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Model Syllabus 4
The London School of Economics and Political
Science
Department of Accounting
AC411
Accounting, Strategy and Control
Professor Wim A. Van der Stede
w.van-der-stede@lse.ac.uk
tel. 020 7955 6695
Introduction
This course 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.
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 among
various control system alternatives. Then we will focus on each of the elements of financial
Teaching Format
The materials in this course 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).
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
Course Materials
Merchant K. & W. Van der Stede (2012), Management Control Systems: Performance
Written Work
You are expected to hand in two essays for this module drawn from the list of the offered
essay questions throughout the schedule below. Because each essay question is related to a
case study, you must turn in your essay of your choice at the beginning of the class in which the
case is discussed. An essay that is handed in after the case has been discussed in class will not
be marked.
Assessment
Schedule of Lectures and Classes
Week 1
Lecture 1: Strategy and Control
MCS Chapters 16
Class 1: The Lincoln Electric Company [in Chapter 4; not Chapter 16]
Case Questions (for advance preparation):
1. How would you describe Lincolns approach to the organization and motivation of their
employees?
2. What role do you think this approach has played in Lincolns performance over the last 25
years? Have any other factors been more important?
3. What factors will be critical for Lincolns future success?
4. What recommendations would you make to Mr. Willis?
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
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Week 2
Lecture 2: Results Accountability
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 KCCs functional organization,
who had the authority to make these decisions? Who has the authority to make these
decisions in KCCs new divisionalized organization?
Week 3
Lecture 3: Planning and Budgeting
MCS Chapter 8; and,
Case: Citibank Indonesia
Case Questions (for advance preparation):
1. Analyze the budgeting process at Citibank and how the budget is used for the performance
evaluation of managers.
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?
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
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Class 3: Two Budget Targets
MCS, Chapter 15; and,
Case Question (for advance preparation),
or Essay Question (for written work): Are Joes actions ethical or unethical? Explain.
Week 4
Lecture 4: Variations in (Budgeting) Practice
MCS Chapter 16
Class 4: Statoil
Case Questions (for advance preparation)
1. Statoil managers claim that their company no longer prepares a budget. What do they mean
by that claim?
2. Why did Statoil decide to abandon budgeting?
3. Describe the new processes that Statoil implemented to replace the budget. What are its
strengths and weaknesses?
Essay Question (for written work): The Beyond Budgeting approach is still relatively rare
outside Europe. Why? Is there something about non-European cultures that limits its
applicability, or are other companies just slow to catch on to an innovation that has started in
Europe?
Week 5
Lecture 5: Incentive Systems
MCS Chapter 9; and,
Van der Stede, Wim A. (2007), The Pitfalls of Pay-for-Performance, Finance & Management,
150, December, 1013.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
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Case Questions (for advance preparation):
1. Why are Houston Fearless 76, Inc. (HF76) managers unhappy with the companys existing
sales incentive plan? Are weaknesses in this plan a major cause of the companys
performance problems?
Week 6
Lecture 6: Performance Measurement
MCS Chapters 1012; and,
Kaplan Robert S. & David Norton (1992), The Balanced Scorecard: Measures that Drive
Performance, Harvard Business Review, JanuaryFebruary, pp. 7179.
Class 6: 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;
b. The relative proportions of financial vs. nonfinancial measures;
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
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Week 7
Lecture 7: Enterprise Risk Management
MCS Chapter 13; and,
Van der Stede, Wim A. & Tommaso Palermo (2011), Scenario Budgeting: Integrating Risk and
Performance, Finance & Management, 184, January, 1013.
Class 7: Entropic Communications, Inc.
Case Questions (for advance preparation)
1. Why did Entropic implement a formal enterprise risk management (ERM) process?
2. Do you think the company realized the benefits of ERM as envisioned by COSO? Why or
why not?
Week 8
Lecture 8: Corporate Control and Governance Issues
MCS Chapter 14; and,
Bebchuk L. & J. Fried (2005), Pay Without Performance: Overview of the Issues, Journal of
Corporation Law, 30, pp. 647673.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
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Week 9
Lecture 9: The Impact of Multinationality on Management Control System Design
MCS Chapter 16; and,
Hofstede G. (1983), The Cultural Relativity of Organization Practices and Theories, Journal of
International Business Studies, 14, pp. 7589.
Class 9: Puente Hills Toyota and Kooistra Autogroep
Case Questions (for advance preparation)
1. Compare and contrast the performance measurement and incentive systems used at Puente
Hills Toyota and Kooistra Autogroep.
2. When comparing the use of incentives in the two companies, do you believe that incentive
3. What advice would you provide to the managers of these companies?
Essay Question (for written work): As a first approximation, which of the following statements
do you believe is most correct, and why:
Week 10
Lecture 10: Management Control in Nonprofit Organizations
MCS Chapter 17
Class 10: University of Southern California: Responsibility Center Management System
Case Questions (for advance preparation)
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2. The RCMS seems to be working reasonably well. USC has used it for over 25 years, and
seemingly nobody wants to abandon it. What makes it effective?
3. Consider each of the criticisms of RCMS:
a. Does it sound plausible that the RCMS could have been causing, or at least contributing
to, the problems if, indeed, there were problems?