FINAL ASSIGNMENT

ANALYSIS MANAGEMENT CONTROL SYSTEM

PT ANGKASA PURA II

CLASS Z

GROUP 5

1. Artika Indahsari 2017310023

2. Cornelia Oribel 2017310029

S1 ACCOUNTING

STIE PERBANAS SURABAYA

2019
 CHAPTER 1
Management and Control

Management control is a critical function in organizations. Management control failures can

lead to large financial losses, reputation damage, and possibly even organizational failure. To
prevent any kind of failures, PT Angkasa Pura II created a structure organization that inline
with the responsibility each function inside the organization.

Management control in PT Angkasa Pura II also depends on the vision and mission of the
organization so the agents of action will not be far away from the goal of organization. To
focus on management control we must distinguish the concept objective setting and strategy
formulation:
1. Objective setting: objectives do not have to be quantified and do not have to be
financial. Employees must have some understanding of what the organization is trying
to accomplish.
2. Strategy formulation: defines how organizations should use their resources to meet
their objectives. It can be specified formally or left largely unspecified. Interaction
between management and employees is important. Strategy can be intended or
emergent.

Vision of PT Angkasa Pura II

The best smart connected airport operator in the region has the meaning of an airport that
manages Angkasa Pura II to be an airport that is connected to many routes or destinations
both at home and abroad, according to the status of each airport (domestic / international
airport). Linking time and linking processes for both passengers and goods must be able to
walk easily and without insulation. APII airports are also ready to become smart airports by
utilizing modern technology. The area referred to in the vision is Asia. Can be accessed by
the vision of Angkasa Pura II to be an airport with high connectivity to many cities or
countries and to use modern technology that is integrated in airport operations and improve
passenger services.

Mission of PT Angkasa Pura II

 Ensuring safety and security is a top priority
 Providing world-class infrastructure and services to support Indonesia's economic
development through connectivity between regions and countries
 Providing a trusted, consistent and enjoyable travel experience to all customers with
modern technology
 Develop partnerships to complement capabilities and expand company offerings
 Become the chosen SOE and maximize the potential of every company employee
 Upholding corporate social responsibility

Declaring vision and mission is a simple thing to do but this is one of the control in the very
first place to ensure that there is no failure created during the activities of organization.
Taling about causes of management control problem like lack of direction, motivational
problems, and personal limitations is not include in PT Angkasa Pura II. Because,
communicating the vision and mission is clear enough to direct the employees how to
behave.

CHAPTER 2
Results Controls

Results controls are an indirect form of control because they do not focus explicitly on the
employees’ actions. Results controls create meritocracies; the rewards are given to the most
talented and hardest working employees. Results controls influence actions because they
cause employees to be concerned about the consequences of the actions they take. Results
controls are commonly used for controlling the behaviors of employees at many
organizational levels.

To analyze how results controls in PT Angkasa Pura II does, let’s see the organization values
first.
Angkasa Pura II also has corporate values or culture that will continue to be developed in
every Angkasa Pura II people. The company's value or culture is PERFORM:
The organization values of PT Angkasa Pura II reflects the Elements of results controls. The
implementation requires four steps:
1. Defining performance dimensions
The goals that are set should be congruent with the measurements that are made and are
important to shape employees’ view of what is important
2. Measuring performance
At higher organizational levels, most of the key results linked to rewards are defined in
financial terms. Lower-level managers are evaluated in terms of operational data that
are more controllable at the local level. In the middle of the organization, managers
must translate financial goals to operational goals. If more than one resulted is
expected, weightings should be added.
3. Setting performance targets
Targets should be specified for every performance dimension that is measured. They
affect behavior in two basic ways:
 Improve motivation by providing clear goals
 They allow employees to assess their own performance.
4. Providing rewards
The rewards can be in the form of anything employees’ value: salary increases, bonuses,
promotions, job security, power and so on. Punishments are the opposite of rewards.
So, PT Angkasa Pura II guided by organization values that can implement the results
controls. It is also supported by the conditions that determining the effectiveness of results
controls. Here is the analysis:
 Organizations can determine what results are desired in the areas being controlled
PT Angkasa Pura II has classify the aeas being control by having organization
structure, and also what results are desired by having them
 The employees whose behaviors are being controlled have significant influence on the
results for which they are being held accountable
PT Angkasa Pura II recruits the best employees by using kind of tight procedures to
get employees.

