BU620BU620

Management ControlsManagement Controls

11stst Class - Objectives Class - Objectives

IntroductionIntroduction Course Outline & ObjectivesCourse Outline & Objectives ExpectationsExpectations In class case exercisesIn class case exercises

IntroductionIntroduction Professor: Professor: Dr. Laura MacDonaldDr. Laura MacDonald Contact Information:Contact Information:

• Lmacdona@wlu.caLmacdona@wlu.ca or ext. 2815 or ext. 2815 P2052P2052 Office Hours:Office Hours:

• Thursday 12:30 – 1:30 or by Thursday 12:30 – 1:30 or by appointmentappointment

Class:Class:• Monday 1- 4 p.m., Monday 1- 4 p.m., SBE 2260 SBE 2260

Faculty Assistant:Faculty Assistant:• Sandra Castellanos, SBE2201Sandra Castellanos, SBE2201

Course OverviewCourse Overview Performance measurement and control is Performance measurement and control is

an essential function of management an essential function of management • ensure that the organization’s objectives ensure that the organization’s objectives

and strategies are carried out and strategies are carried out effectively. effectively.

• it increases the probability of it increases the probability of organizational success. organizational success.

Course OverviewCourse OverviewManagement can use a combination of mechanisms Management can use a combination of mechanisms

to achieve organizational control. to achieve organizational control. • One is to hire good people who can be relied One is to hire good people who can be relied

upon to serve the firm well (upon to serve the firm well (personnel personnel controlscontrols). ).

• ensure that employees do not perform certain ensure that employees do not perform certain actions known to be harmful to the actions known to be harmful to the organization (organization (action controlsaction controls). ).

• rewarding individuals for generating good rewarding individuals for generating good results (results (results controlsresults controls).).

Course OverviewCourse Overview We will focus on the use of We will focus on the use of results controlsresults controls

• measurement and evaluation of measurement and evaluation of financial and non-financial performance. financial and non-financial performance.

Focus on key decisions that must be made Focus on key decisions that must be made in using in using results controlsresults controls::• performance measures, standards and performance measures, standards and

targetstargets• performance-based incentives. performance-based incentives. • Limitations of traditional measures Limitations of traditional measures • Recently developed approachesRecently developed approaches

Course OverviewCourse Overview

The course is designed to be useful to The course is designed to be useful to those aspiring to be:those aspiring to be:• ManagersManagers• Compensation consultants or human Compensation consultants or human

resource specialistsresource specialists• Management consultantsManagement consultants• Management accountantsManagement accountants

Course ObjectivesCourse Objectives

After completing this course you will;After completing this course you will;• Be able to evaluate the efficacy of an existing Be able to evaluate the efficacy of an existing

management control system;management control system;• Understand the role played by effective Understand the role played by effective

management accounting and control systems management accounting and control systems in modern organizations;in modern organizations;

• Be able to design and develop an effective Be able to design and develop an effective management accounting and control systems; management accounting and control systems; and,and,

• Be familiar with a number of emerging ideas Be familiar with a number of emerging ideas and concepts in the field of management and concepts in the field of management control.control.

Seminar Course Seminar Course my role is primarily as a resource person to help my role is primarily as a resource person to help

guide your exploration of the material. guide your exploration of the material.

your role as a student is to contribute to class. your role as a student is to contribute to class. The real learning comes from The real learning comes from • your preparation for class and your preparation for class and • participating in the exploration of ideas during participating in the exploration of ideas during

class. class. • Your level of preparation for class largely Your level of preparation for class largely

decides the value you will take away from each decides the value you will take away from each session.session.

The case method facilitates the exploration of the The case method facilitates the exploration of the management control issues in a broad range of management control issues in a broad range of settingssettings

ExpectationsExpectations Prepared for class and ready to contributePrepared for class and ready to contribute most of the course will involve a most of the course will involve a

discussion of ideas, concepts, opinions, discussion of ideas, concepts, opinions, and analysis that follow from the cases and analysis that follow from the cases and readings and readings

You should therefore come to each You should therefore come to each seminar ready to discuss issues from seminar ready to discuss issues from the assigned readings as well as the the assigned readings as well as the cases assigned for that day. cases assigned for that day.

ExpectationsExpectations

For each case, a number of members of For each case, a number of members of the class will be assigned responsibility for the class will be assigned responsibility for presenting the “basics” of each case: an presenting the “basics” of each case: an overview of the firm/industry, an overview overview of the firm/industry, an overview of the MCS in place, and an overview of of the MCS in place, and an overview of the presenting problem the presenting problem

The class as a whole will be responsible for The class as a whole will be responsible for analyzing the situation, proposing analyzing the situation, proposing alternatives and making alternatives and making recommendations.recommendations.

