RSM422

Management and Controls

Week 2 – An Introduction to
Management Control
Management Control
l Management control is the process by
which managers influence other
members of the organization to
implement the organization’s
strategies
In your own words…

INFLUENCE

strategy

MISSION wo
rk
co
m
pe
ns
at
io
n
Goals!
CEO sets
the goals
Board of
directors ratifies
the goals

Senior management
advises CEO on goal
setting
Goals Congruence
l The goals of an organization’s
individual members should be
consistent with the goals of the
organization itself.
l All management control systems
should be designed and operated
with the principle of goal
congruence in mind
Maximize Shareholder Value

Value derived by Shareholders

• High market value of share
• Maximize profits & EPS
• Profit should be ≥ cost of
capital
Balancing Profit, Growth & Control

Growth

Business
Strategy

profit Control
Strategy

strategy

MISSION
Think Stakeholders! not just Shareholders

Bankers & Management

Creditors

Shareholders Employees

Regulators & Clients &

Governments Suppliers
Creating a Mission
l Mission is the starting point
for our analysis of the
formulation and
MISSION implementation of
business strategy
l Mission refers to the board
purpose, or reason, that a
business exists
Linking Strategy with Action
Mission

Intended strategy

Goals & Plans

Performance measure

Actions
 Implementation Mechanisms

Managemen
t Controls

Human
Organization Resource
Strategy Managemen Performance
Structure
t

Culture
Five Forces of Competitive Markets
Potential entrants to the Market

Suppliers of Inputs Industry

and Resources (Existing) Competitors Customers

Substitute Products or Services

It’s a tough world out there…

Competitive
Advantage
What’s your competitive advantage?
1- Understand the structure of the
industry in which the business unit
operates.
Ø Porter 5 forces

2 – How should the business exploit the

industry’s structure?

3 – What will be the basis of the business

unit’s competitive advantage?
Ø Value Chain Analysis Competitive
Advantage
What’s your goal in life ?

In a goal congruent process, the

actions people are led to take in
accordance with their perceived
self-interest are also in the best
interest of the organization.

Management Control System -12th edition by Robert Anthony

There is power in numbers

“Culture eats strategy for breakfast”

Peter Drucker
 In 1980, Jack Welch became the
CEO of GE. Welch was
outspoken, impatient, informal
and entrepreneurial.

Between 1981 and 1999, sales

increased 4x from $27 billions to
101 billions. GE’s stock rose by
3100 %.

Welch implemented concepts

like the six sigma and the 20-70-
10 method to rank employees.

https://www.c-span.org/video/?c4596847/70-20-10-policy
20-70-10

https://www.c-span.org/video/?c4596847/70-20-10-policy