Management control summary - Week 2 – Designing Management Control Systems Chapter 1 Introduction to - Studeersnel (2023)

Week 2 – Designing Management Control Systems

Chapter 1 Introduction to management control

Definition Management Control (MC)

MC is the systematic process by which the higher-level managers (the board) influence the organizations lower-level managers to implement the strategy. The goal of MC is to implement organizational strategies

Definition Management Control Systems (MCS)

MCS consist of the various ways in which the organizations management attempt to improve the performance.MCS’s elements include the 6 items below. These are tools the board can use to make the lower -level managersbehave in line with the objectives.

  • Strategic planning
  • Budgeting
  • Resource allocation
  • Performance measurement
  • Evaluation
  • Compensation/rewarding

Top down MCS helps decentralized managers decide what decisions to take, what results to achieve, where to leadpeople and how to use their resources.

Bottom up MCS inform the senior managers what decisions have been taken, what results have been achieved, whereemployees have been ked and what resources have been used.

Three reasons managers do not automatically achieve the organizational goals:

  1. Don’t understand the goals, strategies or how they can contribute
  2. Don’t agree with the goals and strategies
  3. Don’t have the needed resources (and/or skills)

Management Control

MC is not just to check/control employees, but also to support, enable and empower the lower -level managersand employees. Overall purpose of management:

  1. Planning What to do in the future?
  2. Organizing Efficient use of resources
  3. Staffing Employing the right people
  4. Leading Ensuring the plans are followed by the employees
  5. Controlling Checking if the plans have made progress

OR: management roles: (1) informational role, (2) leadership role, and (3) decision-making role

MC is about influencing human behavior in such a way that it becomes goal congruent.

  • Is rather difficult because (1) people do not inherently behave goal congruent and (2) it is not always clear what goal congruent behavior is.
  • Goal congruent behavior requires a translation of relatively abstract higher -level management long term goals to operational and short-term goals.

Human motivation

Motivation is the combination of effort, direction, and persistence.

Goals should be clear, close to the manager, and achievable -> in order to improve the effort level

Direction of effort is also very important

Managers are motivated through (1) goals, (2) rewards, and (3) social context

Chapter 2 Designing management control systems

MCS definition

Comprises all the arrangements, tools, and techniques that enable top-down and bottom-up control. MC is aboutcontrolling human behavior.

The control objectives increase in complexity as you go from the level of an individual to the whole organization.

MCS elements

(1) Detector or sensor measures what’s happening(2) Assessor determines the significance of happenings(3) Effector alters behavior, if indicated by assessor (often feedback)(4) Communication network transmits information between detector and assessor(5) Predictive model knowledge about the effect of the behavioral changes made by effector

Management’s actions vs. system (processes): distinction because: management actions are unsystematic. Itseffectiveness is determined by their skill in dealing with people, not by a rule.

Types of control of management behavior

(1) MC by control of input; focuses on managerial input

(2) MC by control of managerial decisions; focuses on allobservable actions and choices of a manager

(3) MC by control of output/performance; making managersaccountable for certain results

In practice, the control of behavior is always a combinationof 1, 2 and 3

Control definition

Control means nothing more than the chance that organizations, through its control processes, can reach itsgoals.

MC activities (resembles PDCA cycle)

(1) Planning organization’s actions(2) Coordinating the activities of several parts of the organization(3) Communicating information(4) Evaluating information(5) Deciding what actions should be taken, if necessary(6) Influencing people to change their behavior

Week 3 – The Influence of Contextual Factors on Management Control Systems

Chapter 4 Strategy and MC

A strategy describes the general direction in which an organization plans to move to attain its goals. It is a concept withmany different dimensions.

Strategies from different perspectives:

Deliberate strategies are a result of a systematic process

Design perspective: SWOT is used; should be in line with contingency theory

Strategic planning perspective: strategy should derive from the goals in a systematic planning process

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Positioning perspective: moves from individual and unique strategies and focuses on the structure of the industry(costs leadership vs. differentiation)

Emerging strategies: emerge out of how problems are dealt with in practice. Focus lies on learning instead ofplanning.

