Slide 3.1

Chapter 3:
Action, Personnel, and Cultural
Controls

Merchant, Management Control Systems PowerPoints on the Web, 3rd edition, © Pearson Education Limited 2012

Slide 3.2

Action controls


Ensure that employees perform (or do not perform) certain actions known to be beneficial (or harmful) to the organization



Prevention / detection
– Most action controls are aimed at preventing undesirable behaviors

Merchant, Management Control Systems PowerPoints on the Web, 3rd edition, © Pearson Education Limited 2012

Slide 3.3

Effectiveness of action controls


They are usable and effective only when managers:
– Know what actions are desirable
» Difficult in highly complex and uncertain task environments
(e.g., research engineers or top-level managers)
– Have the ability to make sure that the desirable actions occur » For example, effectiveness of organizational procedures?

Merchant, Management Control Systems PowerPoints on the Web, 3rd edition, © Pearson Education Limited 2012

Slide 3.4

Behavioral constraints


Physical
– Locks, passwords, limited access, etc.



Administrative
– Restriction of decision-making authority
– Separation of duties, etc.

Merchant, Management Control Systems PowerPoints on the Web, 3rd edition, © Pearson Education Limited 2012

Slide 3.5

Preaction reviews


Scrutiny of action plans, investment proposals, budgets – Review and approval
– Part and parcel in (capital) budgeting processes, which are otherwise mainly a results control mechanism

Merchant, Management Control Systems PowerPoints on the Web, 3rd edition, © Pearson Education Limited 2012

Slide 3.6

Action accountability


Holding employees accountable for the actions they take



It requires:
» Defining what actions are (un)acceptable
» Communicating these definitions to employees


For example, work rules, policies and procedures, codes of conduct » Observing or otherwise tracking what happens




Direct observation/supervision
Periodic tracking (e.g., mystery shoppers)
Evidence of actions taken (e.g., activity reports)

» [Rewarding good actions, or] punishing actions that deviate
Merchant, Management Control Systems PowerPoints on the Web, 3rd edition, © Pearson Education Limited 2012

Slide 3.7

Redundancy


Assigning more people (or machines) to a task than necessary
– For example, “backup” people or facilities

Merchant, Management Control Systems PowerPoints on the Web, 3rd edition, © Pearson Education Limited 2012

Slide 3.8

Pros and cons of action controls
PRO

CON



The most direct form of control



Only for ‘routine’ jobs



Tend to lead to documentation of the accumulation of knowledge as to what works best



May discourage creativity, innovation and adaptation



May cause sloppiness



May cause negative attitudes

– Organizational memory


An efficient way of coordination

– For example, little opportunity
– That is, they increase the for creativity and selfpredictability of actions and reduce actualization the amount of inter-organizational information flows to achieve a
 Sometimes very costly coordinated effort

Merchant, Management Control Systems PowerPoints on the Web, 3rd edition, © Pearson Education Limited 2012

Slide 3.9

Personnel/cultural controls


“People controls” (for short) ensure that employees:
» Will control their own behaviors
– Personnel control
– Self monitoring

» Will control each other
– Cultural controls
– Mutual monitoring


People controls are part of virtually every management control system, and indispensable in … “flatter and leaner organizations with empowered employees”
Merchant, Management Control Systems PowerPoints on the Web, 3rd edition, © Pearson Education Limited 2012

Slide 3.10

Personnel controls


Personnel controls build on employees’ natural tendencies to control themselves, because most people …
– have a conscience that leads them to do what is right
– find self-satisfaction when they do a good job and see their organization