...* there was no existence of a punishment policy. * the employees were trusted too much for their activity. * Behavioral constraint is seen here for fraud is no part of the employees culture. * There is a lack of direction for there is no report or form of supervision for ASCs. Communication process are not followed maybe they do not like it. * There is no motivation at all, one bores when doing the same thing daily. * Dull and negative attitudes emerged when there's no incentive so there a lot of pressure for people employees to commit fraud. The ability to do the job is very poor and this questions the selection process no form of training .Thus, Incompetence could be another reason why this control failed. Stage 2: Action Control * Formation of the taskforce team Implementation Failures: * there was no employee empowerment. The taskforce were professionals which need empowerment. * the team had no specified role they tackle the problem blindly, some of them just went with the flow not all areas were tapped into. * trust is questioned for centralization of power and thus their findings are subjective for their roles were not clearly defined. * Direction was there but due to lack of motivation, direction was never practiced. The capability of achieving the target is in the teams potential. * Performance is measured not only through capability but motivation too and since motivation lacks and so as performance...
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...I think AirTex need a new control system at the time of the takeover; AirTex’s old control system was not effective to serve its objectives, and there are some main reasons why its old control system didn’t work. Firstly, lack of direction, to be specific that is AirTex’s employees don’t know what the company want from them and how can them perform to match the desire from company. Secondly, there was no motivational plan mentioned before the company was taken over, as a result, the employees were not necessarily behavior in the company’s best interests. Thirdly, most of AirTex’s managers and employees were either poor educated or untrained, while the department managers except the accounting department manager, lack the necessary and critical information to do a good job. AirTex has a centralized organizational structure and control system before Fed and Frank took over the company; among all 7 existing departments (the aircraft sales department was discontinued because of company’s poor management), the accounting department was central to the company, positional and administrative; Sarah Arthur, manager of the accounting department, manage the company when CEO was absent, which was frequent. She had no formal accounting training while she control almost everything in AirTex, she is the central repository of the company, she made decision without arriving at consensus with othe management, she keep the information one-way within the company, and she kept the company check…...
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...market thereby expanding its routes. High level management was involved as the deal involved signing a ten year contract with Qantas Airways. The contract situation was a non-cybernetic control. Etihad Airways signed a billion dollar deal with Sabre for the Sabre software solution. This was in an attempt to migrate all its business operations to the Sabre software platform. The role of this control was to simplify management process, auditing and analyzing of important aspects of the airline operations with the aim of minimizing operational costs. The control was top management oriented as it is the airline’s biggest technology investment. The decision to migrate the entire business operations to the Sabre Software is a cybernetic decision. Comparing the given case of Northrop Grumman and Etihad Airways it is clear that both companies are focused easing management by employing solutions and contracts that will make operations of the companies easier and smooth. Etihad aims at reducing costs and meeting the customers need by acquiring the Sabre software, where as Northrop on employee perfomance. The two firms employ different control types, whereas Etihad makes use a feedback control decision (Harrison and St. John, 2002, 118 - 129) where response from customers is used to make the decision Northrop makes use of a concurrent decision. Same level of management is witnessed as both companies employ top management level of control as the decisions...
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...6a6Management Control Research Wrap-up for the first two weeks! During the first two weeks the main goal was to provide a holistic overview and understanding about management control research. After these two weeks you should be able to: 1. Understand what are MACS (book, p. 5) + developed further in chapter 4 of the book. a. Agency theory: Organizations are a web of two-person contracts between owner (principal) and managers/employees (agents). MACS are used to monitor, control, and motivate the agents (e.g. incentive system) – owner’s position; b. Nerve center: Managers need (formal and informal) information to support their decisional, interpersonal and informational roles – manager’s position; c. Accounting symbolism: MACS are used in a ceremonial way: more symbolic than functionalistic. Can be used either to influence or persuade (offensively) or to a posteori justify decisions (defensively) – accounting’s position; d. Labor process: MACS are used to weaken and exploit workers (managers can both be victims and users of MACS) – workers’ position; e. Dialectic controls: Historical analysis and evolution / change based on tensions amongst organizational elements – managers and workers’ position. 2. Understand two typologies about Management Control Research. a. The three paradigms proposed by Chua (1986) and their main characteristics. Dialectic controls Labor process Nerve center Agency theory Symbolism Slides 15+16 Slides 17+18 Slides 13+14 ...
