CHAPTER 3
Action,
Action, Personnel,
Personnel,
and
and Cultural
Cultural
Controls
Controls Student
Student name:
name: Hanan
Hanan
Abaza
Abaza
Previously discussed..
Management Control Systems
› Results Controls
› Action Controls
› People Controls
Controls can focus on:
› the results produced RESULTS CONTROLS
1) behavioral constraints
2) Pre- action reviews
3) Action accountability
4) Redundancy
……Basic forms of action control
Basic forms of action control
1.behavioral
1.behavioral constraints
constraints
it
it is
is aa negative
negative form
form of
of action
action control
control .. They
They
make
make it it impossible
impossible or
or difficult
difficult for
for employee
employee to to
do
do thing
thing that
that should
should not
not bebe done
done ..
Physical constraints
Ex: Including locks, computer passwords, access limit
. to certain areas
Some behavioral constraint devices are technically
sophisticated and often expensive such as magnetic
identifications card or fingerprint/eyeball pattern
reader.
Administrative
Administrative constraints:
constraints:
A.
A. Restriction
Restriction of
of decision-making
decision-making authority
authority
limit
limit on
on employees’
employees’ ability
ability to
to perform
perform all/
all/ aa portion
portion of
of aa
specific
specific act;
act; to
to minimize
minimize the
the risk
risk that
that untrained
untrained employees
employees
will
will make
make mistakes.
mistakes.
(Ex:
(Ex: low
low grade
grade manager
manager can
can only
only approve
approve $1000
$1000
expenditures,
expenditures, while
while med-grade
med-grade manager
manager can
can approve
approve $10000
$10000
expenditure
expenditure ))
B.
B. separation
separation of
of duties
duties (dividing
(dividing up
up tasks)
tasks)
To
To accomplish
accomplish sensitive
sensitive duties
duties thus
thus Making
Making its
its impossible
impossible or
or
difficult
difficult for
for one
one person
person to
to complete
complete certain
certain task
task alone
alone ..
different
different persons
persons for
for positions
positions that
that closely
closely related
related
(Ex:
(Ex: checks
checks receiver
receiver must
must be
be separated
separated from
from the
the accountant
accountant
who
who make
make the
the payment
payment entries
entries in
in the
the account
account receivable
receivable
Separation of
duties
ne of the basic requirements of Internal control
The effectiveness of separation of duties is
limited, it does not prevent the collusion
between two or more employee , or with third
parties or with the top management, the causes
of fraud.
behavior-shaping
behavior-shaping constraint,
constraint, also
also sometimes
sometimes referred
referred to
to asas
a forcing
a forcing function or poka-yoke
function or poka-yoke "mistake-proofing",
"mistake-proofing", is is aa
technique
technique used used in error-tolerant
in error-tolerant design to
design to prevent
preventthethe user
user from
from
making
making common errors or
common errors or mistakes.
mistakes. Where
Where aa certain
certain action
action
must
must be be completed
completed beforebefore the
the next
next step
step performed
performed .Ex:
.Ex:
microwaves,
microwaves, itit is is impossible
impossible to
to start
start the
the microwave
microwave while
while the
the
door
door is is still
still open
open
-- Its
Its difficult
difficult to to make
make behavioral
behavioral constraints
constraints foolproof
foolproof where
where
employees
employees are are disloyal,
disloyal, deceitful.
deceitful.
2.
2. Pre-
Pre- action
action reviews
reviews
(Review/modification/approval)
(Review/modification/approval)
Scrutiny
Scrutiny of
of the
the action
action plans
plans of
of the
the employees
employees
being
being controlled
controlled (approval/checking
(approval/checking made
made by by
the
the supervisors
supervisors about
about certain
certain proposals).
proposals). A A
common
common form
form of
of pre-
pre- action
action review
review take
take place
place
during
during planning
planning and
and budgeting
budgeting process
process ..
3.
3. Action
Action accountability
accountability
it
it is
is aa negative
negative form
form of
of action
action control
control .. They
They
make
make it it impossible
impossible or
or difficult
difficult for
for employee
employee
to
to dodo thing
thing that
that should
should not
not be
be done
done ..
