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5Motivationalcontracts（performanceevaluationandrewards）;

6Controllingspecialsettings（internationaloperationsandinterorganisationalcollaborationventures）.

1.ReasonsforMCS

“Expectationgap”occurswhenwhatisdesiredtoachieveisdifferentfromwhatislikelytoachieve.Employeesaresometimesunableorunwillingtoactintheorganization’sbestinterest.Thismaybecausedbythreetypicalcontrolproblems:

lackofdirection,lackofmotivationandpersonallimitations.Inreducingthe‘expectationgap’problems,managersmusttakestepstoguardagainsttheundesirablebehavioursandtoencouragedesirablebehaviours.

lackofdirection

Whenemployeedon'

tknowwhattheorganizationwantsfromthem

Communication+Reinforcement

MCScaninformemployeesastohowtheycanmaximizetheircontributiontothefulfilmentoforganizationalobjectives.

Lackofmotivation

Whenemployeechoosenottoperformastheirorganizationwouldhavethemperform

●1Lackofgoalcongruence:

individualandorganizationalobjectivedonotcoincide,andindividualsareself-interested

●2employeessometimesactintheirownpersonalinterestattheexpenseoftheirorganizationalobjectives

●3Employees,particularlymanagersarepronetomakingdecisionsthatservetheirinterest,butnotthoseoftheirorganization.

●4Employeefraudandtheft

●5

Personallimitation

Employeesarenotabletodoagoodjobbecauseofcertainpersonallimitationtheyhave

●1Lackofrequisiteknowledge,intelligence,training,experienceorstamina

●2Employeearepromotedabovetheirlevelofcompetence

●3Somejobarenotdesignedproperly

Training

jobassignment/promotion

jobdesign

Managementcontrolincludesallthedevicesorsystemsusetoensurethatthebehavioursanddecisionsoftheiremployeesareconsistentwiththeorganization’sobjectivesandstrategies.MCSisasetofcontrolproceduresorisacollectionofcontrols.

MCScanhelpreducingthegap.Itcanincreasetheprobabilitythattheorganization’sobjectiveswillbeachieved.

Tohaveahighprobabilityofsuccess,organizationsmustmaintaingoodmanagementcontrol.Inachievingthis,thereareseveralissuesmustbeconcernasfollowing:

propercommunicationsoforganizationalgoals;

properinventorycontrol;

controlshouldbefutureorientedandobjectivedriven,thecontrolbenefitshouldexceedcontrolcosts（trytominimizethecostofcontrolsystemtogetmaximumbenefits）.

Organizationscanneveravoidalltheircontrolproblems,buttheycanlimitthemorreducethepotentiallosscausedbytheproblems.Therearefourprominentavoidancestrategies,includingactivityelimination,automation,centralization,andrisksharing.

⏹Activityelimination:

turningoverthepotentialriskdrivenbyparticularentityoractivity,andtheassociatedprofitstothirdpartythroughsubcontract,licensingagreement,ordivestment.

⏹Automation:

computerseliminatethehumanproblemsofinaccuracy,inconsistency,andlackofmotivation.

⏹Centralization:

allkeydecisionsaremadeattopmanagementlevels

⏹Risksharing:

sharingriskswithoutsidepartiescanlimitthelossesthatcouldbeincurredbyinappropriateemployees’behaviours.i.e.insurance,jointventureagreement.

TheprocessesofdesigningandimprovingMCSsrequiretheaddressingoftwobasicquestions:

whatisdesiredandwhatislikelytohappen?

MCScannotbedesignedorevaluatedwithoutanunderstandingofthedemandsoftherolesbeingcontrolled.Objectives,andmostimportantly,strategiesderivedfromagoodunderstandingoftheorganization’sobjectivesoftenprovideimportantguidestotheactionsthatareexpected.

1Choiceofcontrols

ThechoiceofmanagementcontrolsystemisthefirstoftwodecisionsleadingtosettingupofMCS.Itisnotrandom.Thechoicesarebasedonanumberoffactors,particularlythetasktobecontrolled.

Managementcontrolisacriticalfunctioninorganizations.MCSsvaryconsiderablyamongcompaniesandamongtheareasofanysinglecompany.Everyorganisationisuniqueandthereforethereisnouniversalsetofcontrolsapplicabletoallorganisations.Inchoosingpropercontrolsforacertaincompany,thethreecontrolproblemsshouldbeaddressed.

Therearethreetypesofcontrolsbasedontheobjectofcontrols,includingactioncontrol,resultcontrolandpersonnel/culturalcontrol.Asaruleofthumb,itstartswithpersonnel/culturalcontrol,andthenchoosesfromresultsandactioncontrol.Usuallyonetypeonlyisnotfeasible,multiplecontrolscanbeused.Thedifferenttypesofmanagementcontrolsarenotequallyeffectiveinallcircumstances.Therefore,itisimportanttofocusonseekingfornetcontrolbenefits.

