describe and analyse the features of the management control system (MCS) of University of Southern California (USC). Before commencing the analysis a brief background of USC is provided. The USC, located in Los Angeles, was established in 1880 as a private research institution. The university's academic and administrative programs are led by the president's cabinet, which is comprised of a provost and senior vice president for academic affairs, senior vice president for finance and chief financial officer, senior vice president for administration, senior vice president for university relations, and senior vice president for advancement. USC is governed under the direction of the university's board of trustees and in accordance with the university bylaws (Merchant & Van der Stede 2007).

Prior to the implementation of Revenue Centre Management System (RCMS) the decision-making power was centralised, meaning that one senior administrative officer played the main role in all allocation of resource decisions. In 1981 the transition to the decentralised model took place. A Task Force on Budget Incentives was appointed in 1981 with the charge to understand the changes that had been taking place at the university (Merchant & Van der Stede 2007). The Task Force developed eight organisational principles which clarified the weaknesses in the university's old system and became the guidance of the decentralised program. The USC program became known as the revenue centre management system.

i) THE FEATURES OF THE MANAGEMENT CONTROL SYSTEMS IN THE UNIVERSITY OF SOUTHERN CALIFORNIA The main goal of USC was to have a decentralized management system so that they could achieve university's academic and fiscal success. They established a system which provided some central resources which accommodated and supported the requirements of the whole university. It was known as the RCMS. The new RCMS established two responsibility centres: revenue and administrative centres. Revenue centres consisted of academic and auxiliary centres, whose role was to directly generate revenues. The responsibility of the administrative centre was to carry out certain activities that supported revenue centres, and had some authority to exercise the goals of the university. The role of the central administration was to make sure that the responsibility centres achieve their targets. Performance of these responsibility centres was checked with the help of monthly financial reports that depicted the current months and year to date performance results as compared to the given budget. Information regarding funding, gifts received, enrolments and other factors affecting the revenues and expenses of these centres were also reported. Revenues, expenses and participation/subvention were part of the financial reports being created by USC. The performances of the school deans were viewed after every five years and they were evaluated on the basis of their unit's academic excellence, generation of research grants from outside, faculty development, fundraising and bottom-line financial performance. Restricted and unrestricted were the two types of revenues earned by the university. Revenue received by the university to be used only for a specific project or purpose was referred to as the restricted revenue (consisted of more than 25% of the total funds being granted) and the revenue generated from tuition fees, unrestricted gifts and other indirect cost recoveries from government were categorized under the unrestricted revenues (Merchant & Van der Stede 2007). Revenue centre also incurred direct expenses; that being the costs of employees and equipment whereas indirect expenses (costs of shared resources) were incurred by the administrative centres and were allocated on the basis of cause and effect, benefit derived, or common practice to the revenue centre. According to the vice president of budget and...
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