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Management Control System

In: Business and Management

Submitted By mirtha
Words 2221
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Berkshire Industries PLC
Kami harus melakukan sesuatu yang berbeda. Perusahaan ini melakukan besar sesuai dengan semua indikator kinerja kami dipantau, dan manajer kami mendapatkan bonus bagus, tapi pemilik saham tidak menguntungkan. William Embleton

William Embleton, managing director Berkshire Industries PLC, menjelaskan mengapa perusahaannya telah menerapkan sistem insentif baru berdasarkan "keuntungan ekonomi" ukuran kinerja mulai tahun 2000. Pada tahun 2002, bagaimanapun, manajer Berkshire mempertanyakan apakah sistem baru mereka telah memiliki efek yang diinginkan. Ukuran laba ekonomi baru tampaknya tidak menjadi lebih baik dalam merefleksikan kembali shareowner daripada ukuran lama - laba akuntansi - yang manajer Berkshire sebelumnya terfokus. Dan sistem baru yang menyebabkan beberapa kebingungan manajemen dan masalah ketidakadilan yang dirasakan. Mr Embleton harus memutuskan apakah akan memodifikasi sistem baru, dan jika demikian bagaimana, atau menggantinya dengan sesuatu yang lain.

PERUSAHAAN
Berkshire Industries PLC (Berkshire) didirikan pada tahun 1852 sebagai tempat pembuatan bir yang melayani pub lokal. Selama bertahun-tahun itu telah tumbuh, baik secara internal maupun dengan akuisisi. Pada tahun 2002, Berkshire adalah berukuran sedang, milik publik korporasi difokuskan pada minuman dan makanan ringan industri. Itu omset tahunan sekitar £ 500 juta itu mempekerjakan hampir 3.500 orang di enam negara. Berkshire tercatat di London Stock Exchange. Kantor pusat perusahaan yang masih terletak di Manchester, Inggris, di mana perusahaan ini didirikan.
Berkshire memiliki empat divisi operasi: bir, Roh, minuman ringan, dan makanan ringan. Satu direktur dari masing-masing divisi tersebut memiliki otonomi yang cukup karena Berkshire dioperasikan secara desentralisasi. Staf markas kecil terutama bertanggung jawab untuk mengkoordinasikan keuangan, sumber daya manusia, dan berbagai fungsi administratif (misalnya hukum, sistem informasi).

