Management Control Systems

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 Ferreterias de Mexico, 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