Management Control System

MGAD40H3

ASSIGNMENT 2

Lecture 01

Student Name: Yishan (Ophelia) Zhu

Student Number: 998857063

Q1. Consider the “nine management principles”(p788) used to develop the RCMS. Principle #4 states that “outcome measures are preferable to process controls.” a. Under what conditions is this principle valid in the design of management control systems?

Outcome measures are used to determine and evaluate how close the results are comparing to the initial goal, which usually involve rewarding individuals for generating good results, whereas process controls focus on a process that lead to a certain outcome. The aforementioned principle is valid when the organization is under decentralized management, as outcome measures would motivate different subdivisions to fulfill certain revenue targets independently.

b. Do these conditions apply in universities? Discuss.

In USC, which is under decentralized management since 1981, the aforementioned condition enables the principle to guide the development of the RCSM to apply well, with the 19 colleges and schools acting as management centres with their own decision-making powers. However, many universities, especially smaller institutions, are still centrally managed, where the condition would not hold.

2. Under the revenue center management system (RCMS).

a. What factors would a Dean consider when deciding to offer or not offer a new course?

Under the RCMS, the paramount consideration of the deans when the decision is made are profit which is directly linked the popularity of the courses offered, as the number of student taking the course contributes directly to the revenue. To achieve this, the dean may approve courses that are either designed to offer high marks to attract students, or targeting a large audience of students, such as general education courses, which may sometimes be unnecessary, as other schools may have already offered such courses. As a result, all tuition dollars would be retained at their own school since...