PENGUKURAN DAN INSENTIF SISTEM
Sejak perusahaan telah go public, penekanan kinerja utama di Berkshire telah pada pendapatan perusahaan per saham (EPS). Target pertumbuhan EPS jangka panjang perusahaan adalah 8%, tetapi target itu diubah setiap tahun berdasarkan kondisi pasar diantisipasi dan akuisisi tertunda, jika ada.
Proses perencanaan tahunan perusahaan adalah proses bottom-up, yang pertama kali melibatkan divisi operasi mengusulkan target pendapatan mereka untuk tahun ini dan cara mereka untuk mencapainya. Draf rencana divisi dikonsolidasikan dan dibandingkan dengan target pertumbuhan EPS perusahaan Berkshire. Biasanya perbedaan antara rencana divisi 'dan target perusahaan adalah materi. Ini "perencanaan gap" tersingkir dalam serangkaian diskusi antara manajer perusahaan dan divisi, biasanya oleh peningkatan beberapa atau semua divisi target '.
Karena manajemen puncak dianggap begitu penting untuk memenuhi EPS ekspektasi analis, mereka juga membentuk "cadangan laba" perusahaan sekitar 10% dari penghasilan yang direncanakan. Ini cadangan didirikan untuk memastikan bahwa korporasi akan mencapai target bahkan jika salah satu, atau bahkan mungkin dua, divisi yang gagal mencapai target mereka. Jika, di akhir tahun, manajemen menetapkan bahwa perusahaan akan mencapai target, mereka akan merilis cadangan ini kepada Komite Investasi untuk pengeluaran diskresioner proyek, yang sebagian besar memiliki relatif hadiah jangka panjang. Namun pada tahun 2000 dan 2001 tidak ada cadangan ini dirilis kepada Komite Investasi. Semua itu berubah untuk memenuhi target EPS perusahaan.
Manajer senior di Berkshire, sekelompok sekitar 40 orang, berpartisipasi dalam rencana kompensasi insentif tahunan. Kinerja dievaluasi berdasarkan pencapaian target laba pada entitas yang manajer ditugaskan: sebuah divisi dalam kasus personil tingkat divisi atau perusahaan seluruh dalam kasus personil tingkat korporasi. Target bonus berkisar 20-90% dari gaji pokok, tergantung pada tingkat manajer senioritas. Rencananya memungkinkan untuk menimpa subjektif dari penghargaan bonus jika atasan, atau komite kompensasi dari dewan direksi dalam hal manajemen puncak, merasa bahwa kekurangan kinerja disebabkan oleh faktor-faktor di luar kendali manajer.
MOTIVASI UNTUK RENCANA INSENTIF BARU
Pada tahun 1999 dewan direksi Berkshire meminta William Embleton untuk mengeksplorasi keinginan pengukuran kinerja baru dan sistem insentif berdasarkan "keuntungan ekonomi" ukuran kinerja, sebuah konsep yang telah menerima banyak ulasan populer di media manajemen.
Motivasi board untuk rencana baru berasal dari dua kekhawatiran. Pertama, mereka khawatir bahwa kepentingan manajer tidak selaras dengan orang-orang dari pemilik saham. Mereka sangat prihatin bahwa EPS adalah bukan merupakan ukuran yang baik dari kinerja di era baru di mana mantra manajemen telah menjadi "memaksimalkan nilai shareowner." Mereka mencatat bahwa sementara EPS Berkshire telah terus meningkat, pada tingkat pertumbuhan tahunan rata-rata 9% dalam dekade terakhir, pemilik saham perusahaan tidak diuntungkan. Harga saham perusahaan telah meningkat hanya sedikit selama periode waktu.
Kedua, dewan ingin memaksa lebih objektivitas dalam evaluasi kinerja dan sistem penghargaan. Beberapa anggota dewan percaya bahwa terlalu banyak penghargaan bonus subjektif sedang dilakukan, memberikan bonus manajer bahkan di tahun-tahun di mana entitas mereka tidak tampil baik. Salah satu efek yang memungkinkan penilaian subjektif adalah bahwa penghargaan bonus hanya longgar berkorelasi dengan kinerja operasi direalisasikan. Efek lain adalah banyak waktu disalah-gunakan, sebagai manajer terlibat dalam "politisasi." Mereka mencoba meyakinkan evaluator mereka bahwa mereka telah dilakukan dengan baik, meskipun hasilnya mengecewakan. Para anggota dewan yang mendukung perubahan berpikir bahwa sistem insentif baru harus menempatkan batasan tajam pada penggunaan subjektivitas dalam pemberian penghargaan bonus, jika tidak menghilangkannya sama sekali.

THE NEW SISTEM
Menanggapi permintaan dewan, William Embleton meminta tiga perusahaan konsultan untuk mengajukan proposal untuk pertunangan untuk merancang pengukuran baru dan sistem insentif. Setelah serangkaian pertemuan, tim manajemen dan dewan Berkshire memilih besar di New York bermarkas kuat dari Corey, Langfeldt and Associates (PKB). Keterlibatan konsultan dikelola oleh PKB asosiasi berbasis di London. Pendekatan PKB didasarkan pada proprietary "keuntungan ekonomi" mengukur perusahaan kinerja. Rumus PKB untuk keuntungan ekonomi adalah:

Keuntungan ekonomi = Disesuaikan Laba Operasional Bersih setelah Pajak -  [Modal x  Biaya Modal]