EvaluationEvaluation

Participation:Participation: Hand-in case summariesHand-in case summaries 10 % 10 % Case Overviews Case Overviews 10 % 10 % Classroom contributionClassroom contribution 5% 5%

Report and PresentationReport and Presentation 40% 40%

ExaminationExamination 35% 35% 100%100%

Hand-in Case SummariesHand-in Case Summaries Each member of the class will provide a one-page summary Each member of the class will provide a one-page summary

of the cases at the beginning of the class in which the case of the cases at the beginning of the class in which the case is discussed. is discussed.

This summary will not be graded for “correctness” but only This summary will not be graded for “correctness” but only for an honest attempt to consider the issues in the case and for an honest attempt to consider the issues in the case and make a preliminary recommendation. make a preliminary recommendation.

You must be present at the class for this summary to be You must be present at the class for this summary to be accepted for grading.accepted for grading.

These items will not be returned to you, as I will assemble These items will not be returned to you, as I will assemble them into a portfolio of work on which I will assess your them into a portfolio of work on which I will assess your performance collectively over the term. I will also contact performance collectively over the term. I will also contact any student whose case submissions I deem to be any student whose case submissions I deem to be unacceptable for graduate level work. unacceptable for graduate level work.

If you fail to submit a case summary, I will interpret your If you fail to submit a case summary, I will interpret your not submitting a required hand-in as an indication that you not submitting a required hand-in as an indication that you did not prepare for class and will record your contribution did not prepare for class and will record your contribution accordingly.accordingly.

Case OverviewsCase Overviews For each case, 2-4 members of the class For each case, 2-4 members of the class

(depending on course registration) will be (depending on course registration) will be assigned responsibility for presenting the “basics” assigned responsibility for presenting the “basics” for each case: for each case: • an overview of the firm/industry, an overview of the firm/industry, • an overview of the MCS in place, and an overview of the MCS in place, and • an overview of the presenting problem (i.e., an overview of the presenting problem (i.e.,

the symptoms). the symptoms). • Your job is not to solve the case – just to kick Your job is not to solve the case – just to kick

off the discussion. off the discussion. • Your grade will reflect your ability to present Your grade will reflect your ability to present

an informative summary and kick start class an informative summary and kick start class discussiondiscussion

Group FormationGroup Formation

Form groups for purposes of case overviews and Form groups for purposes of case overviews and fiasco report/presentation.fiasco report/presentation.

Allowable group size will be 2-5 (depending on Allowable group size will be 2-5 (depending on enrollment)enrollment)

A sign-up sheet listing all cases will be posted on A sign-up sheet listing all cases will be posted on Monday, May 7 in class. Students will form Monday, May 7 in class. Students will form groups and pick cases.groups and pick cases.

Classroom ContributionClassroom Contribution You are encouraged to take an active part in the You are encouraged to take an active part in the

course discussions by providing thoughtful, course discussions by providing thoughtful, constructive, worthwhile comments, questions constructive, worthwhile comments, questions and debate. Oratory skills are a must for and debate. Oratory skills are a must for professionals, so meaningful classroom professionals, so meaningful classroom contribution is expected.contribution is expected.

Please use a name card in my class. Grading Please use a name card in my class. Grading class participation requires that I get to know class participation requires that I get to know everybody as soon as possible. My expectation is everybody as soon as possible. My expectation is that you will come to class every time. If you will that you will come to class every time. If you will be absent, please let me know before class [by be absent, please let me know before class [by email]. email].

Classroom ContributionClassroom Contribution Good participation grades are assigned to students Good participation grades are assigned to students

who:who:• Are always well prepared;Are always well prepared;• Ask insightful, penetrating questions;Ask insightful, penetrating questions;• Push the discussion of the case to a higher, more Push the discussion of the case to a higher, more

sophisticated level;sophisticated level;• Help other students understand, in a constructive Help other students understand, in a constructive

manner, that some of the arguments that have been manner, that some of the arguments that have been voiced are somehow flawed or incomplete.voiced are somehow flawed or incomplete.

Failing participation grades are assigned to students Failing participation grades are assigned to students who:who:• Rarely talk;Rarely talk;• Skip classes;Skip classes;• Make irrelevant, shallow comments;Make irrelevant, shallow comments;• Are unprepared when they are called on.Are unprepared when they are called on.

Fiasco Report/PresentationFiasco Report/Presentation As part of a 3-5 person team, you will As part of a 3-5 person team, you will

• identify an organization, (i.e. for-profit, not-for-identify an organization, (i.e. for-profit, not-for-profit, public or private sector) that has profit, public or private sector) that has experienced a major management fiasco and experienced a major management fiasco and

• prepare a case study of how the company’s prepare a case study of how the company’s management control system contributed to management control system contributed to that fiasco. that fiasco.

• This research This research mustmust be completed from be completed from secondary sources without contacting the secondary sources without contacting the company, so ensure you choose a company company, so ensure you choose a company whose fiasco was widely publicized and can be whose fiasco was widely publicized and can be researched from publicly available resources. researched from publicly available resources.

• Peer evaluation will also be considered on a Peer evaluation will also be considered on a group by group basis, as requested. group by group basis, as requested.

