• strategic planning
• budgeting
• resource allocation
• performance measurement
• evaluation and reward
• responsibility center allocation
• transfer pricing

1. strategy is developed through a formal and rational process and the strategy dictates the design of the firm's management system (environmental changes are predictable)

2. strategy emerges through experimentation, which are influenced by the firm's management system (rapid changing environments)

1. Detector (sensor)

2. Assessor

3. Effector

4. Communications Network

• thermometer (detector) measures current temperature of a room
• assessor compares the current temperature with the standard for what the temperature should be
• effector prompts a furnace to emit heat if temperature is lower than the standard or activates AC if the temperature is higher than the standard and shuts off either when the tempearture reaches the standard level
• communications network transmits info from the thermometer to the assessor and the assessor to the heating or cooling element.

• sensory nerves (detector) scattered throughout the body
• hypothalamus center (assessor) copares infomration received from detectors with the 98.6 F standard
• muscles and organs (effectors) reduce the temperature when it exceeds the standard (panting, sweating, opening skin pores) and raise the temperature when it falls below the standard (shivering)
• ovreall communication system of nerves

• eyes (sensors) measure actual speed by observing the spedometer
• brain (assessor) compares actual speed with desired speed
• deviation from standard means foot (effector) eases up or presses down on accelerator
• nerves from communication system transmits information from eyes to brain and brain to foot.

• standard isn't present
• management control is not automatic
• management control requires coordination among individuals
• connection from perceiving the need for action to determining the action required to obtain the desired result may not be clear
• much management control is self-control

Manager acting as assessor may say "costs are too high" but not see an easy or automatic action that will bring costs down to what the standard says they should be.

Management control systems are black boxes, we can't know what an action a given manager will take when there is a difference between actual and expected performance nor what action others will take in response to the manager's signal.

1. Strategy formulation

2. Management Control

3. Task Control

• planning what the organization should do
• coordinating activities of several parts of the organization
• communicating information
• evaluating information
• deciding what, if any, action should be taken
• influencing people to change their behavior

• doesn't necessarily require that all actions correspond to a previously determined plan (budget)
• plans are based on circumstances believed to exist at the time they were formulated
• if these circumstances have changed at the time of implementation, the actions dictated by the plan may no longer be appropriate
• conforming to a budget isn't necessarily good, and departure from a budget isn't necessarily bad

Management Control focuses on strategy execution

• organizational structure
• human resource mmanagement
• culture

focuses on monetary "bottom line"

Net income, ROE, etc

subunits have nonfinancial objectives:

product quality, market share, customer satisfaction, etc

• process of deciding on new strategies
• unsystematic because threats, opportunities and new ideas don't occur at regular intervals, so strategic decisions may be made at any time
• analysis of strategy varies with the nature of the strategy; strategic analysis involves judgment and numbers are usually estimates.

• process of implementing those strategies
• process invloves a series of steps that occur in a predictable sequence according to more-or-less fixed time table with reliable estimates.
• uses all levels of staffing in an organization

• process of ensuring that specified tasks are carried out effectively
• transacton oriented; involves performance of individual tasks according to rules established in the process
• consists of seeing that rules are followed
• scientific; optimal decisions or appropriate action for bring an out-of-control condition back to its desired state is predictable wtihin acceptable limit
• information is task control info: number of items, pounds of material, units of componenets, etc

• instant access
• multi-targeted communication
• costless communication
• ability to display images
• shifting power and control to individuals

• understanding the relative importance of various and competiting goals that drive individuals to act
• aligning various individual goals to those of org
• develop specific objectives by which business units, functional areas and individual departments will be judged
• communicating strategy and specific performance objectives thoughout the org
• determining key variables to be measured in assessing an individuals contribution to strategic goals
• evaluating actual performance relative to standard and making inferences
• conducting productive performance review meetings
• designing right reward structure
• influence individuals to change their behavior

• predictable environment - much better chance to establish strategies first and come up with a management control system second
• non predictable environment - symbiotic relationship between the two

1. Revenue Center

2. Expense Center

3. Profit Center

4. Investment Center

Each center differentiate in how they measure inputs and outputs.

1. Strategic Planning

2. Budget Preparation

3. Execution

4. Evaluation of Performance

• Managerial Accounting
• Strategic Planning
• Organizational Behavior
• Human Resources