CHAPTER 3
Action, Personnel, and Cultural Controls

Action controls involves ensuring that employees perform certain actions known to be
beneficial to the organization. They are not effective in every situation. They are feasible only
when managers know what actions are desirable and have the ability to ensure that the
desirable actions occur.

PT Angkasa Pura II has performed the avtion control trough the organization. We can see it
from their management, there is a documentation and regulation. Usually, action controls
reflects the policies and procedures of the organization. So, here PT Angkasa Pura II declare
and implement the internal code of conduct and also external code of conduct.

Personnel controls are controls to make it more likely that employees will perform the desired
tasks satisfactorily on their own because employees are experienced, honest, and hard
working. Three basic purposes:
 They help ensure that each employee understands what the organization wants
 Some of them help that each employee is able to do a good job
 Some of the personnel controls increase the likelihood that each employee will engage
in self-monitoring.

Three major methods of implementing personnel controls:
1. Selection and placement of employees
Finding the right people to do a particular job and giving them both a good work environment
and the necessary resources can increase the probability that a job will be done properly.
 PT Angkasa Pura II do the recruitment tightly and implement the procedures to get
the best employees to behave properly based on the vision and mission of the
organization.

2. Training
This can provide useful information about what actions or results are expected and how the
assigned tasks can best be performed.
  Since the transformation of HR was carried out, Angkasa Pura II also immediately
started a competency development program by providing postgraduate scholarships.
In 2017, 33 employees successfully passed the selection to win a scholarship at the
School of Business and Management, Bandung Institute of Technology. On Friday,
October 18, 2019, the employees carried out the graduation inauguration and were
declared graduated. PT Angkasa Pura II now also has an Airport Learning Center
which has two large programs for improving employee competencies, namely the
Great People Development Program and the Great Leader Development Program. The
presence of the Airport Learning Center can certainly prepare employees according to
the dynamic needs of the company.

3. Job design and provision of necessary resources

Make sure that the job is designed to allow motivated and qualified employees a high
probability of success.
 PT Angkasa Pura II placed their employees based on their skills. So, the
implementation of jod design is good following by the tight procedures of
recruitment.

Cultural controls are controls to shape the organizational behavioral norms and to encourage
employees to monitor and influence each other’s behaviors.

A code of conduct is a set of rules outlining the responsibilities of or proper practices for an
individual or organization. These formal, written documents provide broad, general
statements of organizational values, commitments to stakeholders, and the ways in which
management would like the organization to function. PT Angkasa Pura II use code of
conduct to control their employees as internal and also their stakeholder as external. Here is
the example of code of conduct.
 CHAPTER 4
Control System Tightness

A firm can have tight or loose controls. Effective implementation of tight control requires
that management has detailed and reasonably certain knowledge about how one or more of
the control objects are related to the overall organizational objectives.

PT Angkasa Pura II does not implement a tight control system in their management control
system. But it does not mean that PT Angkasa Pura II ignore the control inside the
organization. The management control the agents of action by having a guidance that being
declared to all the employees. We can see it at:

 PT Angkasa Pura II Guidelines for Whistle Blowing System

The scope of complaints that will be followed up by the Whistle Blowing System
Management Team is an action that can harm the Company, as follows:

 Misuse of Company facilities.

 Threats
 Misappropriation of Company money.
 Misuse of position for personal or group interests or other interests outside the
Company.
 Embezzlement of Company assets.
 Acceptance, gift and request for gratuity.
 Ethical violations and immoral acts.
 Leaking Company secrets.
 Extortion.
 Theft.
 Fraud.
 Breach of discipline.
 Conflict of interest.
 Corruption.
 Collusion.
 Nepotism.

 PT Angkasa Pura II Guidelines for the Management and Control of Gratuities in the
Environment
So, PT Angkasa Pura II handle the gratituities by implementing the company strategy.
 Increase the service quality of air traffic through the implementation of a satelite-
based technology.
 Increase the quality of airport service through the development of terminal and
business facilities based on airport city concept.
  Maximize on technology infrastructure and human resource competency to develop
non-aeronautical products.
 Develop joint-cooperation with competent third parties in the development of airport
supporting businesses.
 Increase company values encompassing:

- Customer : excellent service

- Shareholder : good corporate governance

- Employee : equal, opportunity and welfare

- Society : economic welfare/social responsibility program.

