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Questions and Answers
Market share is an irrelevant measure when conducting evaluations in management control.
Market share is an irrelevant measure when conducting evaluations in management control.
False
Re-planning is necessary if customers have not demanded the service.
Re-planning is necessary if customers have not demanded the service.
True
The control structure consists solely of financial management instruments.
The control structure consists solely of financial management instruments.
False
The creation of responsibility centers promotes centralization in decision-making.
The creation of responsibility centers promotes centralization in decision-making.
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A lack of responsibility within an organization can lead to a failure in the delivery service.
A lack of responsibility within an organization can lead to a failure in the delivery service.
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Customer satisfaction is not a control indicator for management evaluation.
Customer satisfaction is not a control indicator for management evaluation.
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Control indicators are solely focused on financial performance.
Control indicators are solely focused on financial performance.
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Budgets and budgetary control involve calculating deviations and analyzing their causes.
Budgets and budgetary control involve calculating deviations and analyzing their causes.
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Management control does not require any form of action once analysis of deviations is complete.
Management control does not require any form of action once analysis of deviations is complete.
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Control indicators provide a diagnosis of the situation in both the short and long term.
Control indicators provide a diagnosis of the situation in both the short and long term.
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The use of control indicators is inflexible and cannot be adapted to new environments.
The use of control indicators is inflexible and cannot be adapted to new environments.
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Indicators serve as alarm signals for monitoring management activity.
Indicators serve as alarm signals for monitoring management activity.
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All classifications of indicators are mutually exclusive.
All classifications of indicators are mutually exclusive.
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Indicators can only measure tangible aspects of an organization.
Indicators can only measure tangible aspects of an organization.
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A simple spreadsheet can suffice for incorporating control indicators into an IT system.
A simple spreadsheet can suffice for incorporating control indicators into an IT system.
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Control is primarily a punitive mechanism for inappropriate behavior.
Control is primarily a punitive mechanism for inappropriate behavior.
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Performance measures are another term used for control indicators.
Performance measures are another term used for control indicators.
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A clear definition of objectives is crucial for exercising the control function.
A clear definition of objectives is crucial for exercising the control function.
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Management control must only rely on economic incentives to motivate employees.
Management control must only rely on economic incentives to motivate employees.
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The controller should act as a leader who motivates towards the achievement of objectives.
The controller should act as a leader who motivates towards the achievement of objectives.
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Pérez Carballo defines control as ensuring the achievement of plans set during the evaluation phase.
Pérez Carballo defines control as ensuring the achievement of plans set during the evaluation phase.
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Evaluating objectives may reveal that they are unachievable due to various limitations.
Evaluating objectives may reveal that they are unachievable due to various limitations.
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Control should be perceived primarily as a mechanism for oversight without providing any solutions.
Control should be perceived primarily as a mechanism for oversight without providing any solutions.
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Incentives are not necessary for motivating employees in a management control system.
Incentives are not necessary for motivating employees in a management control system.
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Firms must consider respect for human rights as part of their social responsibilities.
Firms must consider respect for human rights as part of their social responsibilities.
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The circular economy aims to increase waste generated by economic activities.
The circular economy aims to increase waste generated by economic activities.
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Firms are not required to disclose their compliance with social responsibility objectives.
Firms are not required to disclose their compliance with social responsibility objectives.
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Employee participation in decision-making is a key aspect of social responsibility.
Employee participation in decision-making is a key aspect of social responsibility.
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The responsibility of safety in textile factories rests solely with the production companies.
The responsibility of safety in textile factories rests solely with the production companies.
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The presence of women in management positions is an important variable in social responsibility measurements.
The presence of women in management positions is an important variable in social responsibility measurements.
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Social Responsibility management control systems include variables like the emissions rates of firms.
Social Responsibility management control systems include variables like the emissions rates of firms.
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Work-life balance plans are irrelevant to the concept of social responsibility.
Work-life balance plans are irrelevant to the concept of social responsibility.
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Residual income measures the amount of money left over after all required costs of capital have been covered.
Residual income measures the amount of money left over after all required costs of capital have been covered.
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Interrelated communication between responsibility centres is essential for effective management control.
Interrelated communication between responsibility centres is essential for effective management control.
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The emergence of new technologies is not considered a non-financial aspect to control in investment centres.
The emergence of new technologies is not considered a non-financial aspect to control in investment centres.
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Short-term results are the best measure for evaluating management performance in all situations.
Short-term results are the best measure for evaluating management performance in all situations.
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The starting point for building a Balanced Scorecard (BSC) is the company's revenue forecast.
The starting point for building a Balanced Scorecard (BSC) is the company's revenue forecast.
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Strategic objectives and critical success factors are graphically summarized in the strategic map.
Strategic objectives and critical success factors are graphically summarized in the strategic map.
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Corporate Social Responsibility (CSR) involves understanding the impacts of an organization's actions on its stakeholders.
