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LECTURE 1
Introduction to Management Planning and Control Systems
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MANAGEMENT CONTROL SYSTEMS

• A combination of control practices designed and implemented by top managers to increase the
probability that lower-level managers and employees will behave in ways consistent with the
organization's mission, goals and strategies. (Anthony and Govindajaran)
• The process of identification, measurement, accumulation, analysis, preparation, interpretation, and
communication of information that assists executives in fulfilling organizational objectives … a formal
mechanism for gathering and communicating data for the ends of aiding and coordinating collective
decisions in light of the overall goals or objectives of an organization. (Horngren and Sundem)
• Management control is concerned with coordination, resource allocation, motivation, and
performance measurement. The practice of management control and the design of management
control systems draws upon a number of academic disciplines such as management accounting,
strategy, operations etc. (Maciariello)

• Lack of appropriate management control systems may cause company failure

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CASES WILL INCLUDE CONCEPTS FROM:

• Management Accounting
• Strategy
• Governance
• Sustainability
• Internal Controls
• Risk Management
• Information Systems
• Ethics
• Finance
• Financial Reporting / Accounting
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CASE METHOD
1. Allocate time for planning/outline
2. Read the narrative
3. Read the appendices (if any)
4. Take a step back
5. Plan what you are going to do
6. Order the required
7. Rank the issues where applicable
8. Allocate your time
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Read the narrative

Something you are specifically asked
to do
Role

Users and their Something that is confusing to a user or

strategic something the user doesn’t know
objectives
Something that the user says they do
timeline not have but you think they need

Something that a user thinks is correct

Requireds- but has the potential to be incorrect
Issues are
watch for
within each
required A hidden issue that the user should
Relevant case know about
facts
Something that directly addresses the
objectives of a user or something that
concerns a user
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CASE ANALYSIS
KEY WORDS TO PAY ATTENTION TO WHEN READING CASES:

Determine Ascertain Provide Need

Require Help Evaluate Consider Concerned
Worried Troubled Bothered Improvements Don’t
understand Address the Issues Comment Analyze
Examine Assess Estimate Project Alternatives
Recommend Weigh options Opinion
Maybe I should have… Suggestions
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OUTLINE/PLAN
1. Each required can be a heading on the outline
2. Margin notes can help categorize information
3. Case facts can be put under requireds or put references to appendix
4. Read each appendix and analyze...reread if required to fully understand
5. Categorize the appendices and record on outline – appendices may be
interlinked. Understand how each fits into the requireds of the case
6. Sometimes there is a separate required on the appendix
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Step back…pause & plan what you are going to do

Think about how the requireds and the analyses you are going to perform fit
together.
1. Ask yourself – are there any overarching issues to address
2. Consider how the analyses relate to the users and their objectives
3. Are there qualitative and quantitative opportunities for each required or
one or the other
4. Audience and tone of writing – plan a thoughtful response
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Generally, requireds are addressed in order of importance to the

users…sometimes the order is changed to create the best response in the
shortest time
Accounting issues may
need to be addressed
before preparing a quant
Impact on other so the necessary
requireds adjustments are
incorporated

Logical flow of Defining a corporate

response strategy may need to
be completed before
analyzing
opportunities
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When writing…

1. Each ISSUE needs to be clearly identified,

2. An ANALYSIS performed Qual/Quant, the impact of the issue stated…why
the issue should be addressed,
3. Based on your analysis and case facts..make a RECOMMENDATION
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MANAGEMENT CONTROL
• Management control systems enable innovative activities using input and output controls
• Design control practices that help maintain or enhance the skill set, job motivation and
organizational commitment of lower-level managers and employees.
• Goal Congruence
 Goal congruence exists when individuals and groups strive for the same organizational goals
 Design control system so that the actions people take out of self-interest are also in the best
interest of the organization
 Goal congruence occurs as employees perform their jobs well and are helping to achieve
organizational objectives at the same time
• Enhance value of the organization
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SIZE OF ORGANIZATION
• Small organizations
• Simple organizational structures
• Owner/manager likely involved in most activities
• Direct, informal communications
• Large organizations
• Decision making authority delegated to lower-level managers have the authority to
take decisions on their own
• More complex organizational structures- functional, divisional, conglomerate, matrix
• Formal control practices necessary
• Practices include budgets, mission statements, transfer pricing arrangements,
performance measures and reward systems.
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TOP-DOWN AND BOTTOM-UP FUNCTIONS

• Top-down
• Top managers implement appropriate control practices so that lower-level
managers and employees have:
• a clear sense of what decisions to take
• what results to achieve,
• where to lead the people and
• how to use the resources under their responsibility.
• Bottom-up
• Report on achievements.
• Enable lower-level managers and employees to
• acquire the support to develop their skills
• as well as the organizational resources to execute their responsibilities.
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WHY IS CONTROL NECESSARY?

1. Lower-level employees may not understand the mission, goals and
strategies and how they can impact them
2. Employees many not agree or buy in to the organization’s mission,
goals and strategies
3. Employees may lack the resources necessary to achieve the
organizational strategic goals
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CONTROL PRACTICES
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INPUT CONTROLS

• Have to do with the people in the organization, and the capabilities, characteristics, knowledge
and intentions they bring to their function.
• Top managers can design control practices that help to ensure that these capabilities,
characteristics, knowledge and intentions increase the chance that the lower-level managers and
employees will engage in such behaviours as can be deemed consistent with the organization’s
mission, goals and strategies.
• Hiring processes
• Core Values and belief systems
• Employee socialization processes
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THROUGHPUT CONTROLS
• These control practices direct lower-level manager and employee behaviour
through formal delegation of decision-making responsibility to lower-level
managers, and by specifying how behaviours are to be performed or not
performed.
• organization's set of rules
• Job descriptions
• Ethical code of conduct
• Operating manuals
• organizational architecture
• Reporting structure
• Responsibility centres
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OUTPUT CONTROLS
• Making managers accountable for certain ‘results’, or output.
• What gets measured and rewarded gets done
• Budgets
• Financial and non-financial performance measures
• Reward systems
• Risk management