 Organization restructuring from a functional-based organization to a business unit-

based organization.
 Further intensify relationship with stakeholder (owner, operator, and regulator).

CHAPTER 5
Control System Costs

Direct cost in MSC’s are the cost of investing in MSC’s in return for one primary benefit: a
higher probability that employees will both work hard and direct their energies to serve to
organization’s interest.

Indirect costs are many times greater than their direct costs. Some are created by negative
side effects others are caused by a poor MCS design or by an implementation of the wrong
type of control for a give situation.

PT Angkasa Pura II creates control system costs well. It is seen from their attidtude to
compensate their customer first, by giving a flight delay compensation. It also seen that PT
Angkasa Pura II generate the cost efficiency without losing the trust of their stakeholders
internally or externally.
The correlation between types of control and possible harmful side effects that might come at
PT Angkasa Pura II.

Result Accountability can create:

 Behavioral displacement. Where Results controls are commonly used for
controlling the behaviors of employees at many organizational levels. Behavioral
displacement like when employees have a strict regulation is applied in a
company, they might have a lot of pressure and they will lose the innvation to
finish their job.
 Gamesmanship. The actions that employee take to imorove their performance
indicators without producing any positive effects for the organizations. Means that
company will get a lot of disadvantages of this harmful effect because this
organization will lose a lot of time but the company has responsible to pay the
employee without producing anything postives.
 Negative attitudes. Employees will think that all their struggle means nothing.
Because the company only focus on the result that give a lot of pressure to the
employees. Employees might not have trust to the company. They might do all
ways can do for having that result even if that’s not allowed to do, like a fraud
maybe.

Behavioral constraints can create:

 Operating delays. Actually this cannot be avoided, but it can be minimized. When
Behavioral constrains is applied, it could create operating delays because this
control need more a little time to be fixed into the right actions
 Negative attitudes. Nature of people is rebel. When this control applied but the
employees dont understand the purpose of this control, it could be a boomerang
for the company itself.

Preaction reviews can create:

 Operating delays. A hard birocracy can effect operating delays. It takes a long
time to have a fix approval from top managers. It means that time consuming on
the journey of proposals can make operating delay because the decision to make a
production is also delayed.
 Negative attitudes. When preaction reviews not give a best result, it will create a
disappointed feeling from the emlpyees. And the managers maybecan give the
random decisions because they have a special relationship the the approval.

Action Accountability can create:

 Behavioral displacement. One of implementation of this control is rewarding good
actions or give a punishment of a deviate actions. It should be communicate well
to the employees through the rules, procedures and policies. But when its not
communicate well to the employees, it could create a misunderstanding and
having a behavioral displacement.
 Gamesmanship. A strict rules based on rewarding good actions is too much
limitations for the employees. It could make an employee do their job as long as it
acceptable but it doesnt give a lot of profit or effect to the organizations.
 Negative attitudes. It can create social jealousy because when the good actions of
employee will get a reward such a bonuses, means that the others feel like left
behind that.

Redundancy can create a negative attitudes. Having a lot of employees but not
effective enough to establish their talent will create nothing for company. And it can
make emplyees do a deviate action because they have a lot of space to do that because
the company is lack of supervising them.

Selection and Placement can create behavioral displacement. It would be happened

when the Recruitment process isn’t capable and maximal caused by Halo Effect and
 anchor bias belongs to Candidate and then placement job to their ability isn’t on the
right place and make the employee doesn’t use all of their potential ability .

Training would make behavioral displacement possible. The fact, The employee base
on training usually thinking that everyone is attending to him then it would make him
feel over protect and absolutely doesn’t feel free then his mindset would be feel
restricted and sometimes make him not focus with what should he does.

Provision of necessary resources will make Creation of a strong organizational

culture. Indeed because the strong organizational culture would not created without
provision of necessary resources, that’s absolutely sense when we compare with the
company on the development progress usually they don’t have any chance to make a
culture cause of identity because they are still focused on meeting their needs to
establish their structure.

Group-based rewards related by Provision of necessary resources. There are some

probabilities the employee would not working in their jobdesc cause of target and it
would make a problem when the employee their mistake and make the reason on it
cause of struggling on group target and otherwise the employee will make a
dependent behavior in their job environment.

