Using Role Plays to Understand and Manage Control System Benefits and Costs

Abstract

The objective of management control is to encourage an organization’s employees to undertake the activities which lead to strategy implementation (Anthony, 1965). Management control systems accomplish this goal in two different ways: By encouraging employees to do the right things, and by discouraging employees from doing the wrong things (Simons, 2000). One of management’s biggest challenges is to effectively design management control systems which achieve this goal, while minimizing any unintended negative side effects. This role play leverages insights from practicing managers to illustrate how to manage this tension. Students are taught to design control systems which maximize organizational benefits and minimize indirect costs (Simons, 2000; Merchant and van der Stede, 2007; Anthony and Govindarajan, 2007). Sometimes, however, students underestimate the indirect control system costs as these costs do not often arise until the controls are applied. Using role plays based on managerial experience, this exercise attempts to redress this by asking students to calculate the indirect control system costs and balance these with its direct benefits. The exercise has two learning objectives: The first is to reinforce that management control systems have two objectives: To encourage employees to do good things and discourage them from doing bad things. The second is for students to recognize that even the best control systems incur indirect costs and how managers can best anticipate and manage these.