Collier 1ce Ch06

© 2013 John Wiley & Sons, Ltd, Accounting for Managers, 1Ce, Ch 6 1
CHAPTER 6
Management
Control
Learning Objectives
 How does management control fit into the strategic
planning process?
 What are the key aspects of a management control
system?
 What is the difference between a feedforward and a
feedback control system?
 Why are non-financial measures of performance important
in a control system?
 What is a balanced scorecard (BSC) and what types of
measures are included in the four perspectives of the
BSC?
 How can an organization extend the concept of
management control to include process improvements?
Management Control and
Strategic Planning
 Management control
‘the process by which managers assure that
resources are obtained and used effectively and
efficiently in the accomplishment of the organization’s
objectives’
 Considered as part of the broader process of
the strategic planning process
 Involves measuring financial and non-financial
performances to ensure that both of these
types of performances meet expectations
Management Control and
Strategic Planning
Management Control Systems
 Management control system (a collection of interrelated mechanisms)
of rules
 Feedforward control
 Ensures that the inputs into a process meet predesigned
standards and helps to ensure that errors in the process do not
occur
 Process of determining whether strategies are likely to achieve
target results that are consistent with organizational goals
 Include established policies and procedures, budgets, and
operational plans.
 Feedback (diagnostic) control
 An error is identified with a process and corrections are made to
reduce the occurrence of this error
 Retrospective process of measuring performance, comparing it
with the plan, and taking corrective action
Elements of Control System
1. A detector or sensor that measures what is
happening
2. An assessor that determines the significance of
what is happening by comparing it with a standard
or expectation
3. An effector (feedback) that alters behaviour if the
assessor indicates the need to do so
4. A communication network that transmits
information between the other elements
Standards against which performance can
be compared
1. Previous results
2. Results of other companies
3. Expected future performance
Measurement of Non-Financial
Factors and Intangible Assets
 Limitations of financial measures alone
 Financialmeasures as lagging indicators
 Short-term versus long term performance
measures
 May result in decisions that can lower the
long-term profitability of a company
Measurement of Non-Financial
Factors and Intangible Assets
 Intangible assets
 Assets that cannot be measured financially
 How innovative and creative are we?
 Are our employees empowered?
 Do we have a skilful workforce?
 Do we have a good reputation in our
marketplace?
 Have we improved our quality?
Balanced Scorecard
 Four different perspectives
 Financial
 Performance for customers
 Internal processes
 Learning and growth
Balanced Scorecard
Management Control versus
Organizational Improvement
 Multidimensional performance
measurement (PM)
“PM systems are part of an attempt to give
management accounting a more strategic,
outward-looking focus, incorporating non-
financial, competitor-centred and customer
focused information into the search for a
sustainable competitive advantage in services”
Brignall and Ballantine
Management Control versus
Organizational Improvement
 Enterprise resource planning (ERP)
 Information system that supports the strategic
management process, and aims to overcome
the difficulties of integrating information from
diverse systems.
 Based on the concept of a data warehouse
holding large amounts of data that can be
accessed by a range of analytical tools
Conclusion
 Management accounting as one element of
management control
 Non-financial performance measurement
 Strategic planning process
 Feedback and feedforward systems
 Non-financial control and management of
intangible assets
 Balanced scorecard

Collier 1ce Ch06

Uploaded by

Copyright:

Available Formats

Collier 1ce Ch06

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Collier 1ce Ch06

Uploaded by

Copyright:

Available Formats

© 2013 John Wiley & Sons, Ltd, Accounting for Managers, 1Ce, Ch 6 1

You might also like

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.