Action Accountability
Holding employees accountable for the actions
. they take
:Its implementation requires
Assigning
Assigning more
more people
people (or
(or machines)
machines) to
to aa
task
task than
than necessary.
necessary. Ex:
Ex: backup”
backup” people
people or
or
facilities.
facilities.
it
it increases
increases the
the probability
probability that
that aa task
task will
will
be
be satisfactorily
satisfactorily accomplished.
accomplished. Its Its common
common
in
in computer
computer facility
facility ,, security
security functions
functions but
but
its
its rarely
rarely used
used in
in the
the other
other areas
areas because
because itsits
expensive
expensive
Assigning
Assigning more
more than
than one
one employees
employees to
to the
the same
same task
task
can
can result
result in
in conflict,
conflict, frustration
frustration and
and boredom.
boredom.
Action controls & control Problem
1.Behavior conctraints Primarily directed at one
control problem: eliminate motivational
problems. Employee who engage in undesirable
behaviors can prevented from doing so.
2.Pre- action review address all three control
problems:
they involve communication to the employee
about what is desired
PROS:
PROS:
Alleviate
Alleviate (minimize)
(minimize) lack
lack of
of direction;
direction;
Provide
Provide motivation;
motivation;
Mitigate
Mitigate personal
personal limitations.
limitations.
Prevent
Prevent mistakes
mistakes or
or harmful
harmful actions
actions from
from
happening
happening
Action controls & Action
Problems
3.Action accountability : addresses all three control
problems. desired action can help provide direction
and alleviate the type of personnel limitation by
increase the expertise and skills . and reward or
punish help provide motivation .
4.Redundancy: limited in addressing the control
problems: its helping in accomplish particular
task
Provide motivation, and perform
satisfactory
Overcome personal limitations.
Types of action
also: rather costly
Lack of direction Motivational Personal
controls problems limitations
Behavioral X
constraints
Preaction review X X X
Action X X X
accountability
redundancy X X
Prevention VS detection
Action control can serve to prevent or detect
undesirable behavior,
- Prevention: none of the costs of undesirable behaviors will
be incurred.
- Detections: they applied after the occurrence of the
behavior . And can be effective if the detection is made in
timely manner and correction of effects of harmful action .
Group-based rewards
For example, profit-sharing, employee ownership of company
stock
These are cultural controls (although of a results control
nature) because the link between group (individual)
performance and rewards is stronger (weaker)
Codes of Conduct
It is a formal written documents provide
broad, general statement of organizational
values, commitments to stockholders, and the
way in which management would like the
organization to function.
It designed to help employees understand
what behaviors are expected, even in the
absence of rules.
Major areas where codes focus in:
1- Purchasing guidelines 2- Information
Security
3- Environment responsibility 4- Marketing
5- Product Safety6- Workplace safety
7- Confidentiality of employee records
Codes of Conduct
Organizations
Organizations relyrely on
on some
some extent,
extent, onon their
their
employees,
employees, to to guide
guide and
and motivate
motivate
themselves.
themselves.
Hiring
Hiring is
is the
the most
most important
important decision,
decision, hire
hire
the
the smartest,
smartest, most
most inspired
inspired people,
people, give
give
them
them the
the resources,
resources, andand get
get away
away from
from
there
there way.
way.
The
The stronger
stronger thethe culture,
culture, the
the less
less need
need for
for
policies
policies manuals,
manuals, organizations
organizations charts,
charts,
detailed
detailed procedures,
procedures, and and rules.
rules.
Advantages of
Personnel/Cultural controls
Personnel/cultural
Personnel/cultural controls
controls have
have several
several
advantages,
advantages, over
over result
result and
and action
action controls:
controls:
1. They
1. They are
are usable
usable toto some
some extent,
extent, in
in almost
almost
every
every setting.
setting.
2. Their
2. Their cost
cost is
is often
often lower
lower than
than other
other forms
forms of
of
controls.
controls.
3. They
3. They usually
usually produce
produce fewer
fewer harmful
harmful side
side
effects.
effects.
The
The degree
degree of
of personnel/cultural
personnel/cultural effectiveness
effectiveness
can
can vary
vary significantly
significantly across
across individuals,
individuals, groups,
groups,
and
and societies,
societies, some
some groups
groups and
and societies
societies have
have
stronger
stronger emotional
emotional ties
ties among
among their
their members.
members.
Start with people controls
People control …
Must always be relied on, to a certain extent.
Have relatively few harmful side-effects
Involve relatively low out-of-pocket costs