Corporate vs. business unit strategy: corporate is concerned with: Where to compete; business unit is concerned withHow to compete in an industry.

The types of measures differ between the corporate level and the level c loser to operations. HQ is concerned withprofitability, revenues and costs, lower levels are interested in non-financial measures, such as productivity andquality. This model is called the hinge because the translator (middle management?/controller) is someone whounderstands both operational and financial measures and translate those two to another

Prospector vs. defender strategies: relates to the adaptive cycle, which is a continuous process of assessing theenvironment an deciding how to deal with changes in it. Four strategic choices that result from the theory are:

(1) Defenders(2) Prospectors(3) Analyzers(4) Reactors

The radiational model is like a mechanic system, which assumes that people work to make money and cantolerate work if the pay is decent

Differentiation vs. low cost strategy:

Low-cost strategyTight cost controlFrequent detailed control reportsStructured organization and responsibilitiesIncentives based on meeting strict quantitative targets

DifferentiationStrong coordination among functions in R&D and developmentSubjective measurement and incentives instead of quantitative measuresAmenities to attract highly skilled labor, scientist or creative people

Strategic Management Accounting

Target costing

Value chain analysis

Balanced Scorecard BSC

Strategic map

Ouchi, 1979: A conceptual framework for the design of organizational control mechanisms

The paper aims to describe three fundamentally different mechanisms through which organizations can seek to cope withthe problem of evaluation and control: (1) market, (2) bureaucracies, and (3) clans

(1) market ability to precisely measure and reward individual contribution

(2) bureaucracies rely upon a mixture of close evaluation with socialized acceptance of common objectives

(3) clans rely upon a relatively complete socialization process which effectively eliminates goal incongruence between individuals

Market mechanism

Prices convey all of the information necessary for efficient decision-making

“Given a frictionless price mechanism, the firm can simply reward each employee in direct proportion to hiscontribution, so that an employee who produces little is paid little, and all payments, being exactly in proportion tocontribution, are fair”

Bureaucratic mechanism

The fundamental mechanism of control involves close personal surveillance and direction of subordinates bysuperiors

The information necessary for task completion is contained in rules (information = rules)

Rules differ from prices in the important sense that they are partial rather than complete bundles of information. Aprice implies that a comparison has taken place; a comparison between alternative buyers or sellers or the valueof the object in question. A rule, however, is essentially an arbitrary standard against which a comparison is yet tobe made. In order to use a rule a manager must observe some actual performance, assign some value to it, anthen compare that assigned value to the rule in order to determine whether actual performance was satisfactoryor not.

The conditions for frictionless prices can rarely be met, and in such conditions, the bureaucratic form, despite itsinadequacies, is preferred.

Clan mechanisms

When socialization processes characterize...

... groups such as physicians or nurses who occupy different organization but with similar values (professions)... all of the citizens of a political unit (culture)... the properties of a unique organization (clan)

In an apparent paradox, these most and least selective kinds of organizations will both have high levels ofcommitment, that is, members will have internalized the underlying objectives of the organization.

Internalized commitment is necessary for a market, since a market possesses no hierarchical monitoring orpolicing capabilities. Internalization is also necessary for a clan, which has weak monitoring abilities. A clan canalso be supported with identification, however, and over time, the identification may be converted intointernalization of the clan’s values.

Loose coupling and the clan as the form of control

Loose coupling implies that bureaucratic forms of control are unsuitable for many contemporary organizations

Essential element for bureaucratic and market forms is the assumption that it is feasible to measure the desiredperformance (with reasonable precision)

The ability to measure either output or behavior which is relevant for this performance is critical to the “rational”application of market and bureaucratic forms.

According to the table, the measurable things are limited to behavior or the results (sometime unmeasurable,such as in research laboratories). Then, workers are carefully selected to have able and committed people, alsohave rituals and ceremonies. Where output and behavior forms of control can be implemented through amarket or a bureaucracy, ceremonial forms of control can be implemented through a clan.

A few closing arguments

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People in organization – with partially divergent objectives – can be moved towards cooperative action through (1)a market mechanism, (2) a bureaucracy mechanism, or (3) a clan mechanism.

