Decision-making, Information & Control
Decision-making & control involve determining the best ways to accomplish your goals, including the best way to get subordinates to successfully implement actions to accomplish those goals.
Our expertise in control allows us to quickly identify problems and propose innovative solutions in a variety of fields like general management, including the design of incentives and information systems, and related fields like accounting and finance. We abhor unintended consequences (due to shallow or wishful thinking) so we consider and explain all factors related to how to best make both special and routine decisions–as well as how to successfully implement those choices.
We work with, and create value, for firms or organizations of any size: from mega-sized multi-nationals to sole-proprietors.
From simple relevant costs and benefits analyses to detailed Monte Carlo simulations and stochastic, dynamic programs, we can help you think more clearly about business issues and problems.
For example, if a series of seemingly optimal decisions have not turned-out as anticipated, it could be simply bad luck, or it could be the inaccurate identification or misspecification of the problem. That means you might be including irrelevant factors or excluding relevant ones in your decisions. Or, could mean that the decision was sound but poorly executed. The lack of proper controls, including poorly-designed incentive schemes, can doom the best intentions of men and firms.
We can’t change your luck, but we can (1) help protect against bad luck and (2) help with almost any control-related issue or problem. Why cast your fate to the wind or the whims of subordinates? With a bit of forethought and planning, it is possible to motivate subordinates to behave in your best interests (while they are acting in their own).
What do we mean by control?
We use the word ‘control’ a lot, and its meaning is simple: doing what you have to do to accomplish your goals, i.e., determining and implementing policies, procedures and actions to accomplish one’s goals. It’s what you are trying to do everyday when you manage and lead your firm or organization; so, it involves all types of decisions–both short-term and long-term, including the choice of strategies and investments, as well as ways of organizing tactics that develop consciously or unconsciously.
We don’t want it to sound too general, because we solve very specific problems, but with a broad and consistent framework, we’re often able to show connections and relationships (and causes) of problems that would otherwise stay hidden (and therefore doom the chance of success).
For larger organizations, control also involves the performance measurement of business units and individuals, and generation of feedback (reports) to adapt policies and plans to increase the likelihood that goals are met in the future. In other words, control involves the optimal design and implementation of information systems, including financial information and/or accounting systems.
That definition of control might sound a bit “geeky,” but having a rigorous, objective framework is necessary to categorize and analyze and correct an organization’s problems and short-comings.
Everything in managerial control involves being able to understand and predict behavior, and in our clear, objective way, we excel at being able to determine the behavior implications of information system design, including ways to subtly influence employees with the information presented to them and in the way it is presented. In any accounting or information system, there are many arbitrary choices and allocations. We analyze those choices and explain the costs and benefits of different reporting structures.
Ask a typical IT consultant about the behavioral implications of information system design, and most likely, you’ll get a blank stare that says, “what do management information systems have to do with people?” Our answer: just about everything.
Our control practice is very broad and encompasses almost all aspects of finance, accounting, and strategy. (We have taught and consulted on all of these topics.)
The practice includes assistance with (1) decision making; (2) the design of control, incentive, and performance management and measurement systems; (3) the design of cost and information systems, and (4) the determination and estimation of relevant costs for short- and long-term decisions. Here are a few examples:
- The linkage of strategies, organizational structure, and control, including optimal performance measurement. We often ask: do you want information or effort from your subordinates? Generally, it’s difficult or infeasible to get both and you’re deluding yourself to think otherwise. More precisely, it’s difficult to get both in an efficient (profit-maximizing) way, i.e., usually, you can’t get both cheaply!
- The development of cost reporting systems that support the organization’s goals and strategies. This is much more interesting and important than many managers think. Don’t leave it to the accountants or the information technology staff to determine what information you need for your decisions.
- The determination of cost behavior and the identification of relevant costs for all types of organizational decisions. We have noticed that many projects that start elsewhere end here with the same basic issue: determining what’s relevant and what is not. For example, one firm wanted a new activity-based costing system to help identify additional relevant costs. We explained that such a system would be very expensive. It would be much more detailed, but it would not provide any new information (relevant costs) for any operating decision that could not be estimated for the existing system. (Instead, we showed them how to extract available information from the existing system and thereby save a lot of money.)
