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    Chapter 2 Results Controls

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    Adrian Chrisceydi
    The document discusses results controls as a type of management control system. It defines results controls, outlines their key elements and conditions for when they are most effective. The document also covers measuring performance, setting targets, and providing rewards or punishments. It analyzes the pros and cons of using results controls.

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    Chapter 2 Results Controls

    Uploaded by

    Adrian Chrisceydi
    189 views7 pages
    The document discusses results controls as a type of management control system. It defines results controls, outlines their key elements and conditions for when they are most effective. The document also covers measuring performance, setting targets, and providing rewards or punishments. It analyzes the pros and cons of using results controls.

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    The document discusses results controls as a type of management control system. It defines results controls, outlines their key elements and conditions for when they are most effective. The document also covers measuring performance, setting targets, and providing rewards or punishments. It analyzes the pros and cons of using results controls.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    189 views7 pages

    Chapter 2 Results Controls

    Uploaded by

    Adrian Chrisceydi
    The document discusses results controls as a type of management control system. It defines results controls, outlines their key elements and conditions for when they are most effective. The document also covers measuring performance, setting targets, and providing rewards or punishments. It analyzes the pros and cons of using results controls.

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    © All Rights Reserved
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    Slide 2.

    Chapter 2:
    Results Controls

    Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
    Slide 2.2

    Results controls
     Involves rewarding individuals for generating good
    results (or punishing them for poor results).
    » Results accountability

     It influences actions because it causes employees to


    be concerned about the consequences of the actions
    they take.
    » However, employees’ actions are not constrained;
    » On the contrary, employees are empowered to take
    whatever actions they believe will best produce the
    desired results.

    Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
    Slide 2.3

    Elements
     Defining the performance dimensions
    » What you measure is what you get; hence,
    » If not congruent with the organization’s objectives, the controls
    will actually encourage employees to do the wrong things!

     Measuring performance on these dimensions


    » Objective > financial > market-based: e.g., stock price
    » > accounting-based: e.g., return on assets
    » > non-financial: e.g., market share, customer turnover
    » Subjective: e.g., managerial characteristics (“being a team player”)

     Setting performance targets


    » Motivational effects

     Providing rewards (or punishments)


    » Monetary and non-monetary

    Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
    Slide 2.4

    Conditions

     Results controls work best only when all of


    the following three conditions are present:
    – Superiors/managers must know what results are
    desired in the areas being controlled.

    – The individuals whose behaviors are being controlled


    must have significant influence on the results in the
    desired performance dimensions.

    – Superiors/managers must be able to measure the


    results effectively.

    Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
    Slide 2.5

    Ability to influence results


     The person whose behaviors are controlled must be
    able to affect the results in a material way in a given
    time span.
    » Controllability principle

     Results controls are useful only to the extent that


    they provide information about the desirability of
    the actions that were taken.
    » If the results are totally uncontrollable, the controls
    tell us nothing about the actions that were taken:
     Good actions will not necessarily produce good results;
     Bad actions may similarly be obscured.

    Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
    Slide 2.6

    Ability to measure results effectively

     The “effectiveness” of results measures must


    be judged by their
    » Ability to evoke the desired behaviors

     Results measures should be:


    » Precise;
    » Objective;
    » Timely;
    » Understandable.

    Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007
    Slide 2.7

    Pros and cons of results controls


    PRO CON
     Behavior can be influenced  Often less than perfect indicators of
    while allowing significant whether good actions have been taken.
    autonomy.  They shift risk to employees (because
     They yield greater employee of uncontrollable factors). Hence, they
    commitment and motivation. often require a risk premium for risk
    averse employees.
     They are often inexpensive.
    – e.g., performance measures  Sometimes conflicting functions:
    are often collected for – Motivation to achieve
    reasons not directly » targets should be “challenging”
    related to management – Communication among entities
    control. » targets should be slightly conservative

    Kenneth A. Merchant and Wim A. Van der Stede, Management Control Systems, 2nd Edition © Pearson Education Limited 2007

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