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...Management Control: Budgeting and Variance Analysis TJ Wicker TJ Wicker Kaplan University Chapter 8 Question 8.1 Why are planning and budgeting so important to an organization’s success? Planning and budgeting both play a critical role in the finance functions of all healthcare service organizations. In fact, on could argue (and usually win the argument) the planning and budgeting are the most importnat of all finance related tasks. Planning encompasses the overall process of preparing for the future. Because of tis’ importance to organizational success, most health services managers, especially at large organizations, spend a great deal of time on a=activities related to planning. Budgeting is an offshoot of the planning process. A set of budgets is the basic managerial accounting tool used to tie together planning and control functions. In general, organizational plans focus on the long-term big picture, and through the control mechanism, ensuring that current performance is consistent with organizational plans and goals. Question 8.2 Briefly describe the planning process. Be sure to include summaries of the strategic, operating and financial plans. 1. Goal setting: Plans are the means to achieve certain ends or objectives. Therefore, establishment of organizational or overall objectives is the first step in planning. Setting objectives is the most crucial part of planning. The organizational objectives should be set in key areas of operations. The objectives...
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...The rapid economical development and civilization progress, as well as technological innovation and globalization have encouraged the need for mgt control arising to give companies the opportunity of greater growth and expansion than what have been possible earlier. Since Weber's golden age, the strong belief in bureaucracies has been torn down. Burns & Stalker (1961) suggested that bureaucracies limited effectiveness and flexibility of post-industrial and fast-pace businesses. This reform in organizational structures has also exerted significant influence on the evolution of management control system (henceforth MCS). The development of the modern capitalism economy provides a rich experience base for discussing the concept of MCS and the methods of enabling the firm succeed in future. Management control can be understood as the complete package which steers the organization to its objectives while MCS can be described as a device which is employed to achieve the control. It is increasingly acknowledged that in order to be successful in the long-term, a company is required not only to achieve alignment in its current operations but also to adapt effectively to the changing environmental demands (Gibson & Birkinshaw, 2004; Raisch & Birkinshaw, 2008). In other words, future’s successful organisations are ambidextrous (Tushman & O’Reilly, 1996). It can offer some comprehensive understanding of MCS by studying how a company like Taiwan Moongod Lamp Co., Ltd.(henceforth TML), which...
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...Principles of Management Control Systems 20 Fo rI B ICFAI UNIVERSITY S U se O nl y C la s s of 09 Principles of Management Control Systems 20 Fo rI B ICFAI Center for Management Research Road # 3, Banjara Hills, Hyderabad – 500 034 S U se O nl y C la s s of 09 The Institute of Chartered Financial Analysts of India, January 2006. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means – electronic, mechanical, photocopying or otherwise – without prior permission in writing from Institute of Chartered Financial Analysts of India. Fo ISBN 81-7881-995-3 Ref. No. PMCS/A 01 2K6 31 For any clarification regarding this book, the students may please write to ICFAI giving the above reference number, and page number. While every possible care has been taken in preparing this book, ICFAI welcomes suggestions from students for improvement in future editions. rI B S U se O nl y C la s s of 20 09 Contents PART I: AN OVERVIEW OF MANAGEMENT CONTROL SYSTEMS Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Introduction to Management Control Systems Approaches to Management Control Systems Designing Management Control Systems Key Success Variables as Control Indicators Organizing for Adaptive Control Autonomy and Responsibility Transfer Pricing 3 15 28 42 57...