Laba operasi bersih setelah pajak (NOPAT) dikecualikan semua non-operasi biaya nonkas, seperti penyusutan, amortisasi, asset write-off dan menulis surut, dan cadangan. Biaya modal ditentukan setiap tahun untuk setiap unit bisnis berdasarkan yield obligasi pemerintah jangka panjang ditambah premi risiko dihitung berdasarkan struktur modal diasumsikan dan faktor risiko ( value) untuk perusahaan rekan sebanding. Karena unit bisnis Berkshire semua dilihat sebagai berada di industri yang relatif stabil, semua diberi tingkat biaya-of-modal yang sama sebesar 10%.
Dalam setiap pertunangan mereka, PKB akan mengusulkan kombinasi spesifik penyesuaian NOPAT untuk membuat ukuran keuntungan ekonomi "lebih baik," untuk lebih cocok biaya dan manfaat dan, karenanya, untuk meningkatkan hubungan antara keuntungan ekonomi dan harga saham. Para perancang sistem PKB telah mengidentifikasi lebih dari 100 penyesuaian yang dapat digunakan dalam situasi tertentu. Tapi dalam kasus Berkshire, konsultan diusulkan hanya dua penyesuaian karena mereka ingin "menjaga model sederhana." Pertama, mereka menyarankan bahwa biaya iklan konsumen perusahaan harus dikapitalisasi dan diamortisasi dengan metode garis lurus selama tiga tahun. Beban tahun berjalan telah ditambahkan kembali ke laba usaha, dan jumlah yang dikapitalisasi ditambahkan ke aset operasional bersih. Exhibit 1 menunjukkan contoh.
Kedua, konsultan PKB menyarankan bahwa goodwill yang timbul dari akuisisi perusahaan tidak harus diamortisasi. Oleh karena itu, mereka menyarankan bahwa goodwill kumulatif yang telah diamortisasi sampai saat ini harus ditambahkan kembali ke aset operasi bersih, dan semua beban amortisasi goodwill harus ditambahkan kembali ke laba operasi.
Dalam presentasi mereka, konsultan PKB menjelaskan bahwa mengukur keuntungan ekonomi mereka lebih unggul semua langkah-langkah lain, khususnya akuntansi laba, yang bisa menggunakan Berkshire. Para konsultan disajikan grafik yang menunjukkan bahwa ukuran mereka keuntungan ekonomi sangat berkorelasi dengan return pemilik saham di berbagai perusahaan. Dengan demikian, mereka mengklaim, itu adalah ukuran yang memberikan "sinyal yang tepat kepada manajemen sepanjang waktu." Memotivasi para manajer untuk memaksimalkan keuntungan ekonomi entitas mereka akan mendorong mereka untuk berinvestasi dalam futures entitas mereka. Mereka akan membuat semua investasi menjanjikan keuntungan yang lebih besar daripada biaya korporasi modal. Hal ini juga akan memotivasi mereka untuk mengenali biaya penuh mengikat modal perusahaan dan, karenanya, untuk mengurangi aset mereka bekerja di mana pengembalian tidak memadai.
Mengetahui kompetisi mereka, konsultan PKB juga menyutradarai beberapa kritik mereka pada sistem yang mencoba untuk menghubungkan insentif manajemen untuk menguraikan kombinasi tindakan. Sistem multi-pengukuran, mereka menjelaskan, biasanya putus asa kompleks. Sistem biasanya dimasukkan tindakan yang tidak terkait langsung dengan nilai shareowner. Mereka termasuk konsep kinerja yang tidak jelas (misalnya, pengembangan personel) dan didukung oleh langkah-langkah yang lemah. Dan mereka jarang membuat pilihan di antara beberapa ukuran yang jelas. Efek keseluruhan adalah difusi perhatian manajemen dan hilangnya dimengerti dan akuntabilitas.
Para konsultan PKB juga dianjurkan terhadap pelaksanaan program insentif berbasis saham. Mereka menunjukkan bahwa harga saham dipengaruhi oleh banyak faktor eksternal dan sangat volatile dalam jangka pendek. Mereka lebih lanjut menjelaskan bahwa insentif berbasis saham bukan merupakan alat yang efektif untuk memotivasi dan divisi-manajer tingkat rendah yang dapat memiliki, di terbaik, memberikan sedikit dampak terhadap harga saham.
Pengukuran-fokus presentasi PKB itu sangat meyakinkan ke beberapa anggota dewan. Satu berkomentar:
Ini adalah apa yang kita butuhkan, salah satu ukuran sederhana yang naik ketika nilai shareowner dibuat dan yang turun ketika nilai hancur. Jika kita mendapatkan manajer kami terfokus pada ukuran ini, mereka akan bekerja dalam kepentingan terbaik dari pemilik saham kami. Dengan penghasilan, kita tidak tahu apa yang kita dapatkan.