Two underlying issues in determining the form of control are (1) question of clarity with which performance can beassessed, and (2) the degree of goal incongruence.

The problem of organization design is to discover that balance of socialization and measurement whichmost efficiently permits a particular organization to achieve cooperation among its members.

Ferreira & Otley, 2009: The design and use of performance management systems: An extended framework foranalysis

Purpose of the paper

Present a performance management systems framework that can be used to describe the structure and operationof management control and performance management systems in a more holistic manner than previouslydescribed in the literature.

The new framework extends Otley's 1999 five question framework into twelve questions and integrates keyaspects of Simons' levers of control framework.


This section emphasizes the need for a more holistic framework than previously presented in the performancemanagement and management control systems literature. The argument is that most of the literature has tendedto focus on specific and fairly narrow aspects of control systems rather than using a more comprehensive andintegrated approach.

Management Control Systems

Most of the previous literature related to the management and control of organizational performance has beencategorized using the term management control systems. Ferreira and Otley use the term performancemanagement systems as a more general term to capture a holistic view of the management and control of anorganization's performance. They begin their discussion with Anthony's 1965 approach that included strategicplanning, management control, and operational control. They view this as too nar row because it does not connectwith strategic planning and implementation. Other broader frameworks are mentioned and two were used as thebasis for their extended framework. These include Otley's 1999 framework and Simons' 1995 levers of control.

Otley discussed five areas that need to be considered in the development of a more descriptive structure for performancemanagement systems:

  1. identification of the organization's key objectives,
  2. formulating and implementing strategies,
  3. setting performance targets,
  4. the organization's reward system, and
  5. the information flows required to adequately monitor performance.

Some strengths and weaknesses of Otley's framework are

It considers management control systems as a whole, it is compatible with other frameworks, is meaningful andstraightforward, and facilitates dealing with large amounts of information in case-based research.

Some weaknesses of Otley's framework are that the organization's vision and mission are not explicitlyconsidered, it appears to be focused on diagnostic control systems, rather than all four of Simons' levers ofcontrol, does not stress how information in the control system is used, tends to present a static perspective ratherthan a dynamic view of change and development, and does not explicitly address the connections betweendifferent parts of the system.

framework because they are viewed by the authors as contingent variables t hat are more related to why somecontrol systems are more or less effective, rather than specific characteristics of the performance managementsystem.

Theoretical Development

This is the longest section of the paper (pp. 267-276) and includes a discussion of each of the twelve questions.My purpose is to provide a brief sketch of the main points of their discussion. In addition, there are a fairly largenumber of references in this section that support their discussion of each part of the framework. I provide links tosummaries of a few of these papers but most of the references are beyond the scope of my brief summary.

(1) Question 1: The mission of the organization is the main purpose the organization exists, while the vision of theorganization indicates the "desired future state". Question 1 focuses on determining the organizations values,purposes, and objectives, how they are established, and how they are communicated to influence behavior.

(2) Question 2: Key success factors are more specific representations of the vision and mission as controlmeasures to be reported on a continuous basis.

(3) Question 3: Organizational structure is a very broad area by itself. There are multiple forms of organizationalstructure that involve various choices related to authority (i., centralized or decentralized), and configuration(i., structures, processes, and operating relationships). Various forms of organizational structure includefunctional, multidivisional, holding company, matrix, transnational, team-based, and project based. The termprocesses refers to supervision, planning, and market activities. Relationships (internal and external) includeoutsourcing, strategic alliances, networks, and virtual organizations. Although most of the control li terature isfocused on vertical controls, there are both horizontal and vertical controls as well as built in controls such askanban inventory controls Organizational structure is closely related to key success factors and strategicdecisions. The authors note that strategy and structure are interdependent in that they support and constrain eachother.

(4) Question 4: There are many different types of strategy indicated by a fairly large amount of literature on thetopic. For example, there are defenders, analyzers, prospectors, reactors, cost leaders, and productdifferentiators. There are also build, hold, and harvest strategies, and various combinations. The authors refer thereader to the literature review paper by Langfield and Smith5 for more on the various types of strategy. Theirdiscussion of this question also includes consideration of the nature of the strategic planning and communicationprocess, i., whether the process follows a top-down approach associated with a hierarchical or verticalorganization, or a bottom-up approach that appears to be more relevant to lean, de-layered, horizontalorganizations.

