Transcript Management Control Systems

Differentiated Strategies &
Service Organizations
Chapters 12 & 13,
Management Control Systems, 12th Ed.,
Anthony and Govindarajan
Differentiated Strategies
 Corporate Strategy
– The right mix of businesses
• Single industry
• Related diversified industries
• Unrelated diversified industries
– Allocation of resources to support the mix
 Business Strategy
– How to compete in a particular market
– Based on the resources allocated by the corporate
strategy
Organizational Structure
 Continuum
– From single industry (Functional)
– Through related diversified (Business units)
– To unrelated diversified (Holding company)
 Must be considered in developing a
management control system
Control Considerations
 Increased diversification reduces knowledge
levels of management
– Results in increased vertical planning systems
– Results in greater budgetary control at lower
levels
– Results in less subjectivity for incentive plans
– Results in less goal congruence at the highest
corporate level
Business Unit Strategy
 Basis – how to compete in a given market
 Usually have one of four “missions”
– Build
– Hold
– Harvest
– Divest
 Two ways to compete
– Low cost
– Differentiation
Implications
 Build
– Less certainty, greater subjectivity
– Use of interactive control systems
 Hold
– Greater certainty, balance of subjectivity and
objectivity
– Heavier use of diagnostic control systems
 Harvest
– Almost absolute certainty, greater objectivity
– Use of diagnostic control systems
 Divest
Top Management Style
 Managers are different
 Management control systems must take that
into consideration
– Personal versus impersonal controls
– Tight versus loose controls
 Want some examples?
– All taken from Fortune, November 18, 2002
John Patterson
National Cash Register Company
1884-1921
 Three-step approach to employee
development
– Break a man’s self-esteem
– Rebuild it from scratch
– Then fire him
John F. Welch
General Electric
1981-2001
 Redefined the CEO’s central purpose in
life:
– Increase the stock price, pure and simple
Albert J. Dunlap
Scott Paper / Sunbeam Corporation
Mid 1990’s
 Scott Paper
– Boosted stock price by 225%
– Cut 11,000 employees, R&D, plant
improvements, and almost everything within
reach
– “I’m a superstar in my field, much like Michael
Jordan in basketball”
 Sunbeam Corporation
– Bankrupt
Service Organizations
 General Characteristics
– Quality Control
– Labor Intensive
– Often Multi-Unit
Organization Types
 Professional Services
 Financial Services
 Health Care Organizations
 Nonprofit