Initial ReportInitial Report by by June 11June 11 you must provide a brief report to me detailing: you must provide a brief report to me detailing: the name of the companythe name of the company the names of those in the group the names of those in the group disclose any relationships that group members may have disclose any relationships that group members may have

with the company with the company an overview of the firm and its strategic position (i.e., what an overview of the firm and its strategic position (i.e., what

customers and markets does it serve, who are its customers and markets does it serve, who are its competitors, what is its business model and what are the competitors, what is its business model and what are the critical success factors for this business). critical success factors for this business).

an overview (description) of the management control fiasco an overview (description) of the management control fiasco you plan to analyze.you plan to analyze.

a research plan specifying how you will collect information a research plan specifying how you will collect information about the fiasco and control system. about the fiasco and control system.

This document will be worth 10 of the 40 marks for this This document will be worth 10 of the 40 marks for this project.project.

Final ReportFinal Report byby July 23July 23 you must provide a final report to me in digital and you must provide a final report to me in digital and

hard copy:hard copy: The digital version will be posted on the website for the class to The digital version will be posted on the website for the class to

read prior to the presentationread prior to the presentation You must also send a copy to Turnitin.com [address provided on You must also send a copy to Turnitin.com [address provided on

course website]course website] Your final report should include Your final report should include a description of the company and its context,a description of the company and its context, a detailed description of the management control fiascoa detailed description of the management control fiasco an overview of the MCS in place,an overview of the MCS in place, an analysis of the MCS and the role it played in the fiasco [using an analysis of the MCS and the role it played in the fiasco [using

the concepts in the course],the concepts in the course], your evaluation of the effectiveness of the MCS your evaluation of the effectiveness of the MCS any recommendations for improvement that are warranted.any recommendations for improvement that are warranted. This document will be worth 20 of the 40 marks for this project.This document will be worth 20 of the 40 marks for this project.

PresentationPresentation Each group will present their study to the class on Each group will present their study to the class on July 30 July 30

or 31or 31:: Each group will have 30 minutes to present the key issues, Each group will have 30 minutes to present the key issues,

analysis and recommendations, and to answer questions analysis and recommendations, and to answer questions (do not spend a lot of time repeating material company (do not spend a lot of time repeating material company information that is included in your written description). information that is included in your written description).

The oral presentation will be graded by the class based on The oral presentation will be graded by the class based on the contribution that you make to their understanding of the contribution that you make to their understanding of management control system design/functioning.management control system design/functioning.

Provide a hard copy of your slides and handouts to me at Provide a hard copy of your slides and handouts to me at the beginning of the session in which your group is the beginning of the session in which your group is scheduled to present. scheduled to present.

All members of your group must be involved in the All members of your group must be involved in the presentation – ideally for equal amounts of time.presentation – ideally for equal amounts of time.

This presentation will be worth 10 of the 40 marks for this This presentation will be worth 10 of the 40 marks for this project.project.

Final ExaminationFinal Examination The examination will be case analysis to The examination will be case analysis to

be completed on an individual basis. be completed on an individual basis. The Final Exam case and instructions will The Final Exam case and instructions will

be distributed during the August 1st class. be distributed during the August 1st class.

You must submit your final examination You must submit your final examination paper no later than 4 p.m. on August 15th paper no later than 4 p.m. on August 15th to the MBA office, as well as an email copy to the MBA office, as well as an email copy to me and turnitin.com.to me and turnitin.com.

Details will be provided closer to the time Details will be provided closer to the time as to requirement for turnitin.com and as to requirement for turnitin.com and format, length etc.format, length etc.

Module 1Module 1Management Control Alternatives Management Control Alternatives

and their (Dis)advantagesand their (Dis)advantages

This module introduces the subject of This module introduces the subject of management control, the major management control, the major management control alternatives, management control alternatives, and their advantages and and their advantages and disadvantages.disadvantages.

Module 2: Financial Results Control Module 2: Financial Results Control SystemsSystems

Financial results controls dominate in Financial results controls dominate in importance in managerial levels in importance in managerial levels in most North American firms. This most North American firms. This module examines the major module examines the major elements of these systems (i.e. elements of these systems (i.e. responsibility centres, planning and responsibility centres, planning and budgeting systems, performance budgeting systems, performance evaluations and reward structures).evaluations and reward structures).

Module 3: Common Financial Module 3: Common Financial Results Control Problem AreasResults Control Problem Areas

In this module, we explore problems In this module, we explore problems that measuring performance in that measuring performance in accounting terms create, including accounting terms create, including management myopia, sub-management myopia, sub-optimization and game playing. We optimization and game playing. We also discuss several methods to also discuss several methods to mitigate these problems.mitigate these problems.

Module 4: Special Concerns in Module 4: Special Concerns in Management ControlManagement Control

This module examines control-This module examines control-oriented roles in organizations and oriented roles in organizations and how to deal with a range of control-how to deal with a range of control-related ethical issues. As well, we related ethical issues. As well, we discuss control in distinctive discuss control in distinctive circumstances.circumstances.