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Using Diagnostic and Interactive Control Systems - ch.10

6 Pages
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Department
Financial Accounting
Course Code
MGAD40H3
Professor
Prof.Jan Klakurka

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MGTD54 Wk 9 Notes
Ch. 10 Using Diagnostic and Interactive Control Systems
- communicate strategy to employees
- control strategy implementation
Diagnostic control systems: levers to communicate critical performance variables,
monitor implementation of intended strategies
Interactive control systems: focus organization attention on strategic uncertainties,
provide lever to alter strategy as competitive markets change
Difference the way managers use systems
Same profit plan or balanced scorecard either diagnostically or interactively
Maximize ROM and effective strategy implementation
Diagnostic Control Systems
- monthly statements to report actual accomplishments
- find deviations, initiate actions
Diagnostic control systems: formal info systems managers use to monitor outcome and
correct deviations from preset standards of performance
Formal info sys can be used diagnostically if:
(1) set goal in advance (2) measure outputs (3) compute variances (4) use var info as
feedback to alter inputs/processes to bring performance back in line
Common diagnostic control systems: bal scorecards, exp centre budgets, project monitoring
sys, brand rev/mkt share monitor sys, HR sys, std cost-acctg sys
Why Use Control Sys Diagnostically?
Implement Strategy
-Variance info about critical performance variables
-Critical performance variables: factors that must be achieved or implemented
successfully for intended strategy to succeed
-top-down monitoring
-communicate and implement strategy effectively in large complex organizations
Managers must ensure:
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1.critical performance variables analyzed and identified
2.appropriate goals set
3. feedback systems adequate to track performance
Conserving Attention
-periodic exception reports from staff accountants
- managers only invest time and attention to investigate deviation, initiate
appropriate remedial actions; called management by exception
Using Diagnostic Control Systems Effectively
Sufficient attention to five areas:
1. Setting and Negotiating Goals - set infrequently once per year
- monitor progress thru quick scan of reports
- desired direction and level of achievement
2. Aligning Performance Measures- span of accountability defined by measures
- reflect strategic goals and priorities
- balanced scorecard to align measures correctly
3. Designing Incentives- max ROM by motivate goal achievement
- merit increases contingent upon performance
reported in diagnostic system
- extrinsic so mngrs dont have to watch
subordinates working toward goals
4. Reviewing Exception Reports- quick, efficient review, increasing ROM
- large sig exceptions
- month and quarterly
5. Following Up Significant Exceptions- remedial steps to rectify problems for
subordinates by the time managers pick up rpt
Risks in Using Diagnostic Control Systems
Measuring Wrong Variables
- misaligned diagnostic measures cause strategy to go off track
Building Slack into Targets
-increase prob of meet goal with easy targets
-set goals at challenging levels
Gaming the System
-work hard to achieve what measured on
-focus on enhancing the measure, even if not leading to advancing strategy
Smoothing
-alter timing and recording of transactions to show better performance
Biasing
- managers report only good news or downplay bad news
Illegal acts
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Description
MGTD54 Wk 9 Notes Ch. 10 Using Diagnostic and Interactive Control Systems - communicate strategy to employees - control strategy implementation Diagnostic control systems: levers to communicate critical performance variables, monitor implementation of intended strategies Interactive control systems: focus organization attention on strategic uncertainties, provide lever to alter strategy as competitive markets change Difference the way managers use systems Same profit plan or balanced scorecard either diagnostically or interactively Maximize ROM and effective strategy implementation Diagnostic Control Systems - monthly statements to report actual accomplishments - find deviations, initiate actions Diagnostic control systems: formal info systems managers use to monitor outcome and correct deviations from preset standards of performance Formal info sys can be used diagnostically if: (1) set goal in advance (2) measure outputs (3) compute variances (4) use var info as feedback to alter inputsprocessesto bring performance back in line Common diagnostic control systems: bal scorecards, exp centre budgets, project monitoring sys, brand revmkt share monitor sys, HR sys, std cost-acctg sys Why Use Control Sys Diagnostically? Implement Strategy - Variance info about critical performance variables - Critical performance variables: factors that must be achieved or implemented successfully for intended strategy to succeed - top-down monitoring - communicate and implement strategy effectively in large complex organizations Managers must ensure: www.notesolution.com
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