Transcript Banc One Corporation Case Study 3

Management Control
Team Topic
Prepared for Dr. Yacus – Mgmt 750
Presented by:
Rob Batarla, Jeff Fitzgerald,
Brad Stegman, and Andrew Walters
Old Dominion University – Northern VA
Agenda
Review of Agenda
How does it Tie in to Strategy?
What is Management Control?
Centralization – Decentralization
Continuum
What are the Types of
Management Control?
Case Study: Mgmt Control at
How does it Tie into Strategy?
Management Control is a component of the
framework of corporate strategy.
We are remember the framework of
corporate strategy, right?
Framework of Corporate Strategy
Competitive Advantage
Resources
Vision
Goals
&
Objectives
Businesses
Coherence
Control
Role of Corporate Offices
Structure, Systems, and Processes
Corporate Advantage
Framework of Corporate Strategy
Competitive Advantage
Management
Resources
Coherence
Vision
Goals
&
Objectives
Businesses
ControlControl
Role of Corporate Offices
Structure, Systems, and Processes
Corporate Advantage
Control
What is Management Control?
Management Control is the connection between
the business and corporate structure.
If the corporate office cannot adequately control
its independent businesses, it will never be able to
create value.
Therefore, Management Control is needed to
maintain control over delegated decision making.
Centralization - Decentralization
Delegation and control
Continuum used to provide balance
One company can utilize both structures
Accuracy became a concern due to many
variables
Performance measures and rewards
Rethinking led to three types of
Management Controls
Three Types of Mgmt Controls
Outcome Control (Andrew)
Behavior Control (Brad)
Clan Control (Rob)
But how do companies pick which
“control” works best for them?
Choosing Management Controls
Choosing a corporate management control
approach….
-centralized vs. decentralized
-organization system of processes
-driven by corporate strategy
Outcome Control
Utilizes delegated decision making
More emphasis placed on results
Determining corporate success
Established industries
Divisional independence
Behavior Control
Executed in more complex companies
Focuses on behavior not results
Monitoring managers’:
-actions
-decisions
-performance
Considers finances
Clan Control
Development of an internal system of values and
norms
(i.e. work dress styles, normal working hours, pride taken in work.)
These methods provide control where output and
behavioral control does not work.
Strong culture and clan control help worker to
focus on the organization and enhance its
performance.
Case Study –
Decentralized management style
-structure and coherence
-reliance on operating mgmt for each subsidiary
-outcome control
Financial Plans (5 and 10 year)
Planning horizon (2 year)
Quarterly updates, revisions, and reviews
Monthly management update
Org Chart –
President and
Chairman of Executive Committee
Vice Chairman of
Executive Committee
Member Executive
Committee
20 Operating
Subsidiaries
Member Executive
Committee
Company Group
Chairman
Subsidiary
President
10 Regional
Divisions of
Subsidiaries
Subsidiary
President
Company Group
Chairman
Company Group
Chairman
14 Operating
Subsidiaries
2 Divisional
Subsidiaries
5 Regional
Divisions of
Subsidiaries
Management Controls relate to positions at orange subsidiary levels
Financial Plans –
Financial Planning (5 and 10 years)
-Four key indicators:
est. unit sales, est. sales revenue, est. net income, est. ROI
-Optimistic expectations
-No penalties for inaccuracies
Budget Planning Horizon (2 year)
-Annual Budget
-Revenues, expenses, and selected balance sheet items
-Used to “run the business, evaluate managers on planning,
forecasts, and achievements.”
Updates –
Periodic Updates
-accuracy of budget projections
-focus on sales and profits
Monthly Management Reports
-income statement highlights
-summary of balance sheet figures and ratios relative to:
position last month / position this month / budgeted position
Valuable Resources Used in
Supplement to the Text
Websites: www.jnj.com and www.codmanjnj.com
Raps, Andreas, Strategic Management. Montvale:
Strategic Finance. June 2004. Volume 85, Issue 12; p48.
Ekanayake, Sampson, Agency Theory, National Culture
and Management Control Systems. Journal of American
Academy of Business, Cambridge. March 2004. Volume 4,
Issue 1/ 2; p49.
ABI/ Inform Database
Keyword Search: Management Control
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