Flashcards
MA Revision notes
Flashcards do conjunto (38)
- 1Management control problems lead tolarge financial losses, reputational damage and possible even organizational failure
- 2Reasons for MCS: 3 control problems• Lack of direction
• Motivational problems
• Personal limitations - 3Management accounting controls- Recruitment / training
- Target setting / planning
- Standard procedures
- Segregation of duties
- Physical / access limits
- Matching / reconciling
- Authorization / approval
- Review / appraisal / rewards
- Backup / insurance - 4Integration of controls- Results controls
- Action controls
- Personnel / Cultural controls - 5Reward performance (influences behaviour)- Job security
- Promotions
- Autonomy
- Plum assignments
- Recognition
- Pay-for-performance - 6Results controlsPerformance-dependent rewards provide the impetus for the alignment of employees’ natural self-interest with the organization’s objectives.
- 7effect of results controls- Influence action by causing employees to be concerned with consequences of actions (via monitoring of results)
- Employees are empowered (by results being measured but action not dictated) to take actions that they believe will best produce desired results - 8Examples of results controls- Piece work
- Commissions
- Rewards (monetary and otherwise) - 9Benefits of results controls- Feasibility
- Autonomy
- Motivating
- Inexpensive - 10drawbacks of results controls- Uncontrollable factors
- Empowerment issues
- Defining ‘good’ results - 11Factors to consider when deciding incentive reward schemes- Results or effort
- Monetary or non-monetary
- Explicit / implicit rewards
- Size
- Time period
- Individual or team-based rewards - 12Implementing results controlsDefine Dimensions > Measure performance in chosen dimension > Set a target for each measure > Provide feedback / rewards
- 13Reward Schemes: ‘Expectancy approach’People act in ways that they think will create rewards they desire.
compensation provides individuals with rewards when their behaviour promotes the organisation’s objectives. - 14Management Accounting Controls- Influence employee behavior in desirable ways
- Increase probability that organisations will achieve their goals - 15Types of performance dependent rewards- Extrinsic / intrinsic
- Positive / negative
- Non monetary
- Monetary (salary increases, STI e.g. bonuses, commission, piece rate
- LTI plans - 16Evaluating reward schemes- Valued
- Impact
- Understandable
- Timely
- Durable
- Reversible
- Cost efficient - 17New ways of setting rewards- Not based on fixed targets (lead to irrational behaviour or divergence of interests)
- Do base on relative targets
- Not used to motivate
- Few, simple, clear and transparent measures
- Align with strategic goals
- Team performance critical
- Support important interdependencies
- Fair + inclusive - 18Personnel ControlsBuild on employees’ natural tendencies to control and or motivate themselves
- 19Types of personnel controls- selection and placement (select right people and place them in good working environment with adequate resources)
- Training (train staff so they know what is expected of them and how the role / tasks can or should be performed)
- Job design (ensure jobs are designed to allow motivated, appropriately qualified employees a high probability of success in their role) - 20Cultural controlsExist to shape organizational behaviour norms and to encourage employees to monitor and influence each other’s behaviour. ‘Mutual monitoring’ offers strong peer/group pressure on individuals who deviate from organizational norms / values.
- 21Types of cultural controls- Codes of conduct (set out organiation vision, mission, related acceptable ethics/bahviour)
- Group rewards (motivate through reinforcing collective achievement)
- Inter-organisational transfers (facilitates transmission of the essential corporate culture throughout the organisation)
- Physical / social arrangements (e.g. open plan offices, formal or casual dress codes, regular staff social events and outings, expected organisation language in key terms)
- Management tone (do what we do, not just what we say) - 22Assessment of personnel / cultural controlsConsidering personnel / cultural controls first allows managers to consider how reliable these forms of management controls are and asses how aggressive they should be in using other forms of controls.
- 23Factors in the assessment of personnel and cultural controls- Unobtrusive (not often thought of as a control)
- Substitution (can be a substitute for other more formal controls)
- Adaptable (more easily adapted than other controls)
- Applicable (In almost every organizational context)
- Inexpensive (relatively low cost)
- Side effects (usually produce few harmful side-effects)
- Economic (make good economic sense) - 24Action ControlsEnsure that employees perform [do not perform] certain actions that are known th be beneficial [harmful] to the organisation
- 25Types of Action Controls- Behavioural constraints (e.g. locks and passwords which make it difficult for employees (and sometimes customers) to do ‘undesirable’ things; direct supervision is a behaviour control too.