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...Analysis of the article: From comfort to stretch zones: A field study of two multinational companies applying “beyond budgeting” ideas by Anatoli Bournistrov and Katarina Kaarboe (2013), Sociological perspective The article by Bournistrov and Kaarboe can be seen using the sociological perspective on studying the budgeting, since the focus of the research is aimed at the organizational level and how applying beyond budgeting ideas in its management control systems (MSC) has influenced the decision making of the managers. The research was conducted as a field study in two multinational companies who recently rejected the traditional budgeting process in favor of beyond budgeting to better respond the ever-changing business environment. The basic premise of study was that introducing a new MSC without budgets, the decision maker in company are moved from “comfort zone” to the “stretch zone” thus creating a new organizational structures and supply and demand of information. For OilCo, the other company in the research that the main reasons for adopting new practices, was that the traditional budgeting was seen as a restriction to innovating and reacting to changing environment, as it set up boundaries for employees to operate instead of utilizing emerging opportunities that would need resources. New “from ambition to action” system allowed managers to start up new projects and gain resources when seen profitable opportunities emerged. For TelCo the new MCS was also brought to...
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...Introduction Management control system (MCS), as a vital part of an organization, which purpose allows organizations to ensure that their activities achieve the objects they desire. The process of designing and improving MCSs requires addressing three basic questions. What is desired? What is likely to occur? And What is the effect of contextual factors ?Then managers must address each of these questions. What controls should be used? In recent years, contingency-based research has maintained its popularity with studies including these variables but redefining them in contemporary terms. This paper provides a critical review of findings from contingency-based studies over the past 20 years, deriving a series of propositions relating MCS to organizational context. The paper examines issues related to the purpose of MCS, the elements of MCS, the meaning and measurement of contextual variables, and issues concerning theory development (Robert H. Chenhall 2003). on the effect of contextual variables on the design of Management Control System (MCS). It is tests the effect of each contextual variable on the relationship between MCS design and performance by using survey instruments. It is demonstrates that contextual variables contribute to the design of MCS. The following sections describe how to address each of these questions. What it is the organization Objectives and, more importantly, strategies that are derived from a good understanding of the organization’s objectives...
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...Chapter 1 Management and Control Management control is a critical function in organisations. Management control failures can lead to large financial losses, reputation damage and possibly even to organizational failure. Reality shows us (in some examples illustrated on page 3-4) the importance of having good management control systems (MCS). However, adding to much control does not always lead to better control. Some MCS’s in common use often stifle initiative, creativity, and innovation. I.e. in organisations with a lot of bureaucracy a culture with a lack of responsibility can occur and due to the slow, bureaucratic processes people can find ‘creative’ ways to speed up this process. That good MCS’s are important is widely accepted, but within the field of MCS’s there are different views. An old, narrow view of a MCS is that of a ‘cybernetic’ system involving a single feedback loop. You can compare measuring performance with a thermostat; They measure the temperature, compare those measurements with the desired standard, and, if necessary, take a corrective action (turn on or off). This book, however, takes a broader view. It recognizes that may management controls in common use, such as direct supervision, employee-hiring standards and codes of conduct do not focus on measured performance. The focus instead on encouraging, enabling or, sometimes, forcing employees to act in the organization’s best interest. MCS can rather be proactive (to prevent) than reactive. The primary...
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...Q.1 How is RI (EVA) analysis carried out? Explain advantages and disadvantages. Ans. The EVA method is based on the past performance of the corporate enterprise. The underlying economic principle in this method is to determine whether the firm is earning a higher rate of return on the entire invested funds than the cost of such funds (measured in terms of weighted average cost of capital, WACC). If the answer is positive, the firm’s management is adding to the shareholders value by earning extra for them. On the contrary, if the WACC is higher than the corporate earning rate, the firm’s operations have eroded the existing wealth of its equity shareholders. In operational terms, the method attempts to measure economic value added (or destroyed) for equity shareholders, by the firm’s operations, in a given year. Since WACC takes care of the financial costs of all sources of providers of invested funds in a corporate enterprise, it is imperative that operating profits after taxes (and not net profits after taxes) should be considered to measure EVA. The accounting profits after taxes, as reported by the income statement, need adjustments for interest costs. The profit should be the net operating profit after taxes and the cost of funds will be the product of the total capital supplied (including retained earnings) and WACC EVA= [Net operating profits after taxes – [Total Capital * WACC] Example; Following is the condensed income statement...