(5) Question 5: The discussion of key performance measures includes consideration of how the measurementsare chosen, whether they are aligned with operations and strategy, omissions as well as what is measured, andthe number of measurements. In relation to how measures are chosen the authors refer to Ittner and Larcker whoindicate that the choice of performance measures is a function of the organizations competitive environment,strategy, and organizational design. It is also noted that omitted measures may be as influential as themeasurements chosen since what is measured tends to drive out what is not measured. In addition, too manymeasurements can reduce their effectiveness.

(6) Question 6: In terms of setting targets there is considerable tension between what is desired and what isfeasible since targets affect performance. Aggressive targets may or may not improve performance depending onthe situation. Embedding continuous improvement into targets and benchmarking are also mentioned in thissection as target setting tools that have been discussed in the literature. For example, Hope and Frazer stronglyrecommend external benchmarks in their discussion of beyond budgeting.

(7) Question 7: Performance evaluations represent a critical aspect in management control and are applicable togroups (teams, departments, divisions) as well as individuals. Performance evaluations can be objectiv e orsubjective and each type of evaluation has advantages and disadvantages. Subjective evaluations allow forcorrecting flaws in the performance measurement system, but are more time consuming for managers andsubject to bias (real and perceived). Objective evaluations do not allow for adjustments to fit the situation, but aremore appropriate in cases where the relationship between inputs and outputs is clear. The questions related toperformance evaluations also includes consideration of gaming behavior and relative evaluations. Relativeevaluations might be more appropriate where outcomes are influenced by uncontrollable factors.

(8) Question 8: Relationships between rewards, motivation and performance are complex. This question includesconsideration of both negative and positive influences on behavior. Financial and non-financial, rewards e.,salary increases, promotions, approval, and recognition can have a positive influence on performance, whilewithholding those things can have a negative effect. The concepts of equity and fairness are also importantaspects in this area as well as a consideration of intrinsic rewards since intrinsic motivation can be undermined byextrinsic rewards. In addition, group rewards such as team-based schemes and gain-sharing are considered aspart of the questions related to reward systems.

(9) Question 9: Questions concerning information flows relate to the organization's feedback as well as feed-forward information. Feedback refers to information useful for corrective, or adaptive action, while feed-forwardrefers to information used to learn and to create new ideas and strategies. This section also includes mention ofsingle loop and double loop learning, ERP systems, broader systems such as the balanced scorecard,information scope, timeliness, aggregation, and integration, and formal and informal networks.

(10) Question 10: This section is a bit confusing, perhaps because the concepts of how performancemanagement systems are used is not well developed. The authors mention Hopwood's concepts of rigid andflexible use, Simons' interactive and diagnostic use, the use of strategic validity controls, and transactional andrelational uses of performance management systems.

(11) Question 11: This question incorporates change dynamics into the analysis of the performance managementsystem. In other words, it relates to analyzing the causes and outcomes of changes in the performancemanagement system.

(12) Question 12: The last question addresses the connections or links between the various parts of theperformance management system. The authors note that the PMSs is greater than the sum of its parts indicatingthat there are interactions between the parts that have effects on organizational outcomes. They mentionChenhall (2003)9 who provides some guidance in determining the strength and coherence of the PMSs. For

Week 4 – Strategy and Performance Measurement; Balanced Scorecard

Chapter 10 Performance measurements and analysis

Definition performance management system (PMS)

Is a mechanism that improves the likelihood that the organization will implement its strategy successfully. Thesemeasures can be seen as the critical success factors (CSFs)

The controllability principle is emphasized, which means that center managers should be evaluated based on(financial) measures that are within their control.

Combining financial and non-financial performance measures

In a performance measurement system, there are measures which tell the manager what has happened, what ishappening and what is going to happen.

