1. Advanced Management Control and Sustainable Development
Lecture 3:
Managing sustainable development with management control systems
Prof. Angelo Riccaboni
University of Siena
Department of Business and Law

2. Agenda Management Control System Cultural Control Planning Control
Cybernetic Control
Reward and Compensation
Administrative Controls

3. Management Control System
Management control system should be able to develop, gather and communicate information to management at different levels in the organization.
Management control system should aim to provide financial as well as non-financial information as needed by different managers.
Financial information are material costs, labour costs, net profit, investments made etc
Non-financial data are those which are not in monetary terms such as production units per worker, labour hours, machine hours, time taken to comply with the customer’s orders, absenteeism. 

4. Today’s Situation
Organizations as systems are bound to be affected by environmental changes.
The degree of environmental control over the organizational goal setting process could be manifest in the form of :
Environmental changes affect:
competition
bargaining
co‐optation or coalition
organizational systems
functions
structure
procedures
strategy
day‐to‐day activities

5. Strategic and Organizational controls
STRATEGIC CONTROL is concerned with tracking the strategy as it is being implemented, detecting any problem areas or potential problem areas suggesting that the strategy is incorrect, and making any necessary adjustments
ORGANIZATIONAL CONTROL is concerned with executing the strategy. Typical operational control measures include return on investment, net profit, cost, and product quality.

6. Strategic and Organizational controls
Administrative
Planning
Organizational
Cybernetic
Reward and compensation
Cultural

7. Cultural control Rely on corporate culture and value system
Defines intrinsic motivation of workers and their aspirations
Culture specifically is a means of controlling behavior, providing stability within the organization and a sense of belonging.
Company leaders develop cultural controls to create social norms and a sense of shared values within the organization.

8. Examples of Cultural Control
Unwritten Social Norms - if your group has an unwritten rule of silence regarding unethical practices, an individual who speaks out against it may be shunned and excluded from future group activities.
Mission Statement - "Our mission is to inspire and nurture the human spirit -- one person, one cup, one neighborhood at a time," implies standards of high ethics, community activism and quality. It provides a base for company culture and how its employees should behave
Rules and Regulations -  Most company have handbooks that include such things as nondisclosure agreements, anti- discrimination policies, expected work schedules, standards of conduct and general information. While many of these are included per federal or state law, other company policies fall in line with the organization's structure and culture.

9. Four major aspects of planning:
Planning control
Rely on strategic planning and company’s objectives
Involve the main focus on action plans
contribution to purpose and objective – has the purpose to facilitate the accomplishment of enterprise purpose and objectives
primacy of planning – is the basis for the organizing, influencing, staffing, leading and controlling functions of managers
pervasiveness of planning - planning is a function of all managers, although the character and the width of planning vary with the authority and with the nature of policies and plans
efficiency of plans - implies the normal ratio input/output and it measures the amount of contribution the plan has over the reaching objectives and purposes.
Four major aspects of planning:

10. Examples of Planning Control
Planning involves – strategy, position and budgets
Strategy - defines the organization. Specific strategy setting can take many forms, but generally includes elements pertaining to the definition of core values, mission, objectives, and sustainability.
Position - depends on gathering and evaluating accounting information(Cost/Volume/Profit Analysis and Scalability; Global Trade and Transfer; Branding / Pricing / Sensitivity / Competition)
Budget - outline the financial plans for an organization. There are various types of budgets, which must take into account ongoing operations, capital expenditure plans, and corporate financing

11. Cybernetic control Focus on corporate performance management
Focus on Reporting
Balanced Scorecard
Accounting
Motivate individual performance management
Define budgeting

12. Examples of Cybernetic Control

13. Reward and Compensation
Compensation can be defined as all of the rewards earned by employees in return for their labour. This includes:
Direct financial compensation - consisting of pay received in the form of wages, salaries, bonuses and commissions provided at regular and consistent intervals
Indirect financial compensation - including all financial rewards that are not included in direct compensation and can be understood to form part of the social contract between the employer and employee such as benefits, leaves, retirement plans, education, and employee services
Non-financial compensation - referring to topics such as career development and advancement opportunities, opportunities for recognition, as well as work environment and conditions

14. Administrative Control
Regard leadership. Management and structure
Policies, guideline and codes of conduct
Training and learning
Communicating, discussions, feedback
Engaging and empowering employees
Vision and mission statement
Cross-functional teams
Resource allocation

15. Examples of Cybernetic Control
Giving workers longer rest periods or shorter work shifts to reduce exposure time;
Moving a hazardous work process to an area where fewer people will be exposed;
Changing a work process to a shift when fewer people are working;
Clear and readable signage are administrative tool for communication and control of hazards at workplaces ;
Compliance of regulatory provisions is the best administrative control;
Organization of drills for emergency;
Inclusion of bonus to those who regard safety and follow the safety instructions
Disclosure of the hazards and risk to civil administration to get help in real emergency;
Inclusion of safety in Corporate Social Responsibility (CSR) and demonstration with community of nearby.