Unsur kedua dari sistem PKB melibatkan ratcheting otomatis target kinerja. Dalam sistem manajer PKB diberi kompensasi langsung untuk meningkatkan keuntungan ekonomi entitas mereka. Pada tahun pertama target kinerja yang ditetapkan berdasarkan proyeksi tingkat unit sejarah ekonomi pertumbuhan laba, jika tingkat pertumbuhan itu dianggap kinerja yang baik, dikalikan dengan 75%. Setelah target kinerja yang ditetapkan secara otomatis berdasarkan perbaikan dari kinerja aktual dari tahun sebelumnya. Target kinerja masing-masing unit bisnis itu tergeser sampai (ke bawah) sebesar 75% dari jumlah dimana kinerja aktual melebihi (jatuh pendek) kinerja unit tahun sebelumnya. Para konsultan PKB menjelaskan bahwa metode ini target pengaturan menghindari kebutuhan untuk menegosiasikan kembali kinerja menargetkan setiap tahun dan, karenanya, politik dan permainan-permainan yang hampir pasti terkait dengan negosiasi ini. Hal ini juga memasukkan filosofi manajemen yang diinginkan perbaikan terus-menerus.
Unsur ketiga dari sistem adalah penghapusan eksplisit ambang batas pembayaran dan topi. Manajer ditugaskan target bonus, persentase tetap dari gaji pokok, yang akan diperoleh jika unit mereka hanya mencapai target kinerja mereka. Target ini meningkat sedikit dari tingkat bonus yang diperoleh di bawah sistem lama Berkshire untuk mendorong penerimaan manajer perubahan. Target bonus berkisar antara 20% dari gaji pokok bagi manajer fungsional dalam divisi sampai 100% untuk direktur Berkshire. Jika unit melampaui target kinerja mereka, manajer akan mendapatkan bonus yang lebih besar. Kemiringan garis menentukan hadiah untuk setiap tingkat keuntungan ekonomi didasarkan pada tingkat pertumbuhan historis masing-masing unit. Kemiringan ini dimaksudkan untuk tetap sama dari tahun ke tahun, meskipun itu ditinjau papan. Bonus maksimal yang bisa diperoleh adalah terbatas (lihat Gambar 2).
Unsur keempat dari sistem adalah "bonus bank" yang dimaksudkan untuk mengurangi risiko manajer dengan memperhalus penghargaan bonus, untuk mengurangi perilaku game jangka pendek manajer, dan meningkatkan retensi manajer. Jika kinerja laba ekonomi suatu unit melampaui target kinerja, "kelebihan" bonus yang diterima (dihitung sebagai kemiringan fungsi kali hasil jumlah dimana keuntungan ekonomi aktual melebihi target) dikreditkan ke bank bonus. Manajer kemudian membayar bonus target mereka ditambah seperempat dari jumlah di bank bonus. Jika keuntungan ekonomi turun di bawah jumlah target entri negatif (diperoleh sebagai kemiringan hasil fungsi kali jumlah dimana keuntungan ekonomi yang sebenarnya jatuh pendek dari target) dibuat untuk bank bonus. Jika manajer divisi berubah, jumlah bank yang bonus mereka akan mengikuti mereka. Manajer yang meninggalkan Berkshire sukarela kehilangan jumlah dalam rekening bank bonus mereka.

