Slide 2.

Chapter 2:
Results Controls

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Slide 2.2

Results controls

Involves rewarding individuals for generating good results

(or punishing them for poor results)
Results accountability

It influences actions because it causes employees to be

concerned about the consequences of the actions they
take
However, employees actions are not constrained
On the contrary, employees are empowered to take
whatever actions they believe will best produce the
desired results

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Slide 2.3

Key results control elements

Defining the performance dimensions

What you measure is what you get; hence,
If not congruent with the organizations objectives, the controls
will actually encourage employees to do the wrong things!

Measuring performance on these dimensions

Objective > financial > market-based: for example, stock price

> accounting-based: for example, return on assets

> non-financial: for example, market share, customer satisfaction

Subjective: for example, managerial characteristics (being a team player)

Setting performance targets

Motivational effects

Providing rewards (or punishments)

Incentives monetary and non-monetary

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Slide 2.4

Conditions for effective results control

Results controls work best only when all of

the following three conditions are present:
Superiors/managers must know what results are
desired in the areas being controlled
The individuals whose behaviors are being controlled
must have significant influence on the results in the
desired performance dimensions
Superiors/managers must be able to measure the
results effectively

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Slide 2.5

Ability to influence results

The person whose behaviors are controlled must be

able to affect the results in a material way in a given
time span
Controllability principle

Results controls are useful only to the extent that

they provide information about the desirability of
the actions that were taken
If the results are uncontrollable, the controls tell us little
about the actions that were taken:

Good actions will not necessarily produce good results

Bad actions may similarly be obscured

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Slide 2.6

Ability to measure results effectively

The effectiveness of results measures must be

judged by their ...
Ability to evoke the desired behaviors

Measurement properties

Congruence
Controllability
Precision
Objectivity
Timeliness
Understandability
Cost efficiency
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Slide 2.7

Pros and cons of results controls

CON

PRO

Behavior can be influenced

while allowing significant
autonomy

Often less-than-perfect indicators

of whether good actions have been
taken

They yield greater employee

commitment and motivation

They are often inexpensive

They shift risk to employees (due to

uncontrollable factors); hence, they
often require a risk premium for risk
averse employees

Sometimes conflicting functions:

For example, performance

measures are often already
collected for reasons not
directly related to management
control (e.g., financial
reporting)

Motivation to achieve
targets should be challenging

Communication among entities

targets should be slightly
conservative

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