Itshouldbementionedthatinappropriatemanagementcontrolcanleadtolargelossesandpossiblyeventoorganizationalfailure.（i.e.managementcontrolincommonusecausemanagerstobeexcessivelyshort-termorientedorarepronetostiflecreativityandinitiative）

Actioncontrol

Actioncontrolsarethemostdirectformofmanagementcontrol.Theyinvolvetakingstepstoensurethatemployeesactintheorganization’sbestinterestbymakingtheiractionsthemselvesthefocusofcontrol.Theytakeanyoffourbasicforms:

behavioursconstraints,peractionreviews,actionaccountability,andredundancy.

Actioncontrolscanalsobeclassifiedaccordingtowhethertheyservetopreventortodetectundesirablebehaviours.Mostactioncontrolsareaimedatpreventingundesirablebehaviours,exceptaction-accountabilitycontrols.

Theyareusableandeffectiveonlywhenmanagersknowthatactionsaredesirable（orundesirable）andhavetheabilitytoensurethatthedesirableactionsoccur（orthattheundesirableactionsdonotoccur）.

Theadvantagesofactioncontrolsareasfollowing:

Theyarethemostdirectformofcontrol,thisconsequentlyprovidethebestcontrol.andifcontrolovertheactionsthemselvesarejudgedtobeadequate,thereisnoneedtmonitorresults.Theyalsoactasaformoforganizationalmemory,sothattheknowledgeisnotlost.Theyparticularlyintheformofpoliciesandproceduresarealsoanefficientwaytoaidorganizationalcoordination.

Thedisadvantagesofactioncontrolsareasfollowing:

Theyhaveseverefeasibilitylimitationforexcellentknowledgeofwhatactionsaredesirableexistsonlyforhighlyroutinizedjobs.Mostactioncontroldiscouragescreativity,innovationandadaptation.Actionaccountabilitycancausesloppiness.Actionaccountabilityoftencausesnegativeattitudes.Itoftenleadstobehaviouraldisplacement.Preactionreviewsarecostly.Andmostcompanieshavedifficultyinmodifyingtheirproceduresassituationschange,andcommunicatingchangesthataremadeanbeexpensive.

Behaviouralconstraints

motivationalproblems

Physically:

computerpasswords,limitsonaccesstoareas

administratively:

therestrictionofdecision-makingauthority

separationofduties

Preactionreviews

Allthree

Scrutinyoftheactionplansoftheemployeesbeingcontrolled.

Expenditureapprovals,budgetreview

Actionaccountability

Allthree

Holdingemployeesaccountablefortheactionstheytake.Canbeeitherpreventionordetection

Workrules,policiesandprocedures,contractprovisionsandcodesofconduct.

Nursesuse‘preoperativechecklistforpreparingsurgery.

Redundancy

Motivationalproblems&

personallimitation

Assigningmoreemployeesormachinestoataskthanisstrictlynecessary.

Costly,resultinconflict,frustrationandboredom

Computerfacilities,securityfunctionsandcriticaloperations.

Resultcontrol:

Resultcontrolsareanindirectformofcontrol.Theyfocusontheresultsproducedbyaddressingmotivationandlackofdirectionproblems.Resultcontrolsarepreventive-typecontrols.Theyinvolverewardingemployeesforgeneratinggoodresults,orpunishingthemforpoorresults.（i.e.pay-for-performance）Therewardslinkedtoresultsgofarbeyondmonetarycompensationandinclude,amongothers,jobsecurity,promotions,autonomy,andrecognition.Well-definedresultsalsoinformemployeeswhatisexpectedofthemandencouragethemtodowhattheycantoproducethedesiredresults.Resultcontrolscaninfluenceactionsofemployeesbecauseconcernedabouttheconsequencesoftheiractions.Althoughresultcontrolcannotdirectlyaddresspersonallimitations,theyareagoodindicator.Resultcontrolsalsocreatemeritocracies.

Resultcontrolscanprovideeffectivecontrolevenwhereknowledgeastowhatactionsaredesirableislacking.Resultcontrolscanyieldgoodcontrolwhileallowingtheemployeeswhosebehavioursarebeingcontrolledhighautonomy.Highautonomyoftengeneratesinnovation.Theorganizationdoesnotdictateemployeeswhatactionstheyshouldtake;

insteademployeesareempoweredtotakethoseactionstheybelievewillbestproducethedesiredresults.Resultcontrolsalsoencouragetheemployeestodiscoveranddeveloptheirtalentandgetplacedinjobsinwhichthywillbeabletoperformwell.Resultcontrolsareofteninexpensive.Iforganizationscantailortheirrewardpackagetotheirmanagers’individualpreferencetheycanprovidemeaningfulrewardsatthelowestpossiblecosts.

Resultcontrols,however,havesomemajorlimitationsasfollowing,theyfailedtomeetoneormoreofthequalitiesofgoodmeasur