MASALAH DAN KEKHAWATIRAN
Sementara Berkshire anggota dewan 'dan manajer' harapan yang tinggi setelah pengenalan perusahaan dari sistem profit ekonomi baru pada tahun 2000, pengalaman awal dengan sistem yang mengecewakan. Sistem baru telah menyebabkan beberapa masalah dan kekhawatiran. Dewan dan tim manajemen puncak sedang mempertimbangkan apakah sistem diperlukan memperbaiki. Beberapa bahkan mempertanyakan apakah sistem baru harus dilanjutkan. Satu masalah adalah bahwa sistem baru telah menciptakan kebingungan manajemen yang cukup besar, yang bertahan bahkan setelah semua manajer operasi telah menghadiri serangkaian sesi pelatihan. Manajer perusahaan berpikir bahwa manajer operasi cepat akan belajar bagaimana ukuran keuntungan ekonomi bekerja, karena bonus mereka sekarang tergantung pada hal itu. Tapi sejumlah manajer tampaknya tidak mengerti bagaimana mengukur keuntungan ekonomi dihitung, dan beberapa dari mereka terus mengelola entitas mereka berdasarkan laporan manajemen laba berbasis lama mereka.
Masalah kedua adalah kekecewaan dan demonisasi di Divisi Spirits (Roh). Dalam kedua tahun 2000 dan 2001 keuntungan ekonomi di Spirits miskin. Dalam masa resesi, konsumen minum roh kurang. Dengan permintaan konsumen turun beberapa pesaing Spirits Divisi memotong harga secara signifikan dan Spirits harus cocok pengurangan mereka. Ini memiliki efek buruk pada margin. Spirits gagal mencapai kedua, target kinerja tahun 2000 dan 2001 target yang tergeser-down, dengan margin lebar. Sebagai penghargaan bonus konsekuensi bagi manajer Spirits secara signifikan di bawah tingkat target, dan semua manajer Spirits memiliki saldo negatif yang cukup besar dalam rekening bank bonus mereka.
Ian Dent, managing director Spirits ', meminta William Embleton untuk beberapa penyesuaian khusus. Dia meminta agar Spirits target kinerja Divisi disesuaikan secara retroaktif untuk mencerminkan kondisi ekonomi yang benar-benar dihadapi. Dia tidak berpikir itu adil bagi manajer untuk menderita efek negatif dari faktor-faktor yang mereka tidak punya kendali. Dia menjelaskan bahwa timnya telah bekerja sangat keras dalam kondisi berusaha yang mereka hadapi, dan mereka telah membuat keputusan sulit yang menyerukan, termasuk penghematan dalam pengeluaran diskresioner dan PHK. Dia juga meminta agar sistem profit ekonomi tidak diterapkan pada divisinya karena tidak responsif terhadap perubahan kondisi pasar. Ian khawatir bahwa divisinya akan menderita kerugian manajemen yang penting karena negatif saldo bank bonus manajernya.
Masalah ketiga adalah persepsi bersama tentang kegagalan dasar mengukur laba ekonomi itu sendiri. Secara keseluruhan, kinerja Berkshire, yang diukur dalam hal keuntungan ekonomi, tampak sangat baik. Keuntungan ekonomi telah membaik sejak 2000, tetapi harga saham perusahaan benar-benar telah menurun selama periode ini (lihat Exhibit 3). Para konsultan PKB telah menjual sistem baru berdasarkan janji korelasi yang tinggi antara jumlah laba ekonomi perusahaan dan kembali ke pemilik saham, namun sampai saat ini, setidaknya, keuntungan ekonomi tampaknya tidak akan bergerak secara paralel dengan harga saham. Para pemilik saham tidak diuntungkan.…...