Outcome measurements (lagging indicators) indicate what has happened

Driver measurements (leading indicators) indicate what is going to happen

Balanced scorecard

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Financial perspective profit; revenue; EPS

Customer perspective: booking/sales orders booked; back orders; market share; key accounting orders; customer satisfaction/retention/loyalty

Internal business perspective capacity utilization; on-time-delivery; quality; cycle time

Innovation and learning perspective no. new products; % of sales from new products or services; number of new projects; number of training hours; employee retention rates

Issues in implementing a BSC

Top management commitment and employee involvement; is needed throughout whole organization. Scorecardshould be broken down from corporate level to functional levels; each functional department or business unitshould have its own BSC.

Do not forget to consider the system support when choosing measures

Review measures and results frequently

Think through the links between non-financial measures and financial results

Update measures frequently and keep it aligned with the strategy

Avoid measurement overload

The link to incentive systems; these systems should be based on all perspectives, not only on financials

Week 5 – Defining Authority and Accountability; Financial Responsibility Centers

Chapter 5 Decentralization, control, and incentives

Decentralization is the main driver of organizations’ need for goal congruence.

Definition decentralization includes three essential elements: (1) delegation of decision-making authority, (2) provision ofsufficient material and formal resources, and (3) assignment of accountability and responsibility

Decentralization advantages and disadvantages

Improves quality of decision making at higher and lower management levels (higher mm reduces span of control,so they can better focus on long-term. Lower mm is more empowered to make wqell-informed decisions and morequickly. It also supports management development, because decisions-making starts in lower hierarchy.

Disadvantages are (1) inefficiencies, (2) lack of coordination and inconsistencies, (3) short supply of people tomake complex trade-offs, (4) delays and distortions in vertical communications , and (5) top mm is cut from thefield and therefore miss insights. Also, (6) the risk of opp. behavior of lower mm arises with assigning resources.

Three main reasons for needing a MCS in a decentralized organization

(1) There is no automatic understanding of developed goals and strategies, (2) there is no automatic agreementwith the goals and strategies and (3) lower MM does not automatically have the needed resources

Formal control of decentralized MM: a formal system can consist of three closely related dimensions to govern thebehavior of lower MM

(1) Organizational structure: three categories

  • Functional structure; with each manager responsible for a specified function -> this specialization makes it likely to have better decisions, better supervision. Disadvantages are: no unambiguous way of determining effectiveness of individual managers. Disputes can only be resolved in the very top. Also, inadequate for a firm with diversified products and markets
  • Business unit structure; managers are responsible for most of the activities and the business functions as a semi-independent part of the company because the HQ still has certain rights. Advantages are that it provides a training group in general management, management can make sounder decisions because they are closer to the market and can react more quickly. BU structure cannot always attract the skilled specialist they need.
  • Matrix structure; functional units have dual responsibilities and can be seen as a mix between functional and business unit structures

(2) Organization’s set of rules: formal ways to control the inputs of lower-MM

  • -- there is distinction between rules as guides, as positive requirements, as prohibitions, as rules that should never be broken –
  • Physical controls
  • Manuals
  • System safeguards
  • Task control systems

(3) Organization’s formal planning and control cycle

  • A combination of all procedures that are followed in the implementation of strategy. Includes operationalization of strategic objectives and plans, and procedures via which goal attainment is measured and monitored

(1) core operations and measurement of input and output;(2) organizational structure(3) controllability principle(4) specific strategic concerns affect the choice of responsibility

Revenue center: output is measured in monetary terms, but no attempt is made to relate input to output. Revenuecenters are usually marketing/sales units.

Expense center: (cost center) inputs are measured in monetary terms, but output is not

Expense center

Engineered vs. discretionary centers: (1) engineered: output can be measured in monetary terms, output inphysical terms, or optimum amount of input can be determined. (2) discretionary: output cannot be measured inmonetary terms, budget may be unrelated to output --> so, main purpose is to control expenses by allowing themanager to participate In the planning.

Then, financial control is exercised at the planning stage before the expenses are incurred. --> budgeting

Planning function has to budgeting methods: incremental budgeting and zero-based budgeting.