CHAPTER 6
Designing and Evaluating Management Control Systems

The process of designing and improving MCSs requires addressing two basic questions:

• What is desired?
• What is likely to happen?

If what is likely is diff erent from what is desired, then managers must subsequently address
the following two MCS-design questions:

• What controls should be used?

• How tightly should each be applied?

Understanding what is desired and what is likely in PT Angkasa Pura II.

A better understanding of objectives and strategies:

PT Angkasa Pura II has declared the objectives and company strategies in the very first place
to create a feasible control alternatives to avoid the possibility of MCS problems. It provides
a better chance of being able to apply each alternative tightly. Fortunately, it also reduces the
chance of creating behavioral displacement problems

What is desired is defined in terms of the actions desired. Knowledge of what is desired is
most useful for management control purposes if it can be translated into knowledge of the
specific demands on the roles of employees in the organization. PT Angkasa Pura II
identified the key actions that must be performed in order to provide the greatest probability
of success. Key results are the things that must go right for the business to succeed. Thats
why PT Angkasa Pura II always design new control to make it suitable for the agent of
actions. PT Angkasa Pura II has prepared an airport digitization program to provide services
for air transport passengers. Then, designing a facility named seamless digital journey
experience. Its kind of the design and evaluate the control of PT Angkasa Pura II.

PT Angkasa Pura II also maintaining good control. This organization does not apply tight
control, but they do loose control. Controls that seem quite loose have some benefits: high
creativity, a healthy spirit of cooperation or low cost. This makes PT Angkasa Pura II being
sustainable.

CHAPTER 7
Financial Responsibility Centers

These are responsibility centers in which individuals' responsibilities are defined at least
partially in financial terms. Responsibility accounting is a reporting system that classifies
accounting information about an organization's activities according to the managers who are
responsible for them.
There are four basic types:
1. Investment centers
2. Profit centers
3. Revenue centers
4. Cost centers

By having a statement “Proud to Serve the Nation”, PT Angkasa Pura II is trying to be a good
organization for public faclities internally or externally. PT Angkasa Pura II apply the
financial responsibility center in the organization, remembering that the organization does not
work by itself, so it needs the financial responsibility center to manage the activities. The
prove is that PT Angkasa Pura II still being the number one which provide air traffic services
and airport business in Indonesia.
Overall, the net profit for the current year reached Rp1.42 trillion or increased by Rp259.78
billion (22.42%), i.e. by Rp1.16 trillion. The increase in the net profit has resulted in an
increase in the Company’s assets. The total assets of the Company reached Rp25.05 trillion,
which was Rp1.38 trillion or 5.85% higher than previous year which reached Rp23.67
trillion.
 CHAPTER 8
Planning and Budgeting

Planning and budgeting systems produce written plans that clarify where the organization
wishes to go (goals), how it intends to get there (strategies), and what results should be
expected (performance targets).
PT Angkasa Pura II implement planning and budgeting systems before the company will do a
project to work on an airport. This organization believe in purposes of planning and
budgeting systems that serve four main purposes:
1. Planning: a powerful form of action control forcing managers to think about the
future and make decisions in advance.
2. Coordination: forces the sharing of information across the organization
3. Top management oversight: occurs in the form of preaction reviews, as plans are
examined, discussed, and approved before actions are taken at successively higher
levels in the organization.
4. Motivation: plans and budgets become targets that affect manager motivation because
the targets are linked to performance evaluations
So, PT Angkasa Pura II did planning and budgeting in every activities before finishing a
project. Until now, this organization success managing more than 16 airports in Indonesia by
having planning and budgeting systems internally and externally trough the stakeholders.

In the planning cycles, there are three cycles:

1. Strategic planning:
2. Capital budgeting:
3. Operating budgeting
This organization has strategic planning that we’ve been discussed in the chapter 3 about
control tighness. And also about capital budgeting, that has long-term effect for the
organizaton can be seen on the annual report of PT Angkasa Pura II. PT Angkasa Pura II did
an operating budgeting when the organization has a project to be done.

PT Angkasa Pura II also implement performance target setting. That is a reviews that
compare actual performance with plans and budgets can lead to improved understanding of
what is and what is not working well. They also improve coordination and they provide
important motivational benefits. Types of financial performance targets choosen is a
historical targets, it derived directly from performance in prior periods when this organization
handle a project to generate or repair an airport.