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... The Formal Control Process No Yes Communication Feedback Measurement Corrective action Revise Revise Responsibility center performance Rules Budgeting Report actual versus plan Was Performance satisfactory Other information Strategic Planning Goals and strategies Goals: The overall objectives, purpose and mission of a business that have been established by its management and communicated to its employees. The organizational goals of a company typically focus on its long range intentions for operating and its overall business philosophy that can provide useful guidance for employees seeking to please their managers. Goals are predetermined and describe future results toward which present efforts are directed. Rules. A business rule is a rule of a business, company, or corporation. It is a rule that defines or constrains some aspect of business and always resolves to either true or false. Business rules are intended to assert business structure or to control or influence the behavior of the business.Business rules describe the operations, definitions and constraints that apply to an organization. Business rules can apply to people, processes, corporate behavior and computing systems in an organization, and are put in place to help the organization achieve its goals. For example a business rule might state that no credit check is to be performed on return customers. Other examples of business rules include requiring a rental agent to disallow a rental......

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Management Control System

...Management Control System CHAPTER 1 : THE NATURE OF MANAGEMENT CONTROL SYSTEMS By: Amirul Affan (115020305121001) Maria Dias Ika S (115020307121009) FACULTY OF ECONOMICS AND BUSINESS BRAWIJAYA UNIVERSITY 2014 A. Basic Concepts Management control system (MCS) is a system which gathers and uses information to evaluate the performance of different organizational resources like human, physical, financial and also the organization as a whole considering the organizational strategies. MCS influences the behavior of organizational resources to implement organizational strategies. MCS might be formal or informal. Control An organization must be controlled to ensure that is strategic intentions are achieved. But controlling an organization is much more complicated than controlling devices. Every control system has at least four elements: 1. Detector or sensor Device that measures what is actually happening in the process being controlled. 2. Assessor Device that determines the significance of what is actually happening by comparing it with some standard or expectation of what should happen. 3. Effector Device that alters behavior if the assessor indicates the need to do so 4. Communications network Device that transmit information between the detector and the assessor and between the assessor and the effector. Management An organization consists of a group of people who work together to achieve certain common goals (in business...

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Management Control System

...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......

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Management Control System

...ijcrb.webs.com OCTOBER 2010 VOL 2, N O 6 INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS Management Control System Hamed Armesh Faculty of Management ,MMU,Malaysia Listed in ULRICH S Dr. Habibollah Salarzehi , Dr.Baqer Kord Faculty of Management, University of Sistan and Baluchestan Abstract A management control systems (MCS) is a system which gathers and uses information to evaluate the performance of different organizational resources like human, physical, financial and also the organization as a whole considering the organizational strategies. Finally, MCS influences the behaviour of organizational resources to implement organizational strategies. Keywords: Management , Control , Systems 1. Introduction To introduce this topic and understanding the importance of management control system we know that In the present globalised world, organisations need to use management control systems that go beyond the strategies that focus on acquisition of technology and logistics which are not sufficient to give the organisation sustained long-term competitive edge over its competitors. Management Control Systems (MCS) as defined by Anthony (cited by LangfieldSmith, 1997) is the process by which managers ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organization s objectives . MCS is a system used in an organization which collects and uses information to evaluate the performance of the organizational......

