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Model Syllabus 2
The London School of Economics and Political
Science
Department of Accounting
AC310
Advanced Managerial Accounting
Module 2
Michaelmas Term (Weeks 610)
Management Accounting in its Organizational Context:
The Function of Management Control Systems
Professor Wim A. Van der Stede
w.van-der-stede@lse.ac.uk
tel. 020 7955 6695
Introduction
Module 2 of AC310 is focused on the study of the quintessential role of management control in
decentralized organizations. Our focus will be on the measurement and evaluation of the
performances of organizational entities and their managers. Management accounting at this
level of analysis is an integral part of companies management control systems.
In this module, we will discuss what it means to have an organization be in control, what
alternatives managers have for ensuring good control, and how managers should choose from
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Teaching Format
This module is taught as five lectures and five classes, and the materials in this module will be
presented through both lectures and case study analyses. The case studies permit the exploration
of management control issues in a broad range of settings (e.g., large and small firms,
manufacturing and service firms, multinational firms, start-ups). Moreover, the foundational
Course Materials
Merchant, Kenneth A., and Wim A. Van der Stede (2012), Management Control Systems:
Written Work
You are expected to hand in one essay for this module drawn from the list of essay questions
Assessment
Assessment will be based wholly upon a three-hour written examination during the Summer
Term covering exam questions from across all four modules of this course. Past examination
papers are available on the Librarys website.
Module Schedule
Week 1 The Control Function of Management
Lecture 1: MCS Chapters 1-6
Class 1: The Lincoln Electric Company [in Chapter 4; not Chapter 16]
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Case Questions (for advance preparation):
1. How would you describe Lincolns approach to the organization and motivation of their em-
ployees?
2. What role do you think this approach has played in Lincolns performance over the last 25
years? Have any other factors been more important?
Essay Question (for written work):
Despite their outstanding success domestically, Lincolns internationalization thrust of the late
1980s and early 1990s failed. Is Lincolns approach to the organization and motivation of em-
ployees exportable outside the US? What are potential barriers to adopting the Lincoln
approach abroad?
Week 2 Results Accountability
Lecture 2: MCS Chapter 7
Class 2: Kranworth Chair Corporation
Case Questions (for advance preparation):
1. Identify the most important key recurring decisions that must be made effectively for
Kranworth Chair Corporation (KCC) to be successful. In KCCs functional organization,
who had the authority to make these decisions? Who has the authority to make these
decisions in KCCs new divisionalized organization?
2. Did KCC top management go too far in decentralizing the corporation? Did they not go far
enough? Or did they get it just right? Why?
Week 3 Planning and Budgeting
Lecture 3: MCS Chapter 8; and,
Hansen, Stephen C., David T. Otley, & Wim A. Van der Stede (2003). Recent Developments in
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Case Questions (for advance preparation):
2. Are managers at Citibank committed to achieving budget targets? If so, are the budget
targets too challenging? Is there any evidence of budget gaming?
Essay Question (for written work):
What should Mr. Mehli Mistri do about the budget issue described on the first page of the case
study?
Class 3: Two Budget Targets
MCS, Chapter 15; and,
Jensen, Michael (2001), Corporate Budgeting is Broken, Lets Fix it, Harvard Business Review,
November, pp. 95101.
Case Question (for advance preparation),
or Essay Question (for written work):
Week 4 Performance Measurement
Lecture 4: MCS Chapters 1012; and,
Kaplan Robert S. & David Norton (1992), The Balanced Scorecard: Measures that Drive
Class 4: Catalytic Solutions, Inc.
Case Questions (for advance preparation)
1. Evaluate the composition of the compensation package at CSI.
a. What are the advantages and disadvantages of awarding stock options?
b. What are the advantages and disadvantages of awarding bonuses?
2. Evaluate the specific features of the annual bonus plan in 2001 and 2002. Comment on:
a. The choice of the number of measures used, the specific measures used, and the
changes in the plan between years;
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b. The relative proportions of financial vs. nonfinancial measures;
Essay Question (for written work):
Fast-forward 10 years. Assume that CSI has been successful. It is now a much larger, public
company. It has three operating divisions (investment centers) that focus on different markets.
What would you expect the CSI measurement and compensation systems to look like at that
time? Why?
Week 5 Incentive Systems
Lecture 5: MCS Chapter 9; and,
Van der Stede, Wim A. (2007), The Pitfalls of Pay-for-Performance, Finance & Management,
Class 5: Houston Fearless 76, Inc.
Case Questions (for advance preparation):
1. Why are Houston Fearless 76, Inc. (HF76) managers unhappy with the companys existing
sales incentive plan? Are weaknesses in this plan a major cause of the companys
performance problems?
2. Evaluate the new incentive plan being contemplated. What modifications would you make