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AC.F317: Strategic Management Control
|Department: Accounting and Finance||NCF Level: FHEQ/QCF/NQF6//RQF6|
|Study Level: Part II (final year)||Credit Points: 15.0|
|Start Date: 15-01-2018||End Date: 27-04-2018|
|Available for Online Enrolment?: N||Enrolment Restriction: Fully available to all students|
|Module Convenor: Mr BW Miller|
- Syllabus Rules and Lancaster Part II Pre-requisites
- Curriculum Design
- Assessment Weights
- Educational Aims
- Learning Outcomes
- Part 1 Modules Video
- Teaching Pattern
Syllabus Rules and Pre-requisites
- The student must take 1 modules from the following group:
Designed around a series of case studies, this module introduces the managerial use of accounting information in overall organisational control. Topics covered include the contingency view of management control, budgetary planning and control, measuring investment centre performance, transfer pricing, motivation and rewards, and designing compensation systems.
Curriculum Design: Outline Syllabus
Wk 1. Introduction to management control
This lecture introduces the concept of a management control system and highlights its
importance in determining organisational success. First, the need for effective
organisational control procedures is reviewed. Second, three generic approaches to
control are introduced: action controls, results controls, and personal controls. Third,
the relation between management control and other levels of organisational control is
then reviewed. Finally, the role of accounting information in the management control
process is highlighted and discussed.
Wk 2. Understanding strategy
At its most basic level, management control is concerned with implementing and
supporting strategy. The ability to identify and understand organisational strategy is
therefore fundamental to effective management control system design. This lecture
begins by highlighting the need for effective strategic control. Two dimensions of
business strategy are identified. Corporate strategy involves selecting the set of
businesses in which the firm will operate and deciding how to deploy resources among
those businesses. Business unit strategy involves creating and maintaining competitive
advantage in industries where the firm has chosen to operate. A series of commonly
used techniques for understanding business unit strategy are introduced including the
growth-share matrix and the five forces model.
Wk 3. Strategy and the contingency view of management control
This lecture uses strategy to illustrate the ?contingency view' of management control:
the notion that appropriate control solutions depend (are contingent) on various
internal and external factors. Strategy is one such factor. To the extent that
management control deals with implementing and supporting strategy, different
strategies are expected to require different management control solutions. Examples of
how different strategies are associated with different task priorities, critical success
factors and behaviours are discussed. The lecture concludes with examples of how
different strategies affect key elements of the management control system, including
strategic planning, budgeting and incentive compensation.
Wk 4. Budgetary planning and control (Part I)
Budgets represent one of the most visible uses of accounting information in MCSs.
This lecture reviews the way budgets are prepared and used in the organisational
control process. The interaction between budgeting and strategic planning is
highlighted. The various roles that budgets play in MCSs are also reviewed. Although
budgets can serve multiple control functions, these alternative uses often conflict. As a
result, budgets by themselves are generally insufficient for organisational control
Wk 5. Budgetary planning and control (Part II)
Continuing from week 4, this lecture reviews some of the key issues facing MCS
designers when implementing a system of budgeting. These include the level of
budgetary participation, the degree of budgetary target difficulty, whether budgets
should be revised during the cycle, and how budget variances should be interpreted.
Significant problems associated with the use of budgets as control tools are identified.
Proposals on how to improve (or replace) budgets are reviewed.
Wk 6. Measuring investment centre performance
While investment decisions are typically made on the basis of net present value (i.e.,
discounted cash flows), periodic investment centre performance is generally evaluated
using accounting numbers. This lecture explores some of the problems associated with
using accounting numbers to measure investment centre performance. Traditional
return-on-investment (ROI)-type measures are shown to create serious performance
measurement problems. Use of residual income can overcome some of these
problems. However, even residual income does not always yield results consistent
with the net present value rule.
Wk 7. Implementing strategy through performance measurement
This lecture explores two management control methods designed to create a direct link
between performance measurement and business strategy. The first system is known
as the Balanced Scorecard. This approach involves supplementing traditional
accounting performance measures with key operating metrics that determine future
financial performance. The second system was developed by management consultants
Stern Stewart & Co. and is known as Economic Value Added (EVA). This system is
based on the residual income concept, with two important extensions. First, Stern
Stewart make adjustments to reported profit and asset figures to overcome the
perceived weaknesses of accounting numbers produced using GAAP. Second, the
resulting EVA measure forms part of an innovatively designed compensation plan that
aims to provide managers with stronger incentives to create value.
Wk 8. Transfer pricing
In most organisations, divisions and departments interact with each other to supply
products and services. Organisational interdependencies create the demand for a
system of internal ?prices' at which such goods and services are exchanged. These are
known as transfer pricing systems. This lecture reviews the various methods used to
determine transfer prices and highlights the importance of effective transfer pricing in
the management control process. Particular emphasis is given to understanding the
role of transfer prices for a firm's strategy and its business model.
Wk 9. Motivation and rewards
Effective motivation is a key consideration for designers of management control
systems. This lecture explains the reasons why organisations spend so much time and
resources on ensuring that employees are correctly motivated. Alternative theories on
how best to motivate individuals are then reviewed. While, financial rewards represent
an important motivational tool for many organisations, other (equally effective)
mechanisms for improving employee motivation often exist. The most effective
management control systems are often those that incorporate a broad range of
Wk 10. Designing compensation systems
Performance-related rewards represent a cornerstone of most organisations'
management control systems. This lecture reviews the theory underpinning
performance-related pay and examines the mechanisms that organisations typically
use to link compensation to performance. Key elements of short-term accounting-based
bonus plans and long-term incentive plans are explored.
- 75% Exam
- 25% Coursework
Educational Aims: Subject Specific: Knowledge, Understanding and Skills
This is an optional half-unit course designed to introduce students to the managerial use of accounting information to implement strategy and control activities within business organisations. It represents part of the management accounting stream of study and requires prior study of basic management accounting. The purpose of the course is to broaden students' perspectives from viewing management accounting as being a purely technical activity to understanding how it contributes to the design and use of management control systems (MCS). It is intended to develop students' ability to understand the role of accounting (and other) information in helping managers to control the activities they are responsible for.
Learning Outcomes: Subject Specific: Knowledge, Understanding and Skills
- After completing this course students should:
Understand the range of literature on MCS
Understand the links between strategy and MCS
Be capable of applying management accounting and control theory to practical situations
Be able to diagnose the likely consequences of operating a particular MCS and make recommendations for change where necessary
Understand some of the 'new' MCS techniques developed and marketed by management control consultants
Present a reasoned argument in both a classroom situation and under exam conditions
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