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Management Control Systems

...Management control systems Solutions to Chapter 16 questions (a) See Chapter 16 for the answer to this question. In particular, your answer should stress: (i) The need for a system of responsibility accounting based on a clear definition of a manager’s authority and responsibility. (ii) The production of performance reports at frequent intervals comparing actual and budget costs for individual expense items. Variances should be analysed according to whether they are controllable or non-controllable by the manager. (iii) The managers should participate in the setting of budgets and standards. (iv) The system should ensure that variances are investigated, causes found and remedial action is taken. (v) An effective cost control system must not be used as a punitive device, but should be seen as a system that helps managers to control their costs more effectively. (b) Possible problems include: (i) Difficulties in setting standards for non-repetitive work. (ii) Non-acceptance by budgetees if they view the system as a punitive device to judge their performance. (iii) Isolating variances where interdependencies exist. (a) See ‘Planning’, ‘Motivation’ and ‘Performance evaluation’ in the section on the multiple functions of budgets in Chapter 15 for the answer to this question. The answer should emphasize that the role of motivation is to encourage goal congruence between the company and the employees. (b) See ‘Conflicting roles of budgets’ in Chapter 15 for an explanation of how...

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Management Control System

...management control system targets. Therefore, conventional management control systems focus on getting better operational efficiency. But as operational efficiency is no longer adequate to create sustainable competitive advantages, management control systems must be expanded to managerial practices that cultivate employee cooperation and creativeness in the discovery and development of new business opportunities. This is especially the case in the high-tech industries that are at the faced with the challenges of globalisation and employee teams must combine efficient communication with creativity. ``Project managers and product designers in software and other industries thus need to find ways to divide up products and tasks so that even teams of many of clever people can work and communicate efficiently as well as creatively'' (Cusumano, 1997). Simons (1987 and 1990) argued that control systems is in four categories, namely i. ii. iii. iv. Diagnostic control systems Boundary control systems Interactive systems Belief systems. These four different management control systems are identified recently by companies as effective categories of controlling system, companies must apply them in a way that maximizes operational effectiveness without limiting employee creativity. This task can be accomplished by using diagnostic measures as a way to improve operational effectiveness and the other three types of control measures as a way to mitigate its negative effects on employee......

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Management Control Systems of Glaxosmithkline

...Abstract Management control systems are tools to aid management for steering an organization toward its strategic objectives and competitive advantage. Management controls are only one of the tools which managers use in implementing desired strategies. However strategies get implemented through management controls, organizational structure, human resources management and culture. In this paper we will discuss how management control system is implemented in various sectors of an pharmaceutical company ie. “GlaxoSmithKline Bangladesh Limited”. GlaxoSmithKline Bangladesh Limited carries with it an enviable image and reputation for the past 6 decades. A subsidiary of GlaxoSmithKline (GSK) is one of the world’s largest research-based pharmaceutical and healthcare companies GSK Bangladesh, continues to be committed to improving the quality of human life by enabling people to do more, feel better and live longer. The Company’s principle activities include secondary manufacture of pharmaceutical products and marketing of vaccines, pharmaceutical and healthcare products. GlaxoSmithKline Bangladesh Limited implements many control systems to attain their strategic objectives and competitive advantages. Some models that GlaxoSmithKline uses to make their activities and resources effective & efficient, for their employee performance evaluation and to enhance the overall performance of the organization will be discussed in this paper. Management Control Systems ......

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Role of Management Control System

...Political Science David Smith Monash University Social capital The role of management control systems in NGOs Research executive summary series Volume 6 | Issue 6 Key findings: • Non-governmental organisations (NGOs) are being confronted with the competitive nature of acquiring funds and need to demonstrate that they have particular competencies to funders, while at the same time continuing to adhere to their traditional welfare or development values. • The evidence shows that developing formal management controls can help NGOs to develop networks with government departments, funding agencies, other service providers and clients. However, formal management controls also have the potential to damage the internal bonding between employees. • Developing belief systems to incorporate financial concerns, along with traditional welfare goals, would seem a useful starting point in the move towards managing in a more competitive NGO sector. Overview and objectives In recent years non-governmental organisations (NGOs) have become increasingly important in addressing humanitarian issues relating to welfare and developmental aid. NGOs face increasing pressure to demonstrate service delivery in cost efficient ways. This creates tension over delivering welfare services while operating within the constraints of cost management. The application of management control systems has the potential to help in the effective and efficient delivery of services,......

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Management Control Systems

...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......

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