Management Control Systems: Performance Measurement, Evaluation and Incentives

✍ Scribed by Merchant, Kenneth A;Stede, Wim A Van der

• Publisher: Prentice Hall
• Year: 2011
• Tongue: English
• Leaves: 832
• Edition: 3
• Category: Library

✦ Synopsis

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

Cover......Page 1
Dedication......Page 6
Brief Contents......Page 8
Contents......Page 10
Preface......Page 13
Acknowledgements......Page 16
Section I: The Control Function of Management......Page 18
Chapter 1: Management and Control......Page 20
Management......Page 23
Strategy formulation......Page 24
Management control versus strategic control......Page 25
Behavioral emphasis......Page 26
Motivational problems......Page 27
Characteristics of good management control......Page 29
Activity elimination......Page 30
Automation......Page 31
Risk sharing......Page 32
Control alternatives......Page 33
Outline of this book......Page 34
Notes......Page 35
Leo’s Four-Plex Theater......Page 36
Private Fitness, Inc.......Page 37
Atlanta Home Loan......Page 39
Section II: Management Control Alternatives and their Effects......Page 44
Chapter 2: Results Controls......Page 46
Prevalence of results controls......Page 47
Results controls and the control problems......Page 49
Measuring performance......Page 50
Setting performance targets......Page 51
Providing rewards......Page 52
Knowledge of desired results......Page 53
Ability to measure controllable results effectively......Page 54
Objectivity......Page 55
Cost efficiency......Page 56
Notes......Page 57
Armco, Inc.: Midwestern Steel Division......Page 58
Loctite Company de México, S.A. de C.V.......Page 72
Puente Hills Toyota......Page 78
Houston Fearless 76, Inc.......Page 91
Behavioral constraints......Page 98
Action accountability......Page 100
Action controls and the control problems......Page 101
Prevention versus detection......Page 102
Ability to ensure that desired actions are taken......Page 103
Selection and placement......Page 105
Training......Page 106
Cultural controls......Page 107
Codes of conduct......Page 108
Group rewards......Page 109
Other approaches to shape organizational culture......Page 110
Personnel/cultural controls and the control problems......Page 111
Conclusion......Page 112
Notes......Page 113
The Platinum Pointe Land Deal......Page 115
Axeon N.V.......Page 122
Alcon Laboratories, Inc.......Page 129
Definitions of desired results......Page 140
Performance measurement......Page 142
Behavioral constraints......Page 143
Preaction reviews......Page 144
Action accountability......Page 145
Tight personnel/cultural controls......Page 147
Conclusion......Page 148
Notes......Page 150
Controls at the Bellagio Casino Resort......Page 151
The Lincoln Electric Company......Page 177
PCL: A Breakdown in the Enforcement of Management Control......Page 198
Indirect costs......Page 203
Behavioral displacement......Page 204
Gamesmanship......Page 207
Negative attitudes......Page 210
Conclusion......Page 212
Notes......Page 213
Philip Anderson......Page 214
Sunshine Fashion: Fraud, Theft, and Misbehavior Among Employees......Page 216
Fit Food, Inc.......Page 220
Choice of controls......Page 226
Personnel/cultural controls as an initial consideration......Page 227
Advantages and disadvantages of action controls......Page 229
Advantages and disadvantages of results controls......Page 231
Choice of control tightness......Page 232
Simultaneous tight-loose controls......Page 233
Keeping a behavioral focus......Page 234
Maintaining good control......Page 235
Notes......Page 236
Diagnostic Products Corporation......Page 237
Game Shop, Inc.......Page 246
Family Care Specialists Medical Group, Inc.......Page 256
AirTex Aviation......Page 263
Section III: Financial Results Control Systems......Page 276
Advantages of financial results control systems......Page 278
Types of financial responsibility centers......Page 279
Profit centers......Page 280
Variations......Page 282
Choice of financial responsibility centers......Page 283
Purposes of transfer pricing......Page 286
Transfer pricing alternatives......Page 287
Simultaneous use of multiple transfer pricing methods......Page 290
Notes......Page 291
Kranworth Chair Corporation......Page 292
Toyota Motor Sales, USA, Inc.......Page 300
Zumwald AG......Page 310
Global Investors, Inc.......Page 312
Purposes of planning and budgeting......Page 323
Strategic planning......Page 324
Capital budgeting......Page 325
Target setting......Page 326
Types of financial performance targets......Page 327
Common financial performance target issues......Page 329
Planning and budgeting practices, and criticisms......Page 335
Conclusion......Page 337
Notes......Page 338
Citibank Indonesia......Page 340
HCC Industries......Page 346
Patagonia, Inc.......Page 358
VisuSon, Inc.: Business Stress Testing......Page 372
Chapter 9: Incentive Systems......Page 384
Purposes of incentives......Page 385
Salary increases......Page 387
Short-term incentives......Page 388
Long-term incentives......Page 390
Incentive formula......Page 394
Size of incentive pay......Page 395
Criteria for evaluating incentive systems......Page 396
Monetary incentives and the evaluation criteria......Page 397
Conclusion......Page 400
Notes......Page 401
