Management Control Systems: Performance Measurement, Evaluation and Incentives

With its unique range of case studies, real life examples and comprehensive coverage of the latest management control-related tools and techniques, Management Control Systems is the ideal guide to this complex and multidimensional subject for upper level undergraduates, postgraduates and practising professionals.

Table of Contents:
Detailed Contents   Preface   PART I THE CONTROL FUNCTION OF MANAGEMENT 1        Management and Control           Management and control           Causes of management control problems           Characteristics of good management control           Control problem avoidance           Control alternatives           Notes           Leo’s Four-Plex Theatre           Wong’s Pharmacy           Private Fitness, Inc.   PART II MANAGEMENT CONTROL ALTERNATIVES AND THEIR EFFECTS 2        Results Controls           Prevalence of results controls           Results controls and the control problems           Elements of results controls           Conditions determining the effectiveness of results controls           Conclusion           Armco, Inc. -- Midwestern Steel Division           Visionary Design Systems: Are Incentives Enough?           HoustonFearless 76, Inc.   3        Action, Personnel, and Cultural Controls           Action controls           Action controls and the control problems           Prevention versus detection           Conditions determining the effectiveness of action controls           Personnel controls           Cultural controls           Personnel/cultural controls and the control problems           Effectiveness of personnel/cultural controls           Conclusion           Atlanta Home Loan           Alcon Laboratories, Inc. (A)           Axeon N.V.   4        Control System Tightness           Tight results control           Tight action controls           Tight personnel/cultural controls           Multiple forms of controls           Conclusion           Lincoln Electric Co.           Controls at the Bellagio Casino Resort   5        Control System Costs           Out-of-pocket costs           Behavioral displacement           Gamemanship           Operating delays           Negative attitudes           Conclusion           Sears Auto Centers (A)           Disctech, Inc.           Philip Anderson   6        Designing and Evaluating Management Control Systems           Understanding what is desired and what is likely           Decision 1: choice of controls           Decision 2: Choice of control tightness           Adapting to change           Keeping a behavioral focus           Maintaining good control           Rabobank Nederland           Airtex Aviation           Puente Hills Toyota   PART III FINANCIAL RESULTS CONTROL SYSTEMS 7        Financial Responsibility Centers           Advantages of financial results control systems           Types of financial responsibility centers           Choice of financial responsibility centers           The transfer pricing problem           Conclusion           Kranworth Chair Corporation           ToyotaMotor Sales           Zumwald, AG           Global Investors, Inc.           Boise Cascade Corporation   8        Planning and Budgeting           Purposes of planning and budgeting systems           Planning cycles           Performance target setting           Variations in practice           Criticisms of companies’ planning and budgeting processes           Conclusion           Citibank Indonesia(HBS case no. 9-185-061 – same as in prior edition)           HCC Industries (HBS case no. 9-189-096 – same as in prior edition)           Borealis (HBS case no. 9-102-048 – new case)           Patagonia, Inc. (same as in prior edition)   9        Incentive Systems           Purposes of incentives           Monetary incentives           Incentive system design           Criteria for evaluating incentive systems           Group rewards           Conclusion           Superconductor Technologies, Inc.           Loctite Company De Mexico, S.A.de C. V.           Tsinghua Tongfang   PART IV PERFORMANCE MEASUREMENT ISSUES AND THEIR EFFECTS 10      Financial Performance Measures and their Effects           Value creation: the primary goal of for-profit organizations           Market measures of performance           Accounting measures of performance           Investment and operating myopia           Return-on-investment measures of performance           Residual income measures as a possible solution to the ROI measurement problems           Conclusion           Behavioral Implications of Airline Depreciation Accounting Policy Choices           Las Ferreterías de México, S.A. de C.V.           Industrial Electronics           Berkshire Industries PLC   11      Combinations of Measures and Other Remedies to the Myopia Problem           Addressing the myopia problem           Measure a set of value drivers: combination-of-measures systems           Measure changes in shareholder value directly           Control investments with preaction reviews           Use “improved” accounting profit measures           Extend the measurement horizon (use long-term incentive plans)           Reduce pressure for short-term profit           Conclusion           Catalytic Solutions, Inc.           Diagnostic Products Corporation           Bank of the Desert (A) and (B)           First Commonwealth Financial Corporation   12      Using Financial Results Control in the Presence of Uncontrollable Factors           The controllability principle           Types of uncontrollable factors           Controlling for the distorting effects of uncontrollables           Other uncontrollable factor issues           Conclusion           Olympic Car Wash           Hoffman Discount Drugs, Inc.           Formosa Plastics Group, Inc.           Southern CaliforniaEdison           Beifang Chuang Ye Vehicle Group   PART V: CORPORATE GOVERNANCE, IMPORTANT CONTROL-RELATED ROLES, AND ETHICS 13      Corporate Governance and Boards of Directors           The Sarbanes-Oxley Act of 2002           Boards of directors           Audit committees           Compensation committees           Conclusion           Pacific Sunwear of California, Inc.           Financial Reporting Problems at Molex, Inc.           Golden Parachutes?           Vector Aeromotive Corporation   14      Controllers and Auditors           Controllers           Auditors           Conclusion           Don Russell: Experiences of a Controller/CFO           ITT Corporation: Control of the Controllership Function, 1977 vs. 1991           Desktop Solutions, Inc. (A): Audit of the St. LouisBranch           Desktop Solutions, Inc. (B): Audit of Operations Group Systems           Landale PLC   15      Management Control-Related Ethical Issues and Analyses           The importance of good ethical analyses           Ethical models           Analyzing ethical issues           Why do people behave unethically?           Some common management control-related ethical issues           Spreading good ethics within an organization           Conclusion                               Two Budget Targets           Conservative Accounting in the General Products Division           Education Food Services at CentralMaineStateUniversity           The “Sales Acceleration Program”           Expiring Software License           The PlatinumPointeLandDeal           Lernout & Hauspie Speech Products   PART VI SIGNIFICANT SITUATIONAL INFLUENCES ON MANAGEMENT CONTROL SYSTEMS 16      The Effects of Environmental Uncertainty, Organizational Strategy, and Multinationality on Management Control Systems           Environmental uncertainty           Organizational strategy           Multinationality           Conclusion           Conagra Grocery Products Company           LincolnElectric: Venturing Abroad           Teco Electric & Machinery Co. Ltd.           Driessen Autogroep   17      Management Control in Non-Profit Organizations           Differences in for-profit and non-profit organizations           Goal ambiguity and conflict           Difficulty in measuring performance           Accounting differences           External scrutiny           Legal constraints           Employee characteristics           Services provide           Conclusion           BostonLyric Opera           City of Yorba Linda, California           Waikerie Co-Operative Producers Ltd.           Universityof Southern California: RevenueCenterManagement System   Index