EXERCISE: MANAGEMENT CONTROL SYSTEM

H is a company that manufactures basic electronic components such as capacitors and

printed circuit boards for the IT industry. The company has recently appointed K as a non-

executive director. K was the founder and chief executive of a quoted executive

recruitment consultancy and employment agency. She has stood down from that role and

has accepted the position on H’s board in order to seek fresh challenges.

H’s board meets twice every year for a formal discussion of company strategy. These

meetings tend to look back at H’s performance for the previous half-year. This discussion

mainly focusses on a report based on the monthly management accounts for the previous

half year and then briefly considers the future impact of these. Monthly management

accounts are presented to the board at their monthly board meetings.

K has attended two of the meetings relating to strategy. At the conclusion of the second

meeting she expressed two concerns about the half-yearly board meetings. Firstly the

meetings focus on feedback rather than feed forward. K argued that the board should be

constantly forward looking and aiming to identify new opportunities. K believes that

historical summaries of past performance distract from the need to plan for the future.

Secondly, K believes that the half-yearly meetings focus on details associated with the

existing business model rather than strategic direction. She believes that it would be a more

productive use of the board’s time at these meetings to work towards identifying strategic

opportunities that might be pursued over the next three to five years. When she was chief

executive of her employment agency the board met at least once per year and frequently

more often to think about new strategies that might be pursued.

H’s Production Director has complained that K has really misunderstood the board’s

responsibility for the management of H. The Production Director believes that her first

argument is invalid because the distinction between feedback and feed forward control is

more about day to day tactical management rather than strategic management. The

Production Director believes that feed forward is more about fine tuning rather than

strategic management. The Production Director also believes that K’s comments about

strategic direction demonstrate a very limited understanding of manufacturing electronics.

H must respond and react to the requirements of the IT industry. H cannot really innovate.

The life cycle of the company’s products is such that changes to H’s strategic direction

happen infrequently. The Production Director has suggested that K should restrict her

comments to the information prepared for consideration by the full board, especially as she

has come from the service sector and has no real understanding of manufacturing.

REQUIRED:

(a) Evaluate the respective arguments put forward by K and by the Production Director

concerning the need for H’s full board to be forward looking rather than focussing on

past performance.

(b) Evaluate K’s argument that H’s board should review the company’s strategic direction

at its half-yearly meetings.

Please prepare answer in Power point. Do it in group.

We will discuss the answer next week – Wednesday 30/9.