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...In today’s “tech” and competitive world, businesses are in transformation from manual inventory system to automated inventory system, including small businesses. Automated Inventory systems can reduce costs, retain the existing customers and gain profits. It can replace the time consuming manual process by providing more accurate data. Every business should have a proper inventory system in order to track whether the store is running out of the stock of an important item or there are some items that are obsolete. Nowadays, automated system is used almost by all the retailers, grocery stores and manufacturing companies. A good inventory control system will alert the retailer when it is time to reorder (www.barcodesinc.com). Automated inventory system will keep the competitive advantage of your company and increase the value of your business. This plan will describe all the necessary equipment required for a low-cost automated inventory system for a small clothing store. It will also explain the costs involved in creation of the system and describe the ongoing maintenance that will be required for the smooth running of the system and provide a workflow diagram of how the system will work. The equipments required to install a low-cost automated inventory system in small clothing store consists of a computer- desktop or laptop whichever is more cheaper, system requirements that can handle and store the inventory system, backup/recovery/portable hard disk and archive device, wireless...
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...Management and control Chapter 1 Management relates to the process of organizing resources and directing activities for the purpose of achieving organizational objectives; consist of 4 phases: 1. planning • mission; reason of company’s existence • vision; what to do to reach the mission • objective • strategy; Corporate S.(expansion/ shutdown/ no change) Business unit S. (Differentiation, cost leadership, focus) Operational S. (mktg, finance, HR, R&D) 2. organizing • organization structure • amount of resources • task • Standard Operation Procedure 3. leading • Implementation 4. controlling • Performance Evaluation • Actual-Target comparison Management process: 1. Objective setting; important for design of management control system; doesn’t have to be quantified, needn’t be financial, must be understood by the employees 2. Strategy formulation; define how organizations must use their resources to meet their objectives, can be formulated thru SWOT analysis, it emerged from the interaction between management, employees and environment 3. Strategic control; to see whether the company’s strategy should be changed, considering the environment, competition and other factors; primarily focused on external (SWOT factors) 4. Management control; to ensure the employees (behavior) do the best for the...
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...The Internal control management strategies Prepared for: LJB Company Prepared by: Chibuzor E. Edeh Devry University ACCT 540: Financial Accounting TABLE OF CONTENT Introduction ----------------------------------------------------------------------------------------------------------3 Internal control regulations for public companies -----------------------------------------------------------3-4 LJB’S good internal control measures -------------------------------------------------------------------------4 Recommendations for Indelible ink --------------------------------------------------------------------------4 LJB’S poor internal control measures ------------------------------------------------------------------------5-6 Recommendations for improvement --------------------------------------------------------------------------5-6 Summary --------------------------------------------------------------------------------------------------------7 References ------------------------------------------------------------------------------------------------------- 7 INTRODUCTION Internal control consists of all the related methods and measures adopted within an organization to safeguard its assets, enhance the reliability of its accounting records, increase efficiency of operations, and ensure compliance with laws and regulations. Internal control is very important because it discourages employees from fraudulent activities...
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...Management Control Environment Theoretical Introduction An organization consists of responsibility centers. The performance at responsibility center can be measured in terms of Effectiveness and Efficiency of Work.Effectiveness refers to how well the work is done while Efficiency in the engineering sense,is the amount of output per unit of input. Management control involves the planning and control of these centers’ activities so they make the desired contributions toward achieving the organization’s objectives. The management control environment includes the nature of the organization:its rules,guidelines,and procedures;its culture; and its external environment. Responsibility centers use inputs and assets to produce outputs.Responsibility accounting focuses on planned and actual amounts for responsibility center inputs and outputs. It is to be contrasted with full cost accounting, which focuses on products rather than on responsibility centers. There are four types of responsibility centers: revenue centers,in which outputs are measured in monetary terms & are often expense centers as well;expense centers,in which inputs are measured in monetary terms; profit centers, in which both inputs and outputs are measured in monetary terms; and investment centers,in which both profits and assets employed are measured and related to each other.Profits and Assets employed interrelates ( not just mere control of assets) in an investment center. ...
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