Chapter 7 Responsibility centers: profit and investment centers

Profit centers

Two conditions are important when delegating in profit centers: (1) the manager should have access to relevantinformation and (2) there should be some way to measure the effectiveness

Major step is to determine the lowest level in an organization at which these conditions prevail.

(+) Advantages: the quality of decisions may improve, excellent training ground is provided for general MM, profitconsciousness is enhanced

(-) Disadvantages: some loss of control, friction may increase (arguments over transfer price, etc.), additionalcosts (additional MM), and too much emphasis om short-run profitability

Decisions to delegate responsibilities depend on the influence that the manager has over the activities that affectthe profit. Types of profit centers are:

(1) Business units Managers control product development, manufacturing and marketing resources; BU structure represent trade-offs between BU autonomy and corporate constraints(2) Marketing Can be a profit center by applying transfer prices, which provide the manager with relevant information to take optimal revenue/cost trade-offs(3) Manufacturing Where performance of manuf. is measured against standard costs, quality control, production scheduling and make-or-buy should be evaluated separately(4) Service and support units Managers are motivated to control costs to prevent customers going elsewhere, while managers of receiving units are motivated to make decisions about whether using the service is worth the price

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Five measures of profitability

(1) Contribution margin(2) Direct profit(3) Controllable profit

(4) Earnings before interest expenses and tax(5) Net income

Managers should be measured against those items they can influence, even if they do not have total control overthose items

Investment centers

If managers can also influence the assets employed in earning the profit, the investment center is appropriate RC

The purpose is to provide managers with information, so they will make sound decisions that are in the bestinterest of the company and to measure the performance of the BU, with two main objectives: (1) generate adequate profit form resources at disposal; (2) invest in additional resources when the investment produces additional returns

ROI vs. RI

Two methods of relating profit to the sum of the assets (investment base): (1) Return on investment ROI (2) Residual income RI

ROI reflects anything that affect financial statements, is simple, easy and meaningful, but RI motivates managersto take actions consistent with increasing shareholders’ value.

Measuring assets deployed: (1) working capital, (2) PPE, and (3) Intangible non-current assets and EVA

effect, therefore, includes cases where penalties increase behavior, and focuses on behavior concurrent with the incentiverather than after its removal.

Control mechanisms in MCT (when the likelihood of intrinsic rewards is high and/or when intrinsic rewards are important

Financial compensation --> minimum requirement is fixed pay, bonusses should be unexpected or based on collective performanceInteresting assignments --> will be a reward itself if the employee is interestedCommunication --> management by walking around, taking notes of subordinates, informing, and listening, etc. tend to crowd in intrinsic informationInvolvement --> involvement in decision-making may increase intrinsic motivationAffiliation --> being part of something bigger: gives meaning and creates ties within organization. Affiliation or kinship may be a strong motivator

Critique MCT: (1) results are not the same as the ones found in real life situations, (2) present systems attract a certaintype of people who is driven mainly by extrinsic rewards, (3) positive outcome of bonusses and extrinsic rewards are moreobvious than the negative outcomes, and (4) if extrinsic reward is big enough, total motivation will increase even if theintrinsic motivation is being crowded out.

AT or MCT as underlying theory?

What type of work task are we talking about?What kind of people are we talking about?Which theory do we support?

Bartlett, Johnson & Reckers, 2014: Accountability and Role Effects in BSC Performance Evaluations whenStrategy Timeline is Specified


Aim/approach: (1) Examines if fixation on lagging financial measures is mitigated when evaluators are providedwith a strategy implementation timeline. To do so, the experiment manipulates (1) whether or not evaluators aresubject to process accountability as well as (2) the role: supervisor or subordinate.

Prediction and results: provision of timeline results in evaluators placing more weight on strategically linkedleading non-financial measures within a subordinate’s time span of control (in comparison to strategically linked,lagging financial measures, beyond subordinate’s controllable time horizon).

Another result is that evaluators in supervisor role differentiate less between strategically linked non-financialmeasures that fall within the subordinate’s control and strategically linked financial measures beyond thesubordinate’s control when held accountable compared to when supervisors not held accountable.