- Pre-action reviews (such as budgets and capital investment / project appraisals which require close scrutiny of plans prior to implementation)
- Action accountability (holding employees responsible for the decision they take while supporting them by providing regular monitoring
- Redundancy (assigning more resources than actually needed to ensure a task will be completed successfully. - 26Benefits of action controls- Clarity / directness (must be clearly laid out – crucial to do so (often observed)
- Documentation (organisation accumulates knowledge / intellectual capital as to know what works ‘best’ in different circumstances) - 27Drawbacks of action control- Feasibility (only appropriate for routine, repetitive activities)
- Negative attitudes (encouraged due to restrictions and pressure they are perceived to place on employees)
- Expensive (relatively pricey to implement due, for instance, to the considerable input needed from experienced [and thus expensive] managers - 28EffectivenessTo test: does the system motivate and assist managers in attaining their organizational objectives in a timely, efficient and effective manner
- Control system ‘tightness’ (which can lead to significant costs)
- On going adaptation of the through the regular utilization of a contingent approach.
- Also incorporates a discussion regarding changing organizational structures from the 20th century industrial age to today’s information age - 29Characteristics of good management controls- Good control is not perfect control: there is always the possibility of poor performance
- Good control indicates that management can be reasonably satisfied that no ‘unpleasant’ surprises will occur
- Benefit must outweigh the costs for MCS to be implemented
- Assessment of whether control has been achieved must be future-orientated and objectives-driven.
- If multiple objectives, good control must achieve all performance dimensions to be considered - 30Costs considerationsInvestment in MCS causes direct out-of-pocket costs, ergo, in return, MCS must provide “a higher probability that the employees will both work hard and direct their energies to serve the organisation’s interests.
MCS can also incur indirect, less obvious costs that can be many times greater than their direct costs - 31Direct costs for MCS- Time spent (expensive managers and supervisors – observing staff, authorizing transactions and monitoring budgets)
- Internal audit (associated salaries and comp systems)
- Bonuses
- Certificates (outstanding achievement)
- Social events (celebrate achievements) - 32Indirect costs for MCS- Behavioral Displacement
- Gamesmanship
- Operating delays
- Negative responces - 33Behavioral displacementOccurs when the control system encourages behavior that are not consistent with the organisation’s objectives.
With results controls, it occurs when the results’ measures are incongruent with the organisations true objectives
- Poor understanding of desired results
- An over-emphasis on “measured” results
With action controls it can be manifested by:
- Means-end inversion (employees are induced to pay more attention to what they do and lose sight of what they are trying to accomplish
- Rigid, non-adaptive, bureaucratic behaviour. - 34GamesmanshipRefers to the actions managers take to improve their performance indicators without producing any positive economic effects
Data manipulation
- data management: affecting the reported results through accounting methods (e.g., reserves) or operating methods (e.g. delaying expenses)
- Falsification: reporting erroneous data
- consumption of resources in excess of what is required - 35Operational delaysMostly associated with action controls, notably delays caused by review processes. Examples are, cumbersome [heavy / difficult to manage] authorisation layers and bureaucratic organisations, passwords or barriers to entry to certain systems or physical locations).
- 36Negative attitudesJob tension, conflict, frustration, resistence which causes numerous errors (gaming, lack of effort, absenteeism, staff turnover
Action controls often “irritate” employees – it is difficult for people to enjoy following strict set of procedures for a long period of time
Results controls – lack of employee commitment to performance targets (targets could be too difficult, not meaningful, uncontrollable) or when performance evaluations are deemed unfair. - 37MACS: Contingent approachIs based on the premise that there is no universally appropriate (accounting) system applicable to all organisations in all circumstances. The development of an effective control system depends on the relationship between the organisation and a number of notable contingent variables.
- 38Contingent implications- Environment: dynamism / rate of change (fast paced = feed forward necessary)
- Technology: task complexity (should be closely associated with the orgs accounting control structure
- Strategy: build / harvest strategies
- Culture: starting point
- Structure: accounting systems invariable mirror existing management structure and, as this structure evolves, so should the accounting model.
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- FlashCards sobre MA Revision notes, criado por Nico Kyle Lawren em 29-12-2013.
- Criado por
- Nico Kyle Lawren
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