Corporate Social Responsibility (CSR) involves understanding the impacts of an organization's actions on its stakeholders.
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The lack of motivation and recognition of management can enhance performance within responsibility centres.
The lack of motivation and recognition of management can enhance performance within responsibility centres.
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The Balanced Scorecard aims to ignore the cause-effect relationships between different perspectives.
The Balanced Scorecard aims to ignore the cause-effect relationships between different perspectives.
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Delegation of responsibilities does not depend on the organizational structure.
Delegation of responsibilities does not depend on the organizational structure.
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Increasing strategic feedback is part of the objective of the Balanced Scorecard.
Increasing strategic feedback is part of the objective of the Balanced Scorecard.
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Defining the Balanced Scorecard has no educational effect on staff regarding strategic direction.
Defining the Balanced Scorecard has no educational effect on staff regarding strategic direction.
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Identifying responsibility centres is solely based on financial performance metrics.
Identifying responsibility centres is solely based on financial performance metrics.
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Control indicators in the Balanced Scorecard are unrelated to the strategic objectives.
Control indicators in the Balanced Scorecard are unrelated to the strategic objectives.
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The Balanced Scorecard seeks to develop a disjointed set of indicators that do not relate to one another.
The Balanced Scorecard seeks to develop a disjointed set of indicators that do not relate to one another.
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Barriers to strategy implementation are addressed through objectives set in the Balanced Scorecard.
Barriers to strategy implementation are addressed through objectives set in the Balanced Scorecard.
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Study Notes
Management Control
- Management control aims to provide reliable and timely information to managers for effective decision-making.
- It analyses company results and performance, forecasting trends, and designing indicator systems.
- Control involves evaluating deviations from targets, understanding their causes, and monitoring objectives.
- Control is crucial for maintaining or improving competitiveness, especially in dynamic environments.
Objectives of the Chapter
- Defining management control's scope and objectives.
- Identifying elements of a control system.
- Analyzing the evolution of a controller's role & required attitudes and competencies.
- Understanding control by responsibility centers.
- Defining Social Responsibility and its connection to management control.
The Control Function in the Firm
- Environmental instability and increasing market complexity necessitate a strong control function in business management.
- Issues like globalisation, market vulnerability, customer demands, organizational complexity, and technological advancements contribute to this necessity.
- Control mechanisms are required to balance decentralization and maintain a unified company vision.
Types of Control
- Strategic Level: Focuses on long-term, qualitative objectives related to organizational strategy (e.g., improving employee motivation or customer satisfaction).
- Tactical Level: Involves the company's lines of action in medium-term plans. Objectives are more concrete and quantitative (e.g., reducing delivery time).
- Operational Level: Extremely short-term, highly specific, and quantitative objectives such as meeting daily production targets or fulfilling orders within a set timeframe.
Management Control System
- The control process encompasses the steps needed to implement control systems.
- The control structure refers to the elements that make up the control system, like tools or instruments for analysis.
- In a formal structure, systems are developed according to pre-established patterns (such as budgeting). Conversely, an informal structure uses spontaneous mechanisms (such as suggestion boxes).
Functions of a Controller
- Controllers are responsible for company objectives, coordination, and change management.
- They gather information from various sources and disciplines, ensuring timely and reliable data.
- Controllers have evolved to incorporate enhanced data analysis capabilities, such as business intelligence or Big Data.
Management Control by Responsibility Centres
- Responsibility centres are organizational units headed by a manager, who is accountable for their functions and actions.
- These centres are crucial for allocating responsibility in larger organizations.
- Different types of responsibility centres may arise based on factors such as strategy or organizational structure. Examples include cost centres, profit centres, and investment centres.
Corporate Social Responsibility (CSR)
- CSR refers to the responsibility of enterprises for the impacts they have on society.
- CSR considerations are integrated into modern management control systems to evaluate and manage impacts on different stakeholders (owners, employees, customers, etc.).
- Environmental and social concerns are often addressed in sustainability reporting and in some related international guidelines and standards.
The Balanced Scorecard (BSC)
- A BSC is a strategic management system used for tracking indicators of performance against company goals.
- BSCs include perspectives reflecting financial, customer, internal process, and learning/growth elements.
- The concept and implementation of the balanced scorecard emphasizes aligning all aspects of the organisation towards achieving long-term sustainability and competitiveness.
- A BSC is designed to monitor strategic objectives, communicate them, and use them to monitor performance.
Budgeting Techniques
- Techniques like incremental budgeting rely on past performance.
- Zero-based budgeting completely reassesses all activities each year.
- Programme-based budgeting integrates plan formulation with budget allocation to align with strategic priorities.
- Activity-based budgeting considers key activities for competitiveness, including the use of activity-based costing.
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Description
This quiz examines key concepts and misunderstandings in management control theory. It challenges common beliefs regarding indicators, responsibility centers, and the role of financial management. Test your knowledge of how control indicators function in both short and long-term evaluations.