On the other hand, participants in the role of a subordinate were able to differentiate appropriately between thesemeasures when held accountable.


BSC is a multidimensional performance evaluation system, it (1) assists top management in communicatingstrategic goals top-down, (2) helps to evaluate management performance, and (3) it supports longer-termstrategic performance by emphasizing the importance of meeting leading non-financial targets. (drivers ofimproved long-term financial performance.

Evaluators still tend to discount or ignore leading non-financial performance in BSC-based evaluations, focusinginstead on lagging financial performance metrics. These biases may reflect evaluator’s preference for financialand/or evaluator’s inability to estimate the effects of non-financial measures.

Paper examines whether fixation on financial measures is mitigated when all managers are provided with anexplicit strategy implementation timeline as a key element of the strategy map.

BSC does not consider a time dimension (while time span of control is critical for proper evaluation ofperformance). Norreklit (2000) argues that the absence of time dimension makes it impossible to understandcause and effect.

(Kaplan, 2009, 1268) Strategy maps still represent a highly-aggregated view of causal relationships amongstrategic objectives. A detailed systems dynamic model would incorporate causal linkages that have estimates ofmagnitude and time delay.

Consideration of the implementation timeline is a critical element of both strategy implementation and theevaluation of (for implementation) responsible managers.

(1) Value 1 of research: including a strategy implementation timeline that clarifies the intended time period overwhich strategic performance measures are expected to be met.

(2) Value 2 of research: examine whether increased cognitive effort (in the form of process accountability) leadsto a dilution effect when a BSC contains both diagnostic and non-diagnostic performance measures.

(3) Value 3 of research: examine whether the role conflict (Wong-On-Wing et al., 2007) is mitigated with theprovision of an implementation timeline that is expected to attenuate (verzwakken) evaluators’ tendency to fixateon lagged financial performance.

Results: (1) in absence of process accountability, provision of an implementation timeline mitigated the financialmeasure fixation, as well as the role conflict. (2) however, accountability led to a dilution effect with respect tosupervisors (it led supervisors to differentiate less between diagnostic and non-diagnostic performance measuresrelative to subordinates when held accountable, which resulted in role conflict)

Implications: (1) evaluator awareness of the planned time frame for expecting measurable results under a newstrategy may reduce financial fixation and role biases in performance evaluations of managers responsible forimplementing the strategy. (2) the provision of timeline may be insufficient in mitigating these biases whensupervisors are held accountable for their performance evaluations

Literature review and hypothesis development

H1: When evaluators are provided with a strategy map and explicit implementation timeline, store managers’performance evaluations will be based on strategically linked measures within the time span of control.

H2: Evaluators who are required to justify their performance evaluation judgments will be more likely to use allperformance measures (both diagnostic and non-diagnostic) in their performance evaluation judgments thanevaluators who are not so required.

R1: Will the performance evaluations rendered by supervisors and subordinates differ when all evaluators areprovided with a strategy map and implementation timeline.

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Provided is evidence regarding the efficacy of temporal cause-and-effect awareness through the provision of astrategy implementation timeline in overcoming financial measure fixation. Important because managers’decisions are affected by the measures included in their performance evaluation and compensation. (so, financial


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What are the 5 types of management? ›

There are many management styles, but five stand out above the rest: autocratic, democratic, laissez-faire, visionary, and servant leadership.

What are the three key properties of management control system? ›

Control is a management process to aim at achieving defined goals within an established timetable, and comprises of three components: (1) setting standards, (2) measuring actual performance, and (3) taking corrective action.

What are the 4 most important pillars of successful team management? ›

When working with any new team I look for these 4 key pillars.
  • COLLABORATION. Individuals coming together by bringing innovative ideas implemented with a high level performance will get you to where you're going so much faster, and with way less resources. ...
  • CONFLICT. ...

What are the 4 functions of management and give an example of each? ›

Four Functions of Management
  • Planning involves the planning of decision making.
  • Organizing includes appropriate coordination between planning and resources.
  • Leading involves motivating the employees to achieve organizational goals.
  • Controlling is related to monitoring and evaluation.
Aug 24, 2021

What are the 4 pillars of effective leadership? ›

To do this leaders must emphasize the four pillars of integrity, accountability, learning and communication.

