RSM422

Management and Controls

Week 2 – An Introduction to Management

Control
Management Control
 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
a ti
on
Goals!
CEO sets
the goals
Board of directors
ratifies the goals

Senior management
advises CEO on goal
setting
Goals Congruence
 The goals of an organization’s individual
members should be consistent with the
goals of the organization itself.
 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
 Mission is the starting point for
our analysis of the formulation
and implementation of business
MISSION strategy
 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

Management
Controls

Human
Organization Resource
Strategy Performance
Structure Management

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.
 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?
 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