Words: 1887
That being said in order to determine if the motivation of the article was achieved is to analyze the relevance of their findings. Firstly for brief details upon the restaurant studied, it was labeled as the Restaurant Division, and acted as one of the largest full-service chain restaurants in the U. K. The business structure acts key to the analysis done by Reran and Chapman as well as this resulting critique, and a diagram of the structure has been extracted for visual reference within the Assignment’s Appendix.
In summary the organization consisted of over 200 restaurants operating as profit centers fully owned by the company, ran by salaried managers, governed by regional managers who ultimately report under to the organization’s headquarters and board f directors. In terms of ownership, the Restaurant Division acted and reported under complete ownership to a leisure group registered under the London Stock Exchange, but at the same time registered as its own company for legal purposes.
Lastly as background information on the company studied it is important to note that they have overall remained profitable by achieving sales of roughly 20 percent and to recent acquisitions of additional units showing future growth and even further stressing a requirement for substantial control systems for its further development to it’s already sophisticated organization structure.
Overall a qualitative study was performed, by obtaining three types of evidence for a period lasting Just over two years; interview data, archival records, and direct observations. The study was able to identify cost control procedures and performance measures within the operating environment of the company. Like one would imagine within a restaurant; food costs were budgeted according to a target profit which was appointed by between both the boards of the Restaurant Division and the ownership group.
Next it was found that budgets and resulting variances were separated between price and efficiency allowed responsibility to managers only for the food the chain used. In addition to food costs, labor costs were identified to be next largest controllable cost faced by the Restaurant Division, and was budgeted was based on a straight percentage of sales revenue. As for the performance measures, managers were eligible for a bonus of 50 percent of total remuneration, based upon both budgeted results and customer satisfaction.
One important way in which this was measured was through internal audits by “mystery diners” which acted as an important control measure towards their customer service standards. After identifying important cost and performance measures as stated above, a few operational controls acted key to the study findings, as it was not until the following controls were outlined was there any substantial perceived applicability to the enabling approach.
That being said the internal transparency function could be outlined through both of these controls: – Starter Bingo- Each waiter was given a bingo card that had symbols for menu items with high margins, all designed to increase sales figures as well as waiting staffs product knowledge, and specifically indicate to them which products are highly retrofitted to sell for the company – ultimately attempting to make this priority mutual.
The game would simply require the specified product to be sold enabling it to be crossed off the bingo-card where a row crossed off by the waiter would be rewarded by a bottle of wine. – Sales target blackboard – It was often employed toward the last days of the weekly budget period and, positioned close to the kitchen, showed the daily sales targets in chalk, which were updated with actual sales figures every half hour. As one would concur, this seems like a very common business reactive and control measure, however what the authors found to be most effective was the place of the sale’s measures.
They were displayed at a place where all the operational member’s would see them walking in and out of the kitchen, and the timely updates provided by management acted not only as internal transparency, but also enabled repair efforts supported by the waiting staffs initiative to attain such goals. Therefore after identifying the presence of the enabling approach within the Restaurant Division’s control systems, it was not until the author’s reinforce their analysis of it with a comparison of the coercive approach pressured downwards by upper management – a tendency outlined as common in large bureaucratic organizations like the one studied.
Ultimately this constant persistence for the Restaurant’s Division to ensure the operational units are following and meeting their standards caused a pervasive concern that the reporting system was subject to and even create fictional surpluses. The best examples of the coercive of these concerns were those of the Management Accountant, which will be outlined in a following section of the assignment with more applicability.
In conclusion Earns and Chapman conclude their argument in a fairly effective way, by basically outlining how when the Restaurant Division’s upper management was trying to exhibit the enabling approach to management control systems, it was only applying the coercive approach. The way in which the authors demonstrate the effectiveness of the enabling approach over the coercive approach, was through their observations of a workshop which was conducted after management realized the problem.
The workshops acted as a reconciliation of their constant exhibits of mechanistic controls mimed at delivering standardized and demanding levels efficiency, with discussion and an attempt to link such upper management objectives to the actual operational contingencies faced within the profit centers. A key goal of the workshop’s was to help shape, but not take away the entrepreneurship of the operating manager’s by aligning the control measures to yield goal congruence.