Harwood Medical Instruments PLC......Page 403
Superconductor Technologies, Inc.......Page 405
Tsinghua Tongfang Co. Ltd.......Page 414
Raven Capital, LLC......Page 419
Section IV: Performance Measurement Issues and their Effects......Page 428
Chapter 10: Financial Performance Measures and their Effects......Page 430
Market measures of performance......Page 431
Accounting measures of performance......Page 434
Investment and operating myopia......Page 437
Return-on-investment measures of performance......Page 438
Return-on-what?......Page 439
Problems caused by ROI-type measures......Page 440
Residual income measures as a possible solution to the ROI measurement problems......Page 443
Conclusion......Page 445
Notes......Page 446
Behavioral Implications of Airline Depreciation Accounting Policy Choices......Page 447
Las Ferreterías de México, S.A. de C.V.......Page 449
Industrial Electronics, Inc.......Page 452
Haengbok Bancorp......Page 454
Berkshire Industries PLC......Page 456
Pressures to act myopically......Page 462
Reduce pressures for short-term profit......Page 463
Control investments with preaction reviews......Page 464
Extend the measurement horizon (use long-term incentives)......Page 465
Measure changes in value directly......Page 467
Improve the accounting measures......Page 468
Measure a set of value drivers......Page 469
Notes......Page 473
Catalytic Solutions, Inc.......Page 475
First Commonwealth Financial Corporation......Page 483
Statoil......Page 504
Chapter 12: Using Financial Results Controls in the Presence of Uncontrollable Factors......Page 520
The controllability principle......Page 521
Types of uncontrollable factors......Page 522
Controlling for uncontrollables before the measurement period......Page 525
Controlling for uncontrollables after the measurement period......Page 526
Variance analysis......Page 527
Conclusion......Page 532
Notes......Page 533
Olympic Car Wash......Page 534
Southern California Edison......Page 535
Beifang Chuang Ye Vehicle Group......Page 544
Hoffman Discount Drugs, Inc.......Page 546
Formosa Plastics Group......Page 553
Bank of the Desert (A)......Page 560
Bank of the Desert (B)......Page 563
Section V: Corporate Governance, Important Control-Related Roles, and Ethics......Page 568
Chapter 13: Corporate Governance and Boards of Directors......Page 570
Laws and Regulations......Page 571
The Sarbanes-Oxley Act of 2002......Page 572
Boards of directors......Page 578
Audit committees......Page 580
Compensation committees......Page 582
Notes......Page 583
Vector Aeromotive Corporation......Page 584
Golden Parachutes?......Page 591
Pacific Sunwear of California, Inc.......Page 595
Entropic Communications, Inc.......Page 607
Financial reporting problems at Molex, Inc.......Page 622
Controllers......Page 634
Audits......Page 638
External and internal auditors......Page 639
Common audit types......Page 640
The value of audits......Page 641
Conclusion......Page 643
Don Russell: Experiences of a Controller/CFO......Page 644
Desktop Solutions, Inc. (A): Audit of the St. Louis Branch......Page 651
Desktop Solutions, Inc. (B): Audit of Operations Group Systems......Page 660
Landale PLC......Page 663
Chapter 15: Management Control-Related Ethical Issues......Page 673
The importance of good ethical analyses......Page 674
Ethical models......Page 675
Why do people behave unethically?......Page 678
The ethics of creating budget slack......Page 679
The ethics of managing earnings......Page 681
The ethics of responding to flawed control indicators......Page 682
The ethics of using control indicators that are “too good”......Page 683
Spreading good ethics within an organization......Page 684
Conclusion......Page 685
Notes......Page 686
Conservative Accounting in the General Products Division......Page 687
Education Food Services at Central Maine State University......Page 688
The “Sales Acceleration Program”......Page 690
The Expiring Software License......Page 691
Lernout & Hauspie Speech Products......Page 692
Section VI: Situational Influences on Management Control Systems......Page 700
Chapter 16: The Effects of Environmental Uncertainty, Organizational Strategy, and Multinationality on Management Control Systems......Page 702
Environmental uncertainty......Page 703
Corporate strategy......Page 705
Business strategy......Page 706
National culture......Page 707
Differences in local business environments......Page 709
Foreign currency translation......Page 711
Notes......Page 713
ConAgra Grocery Products Company......Page 715
Lincoln Electric: Venturing Abroad......Page 726
TECO Electric & Machinery Co. Ltd.......Page 742
Kooistra Autogroep......Page 749
Differences between for-profit and not-for-profit organizations......Page 757
Goal ambiguity and conflict......Page 758
Difficulty in measuring performance......Page 759
Accounting differences......Page 761
External scrutiny......Page 762
Employee Characteristics......Page 764
Conclusion......Page 765
Notes......Page 766
City of Yorba Linda, California......Page 767
Waikerie Co-Operative Producers Ltd.......Page 778
Boston Lyric Opera......Page 787
University of Southern California: Responsibility Center Management System......Page 803
Index......Page 818

✦ Subjects

Business;Economics;Finance;Management