What are the two primary purposes of control? ›

Control has two basic purposes namely (i) to facilitate coordination, and (ii) to help in planning. A good control system provides timely information to the management which is very much useful for taking various actions for the efficient operation of the organizational processes.

What are the two main types of control which is more important and why? ›

In management, Controlling is one of the most important functions in an organization which is goal-oriented. Types of Control techniques in management are Modern and Traditional control techniques. Feedforward, feedback and concurrent controls are also types of management control techniques.

What are the two methods used to control the performance of a control system? ›

There are two areas of control system theory in which the application of performance measures is of inter- est: 1) the evaluation of control system designs in general, and 2) the design of adaptive control systems.

What is the 4 function of management? ›

Originally identified by Henri Fayol as five elements, there are now four commonly accepted functions of management that encompass these necessary skills: planning, organizing, leading, and controlling. 1 Consider what each of these functions entails, as well as how each may look in action.

What are the three management control processes? ›

The basic control process, wherever it is found and whatever it is found and whatever it controls, involves three steps: (1) establishing standards. (2) measuring performance against these standards. and (3) correcting deviations from standards and plans.

What are example types of controls? ›

Types of Controls
  • Preventive controls are proactive in that they attempt to deter or prevent undesirable events from occurring.
  • Corrective controls are put in place when errors or irregularities have been detected.
  • Detective controls provide evidence that an error or irregularity has occurred.

What are the 7 functions of management? ›

The 7 functions of management are as follows:
  • Planning.
  • Organising.
  • Staffing.
  • Directing.
  • Coordinating.
  • Reporting.
  • Budgeting.

What are the three main objectives of management? ›

These objectives are Survival, Profit and Growth of an organisation.

What makes a good leader? ›

A good leader should have integrity, self-awareness, courage, respect, empathy, and gratitude. They should be learning agile and flex their influence while communicating and delegating effectively. See how these key leadership qualities can be learned and improved at all levels of your organization.

What are the 7 types of managers? ›

Types of Management Styles
  • Democratic.
  • Visionary.
  • Autocratic.
  • Coaching.
  • Laissez-Faire.
  • Pacesetting.
  • Servant.
Dec 17, 2019

What is management control system and example? ›

In management control systems, managers closely monitor financials to identify the adjustments they need to remain aligned with the business's goals. For example, a sales professional and their supervisor have specific financial goals for their management control systems.

What is the purpose of a management control system? ›

A management control system maintains a detailed level of oversight over the use of resources within a business. The system assigns responsibility for resource consumption to various individuals, whose performance is judged based on their ability to manage resources in the most effective manner possible.

Which is the the main function of management control system? ›

After strategies are set and plans are made, management's primary task is to take steps to ensure that these plans are carried out, or, if conditions warrant, that the plans are modified. This is the critical control function of management.

What is management control system importance? ›

Control management is a process as it helps your business to check errors and put the right corrections in place and keeps your project management on track. With control management in place, your company increases its chances of achieving its goals.

What is a real life example of controlling in management? ›

Examples of controlling functions

Schedule and deadline management, employee training, performance evaluations, adjustments to budgets or staffing assignments, and resource allocation are all included within the controlling function.

What are some examples of control? ›

She hired an accountant to take control of her money. He lost all muscle control in his left arm. The soccer player showed good control of the ball. a teacher with good control of her students The farmer used an organic pest control on his crops.

What plays the most important role in management control? ›

As such, the control function of management is highly intertwined with the planning phase. The guides that managers use to ensure progress and the mechanisms used to monitor progress are areas that need direct consideration before the plan implementation begins.

What are the four functions of controlling in management? ›

Over the years, Fayol's functions were combined and reduced to the following four main functions of management: planning, organizing, leading, and controlling.

What are the 4 steps in the control process? ›

Steps involved in Control Process
  • Establishing standards and methods or ways to measure performance.
  • Measuring actual performance.
  • Determining if the performance matches with the standard.
  • Taking corrective action and re-evaluating the standard.


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