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Management Control Systems, Chapter 1-4

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Summaries Management Control
Session 1: Chapters 1,2,3 & 4
Chapter 1 Management and control

Management control – all devices or systems managers use to ensure that behaviors and decisions of their employees are consistent with the organizations objectives and strategies (MCS)

* Back end of management process * Involves managers taking steps to help ensure that employees do what is best for the org.

Primary function of MC: to influence behaviors in a desirable way
Benefit of MC: increased probability that organization’s objectives will be achieved
Addressing types of problems: theft, fraud, unintentional error, etc
Disadvantageous of MC: suppress initiative, creativity and innovation
Control System: 1) Strategic Control – Is our strategy (still) valid or do we need to change it and if, how? Focus on the external tools. Management Control – Are our employees likely to behave accordingly? (do they understand what’s expected, and are they capable and willing to do so, if not how can we change it?) Focus on the internal mechanism.

Causes of MC problems and needs for control:
Can happen in any kind of combination simultaneously
Can happen in any kind of combination simultaneously

1. Lack of direction – some employees perform poorly simply because they do not know what the organization wants form them. Management control therefore involves informing employees.

2. Motivational problems – individuals are self-interested or effort averse. Employees sometimes act in their own personal interest at the expense of their organization’s interest. The role of MCs in motivating employees to perform well involves incentives in a result control context.

3. Personal limitations – employees can lack the requisite intelligence, training, experience or knowledge, even though they know what is...

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