Ultimately they provided both internal and global transparency to the Restaurant Division’s management control systems, and the much needed flexibility. Indicate what major concept from he course was addressed by the article: Within the article there were a few major concepts evident which have been discussed within the course: Responsibility Center’s and Business Structures – it was clear throughout the article that the main problem in which caused the Restaurant Division’s control issues was the friction provided when communicating from the top to the organization to the bottom.
That being said a solution which has been discussed in class was to ensure operational input within the budget, which essentially would provide the flexibility to the control systems Earns and Chapman were stressing the organization needed. This also seemed to possibly be something which was discussed within the concluding workshops; however it was not specifically specified. Also as mentioned in the article and as one would assume each restaurant within the restaurant chain acts as its own profit center, which was another major concept addressed within the course.
That being said the article did take look time at the performance measures and did relate them to customer satisfaction strategy, which during the study was best realized through the enabling approach to the Restaurant Division’s controls as opposed to he perceived coercion and adherence to top management’s standards. Lastly the relation between a control system and its ability to facilitate the company’s strategy acted as an essential concept analyzed throughout the course when determining the success of management control system.
Agency Theory – As previously stated there was a general concern of that restaurant manager’s had the ability to enter an incorrect sales mix into the reporting system giving them the ability to hide food deficits or even create false surpluses, and these were best exemplified by the encores stressed by one of the company’s Management Accountant: – It was thought that the percentage allowance for waste built into target produced a great deal of ambiguity in the reports and made it difficult to assess true performance. Another interesting concern made by the accountant was that staff had the ability to misreport the sales mix when entering in transactions into the system. Being that miscellaneous category with a standard margin assigned to it much lower than the dish actually sold. – Another third notable concern was labeled as the “manager’s stock”. This involved the old trick of overstating ending food inventory, thereby understating actual food cost for the period.
However as stated from the article, “Our fieldwork suggested that these alleged loopholes were not based on fact but on worries shared among the head office staff. Those worries fed on a culture of mistrust toward restaurant managers that was also expressed through coercive visions of restaurant control. ” (p. 1 7) Firstly the manager’s stock issue by definition would only reverse in the next period, and in addition the restaurant inventory was also subject to periodic and random audits. Most importantly the alleged “miscellaneous food” loophole through further investigation was proved to be non-existence.
As a control measure the restaurant industry has been praised for; once an order is entered into the system that order is printed in the kitchen which would be received and prepared by the kitchen staff, therefore this separation of duties disallowed any dish to be switched for a lower margin. Therefore all the distrust evident within the study, and the subsequent attempt to solve it by coercion (which as concluded made matters worse) was an interesting topic also covered within this course.
Assess whether or not the article provides you with additional insight concerning this topic: Besides the interesting practical overview of the agency theory applied in actual reality, and a real world business environment, being so academically-oriented and fairly generic I do not feel any additional insight acting substantial to this topic. Although I agree with the theory and concept, as well as admire the article academically, in a way it seems Just as an extension and reinforcement of the theory discussed within the class text book as well as in lecture. Mention some practical implications of its ideas:
Its main practical implication relates to the above section, because the article is academically oriented it does not serve much of a practical purpose. In fact it bases analysis from the mentioned models and conceptual framework to discuss normative suggestions to any of the problems discussed. Critically evaluate its limitations: In conclusion, as mentioned this academic piece is conceptually sound. The logic makes sense and it could easily be told that the research and their conclusions were written by two very bright individuals. However that being the article’s biggest strength, in my opinion also acts as its biggest limitation.
Although a fair amount of qualitative research has been conducted, and supports all of Reran and Chessman’s theory about the enabling approach vs.. The coercive approach of control systems – I Specifically, when reading the title of the article and its focus on a restaurant chain I was hoping to see mention of BBC and any use of it. However such costing was not even mentioned from the study findings nor recommended as a control measure. It can be said that basing costs upon material quantity variances would be assumed a given when dealing with a restaurant, therefore I feel that if the author’s went beyond this