Management 701

Management Control Systems:

From Command and Control to Lead and Coordinate
Peter F. Drucker and Masatoshi Ito Graduate School of Management
January 29, 2007

Spring II 2007 Professor Joseph Maciariello

A control system may be defined in at least two ways:

1) A system for establishing objectives, measuring and
evaluating performance, and taking action to improve
performance and as
2) A system of “controls,” or performance measures, to assure
that resources are used effectively in accomplishing
organizational
objectives.

The word “control” is very ambiguous as is its relationship to

“controls” and to “management.” That ambiguity is most effectively
resolved by studying “Controls, Control and Management,” Chapter
31 of Peter F. Drucker’s book Management: Tasks, Responsibilities,
Practices, Abridged Edition, Butterworth-Heinemann, 1988.

Rapid innovations in technology, the growth and splintering of

knowledge work and dramatic reductions in the cost of
communications have led to the adoption of new methods for
controlling the work of organizations. Traditional command and
control systems, while necessary for almost all organizations, are
giving way or are being supplemented by systems that seek the same
objectives but by using different methods. These different methods
can be summarized as “leading, cultivating and coordinating” work to
achieve organizational objectives.

This module emphasizes traditional command and control systems as

well as emerging management systems that rely less of formal
authority to reach objectives and more on coordination and
leadership. Regardless of the system used in an organization, the
ends or desired results for an organization do not change but the

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means of achieving those results do change and sometimes change
very significantly.

We will begin this module by investigating new forms of

communications and control systems. These are discussed in our
short book, The Future of Work. Next, we will examine a systematic
model of management that can be used by executives to coordinate
and control the work of an organization using all of the methods
available, from very tight and traditional command and control
systems to very loose and emerging coordination and cultivation
systems.

Then we will examine a number of cases in which our model can be

applied to evaluate properties of an institution’s existing management
system and probe for ways to improve these systems. We will
consider organizations engaged in manufacturing, service and
knowledge work. Finally, we will examine evidence of two actual
organizations that I have investigated extensively using an earlier
version of our model which demonstrates the model’s utility to predict
continued good to outstanding performance.

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Course Materials

Book
1. Thomas W. Malone, The Future of Work, Harvard Business
School Press, 2004.

Articles
1. Peter F. Drucker, “The Coming of the New Organization,”
Harvard Business Review, January-February 1988.
2. Karen L. Higgins and Joseph A. Maciariello, “Leading Complex
Collaboration in Network Organizations: A Multidisciplinary
Approach,” in Complex Collaboration: Building Capabilities for
Working Across Boundaries, Advances in Interdisciplinary
Studies of Work Teams, Volume 10, 2004, pp. 203-241.

Book Chapters
1. Chapter 6, “The Power and Purpose of Objectives,” Peter F.
Drucker, Management: Tasks, Responsibilities, Practices
(MTRP), Abridged Edition, Butterworth-Heinemann, 1988.
2. Chapter 26, “Management by Objectives and Self-Control,”
Peter F. Drucker, Management: Tasks, Responsibilities,
Practices (MTRP), Abridged Edition, Butterworth-Heinemann,
1988.
3. Chapter 28, “The Spirit of Performance,” Peter F. Drucker’s
book Management: Tasks, Responsibilities, Practices (MTRP),
Abridged Edition, Butterworth-Heinemann, 1988.
4. Chapter 31, “Controls, Control and Management,” Peter F.
Drucker Management: Tasks, Responsibilities, Practices
(MTRP), Abridged Edition, Butterworth-Heinemann, 1988.
5. Chapter 32, “The Manager and the Budget,” Peter F. Drucker’s
book Management: Tasks, Responsibilities, Practices (MTRP),
Abridged Edition, Butterworth-Heinemann, 1988.

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Cases
1. Nucor Corporation (A), in Robert N. Anthony and Vijay
Govindarajan, Management Control Systems, Twelfth Edition,
McGraw-Hill Irwin, 2007, pp. 19-30.
2. Wal-Mart Stores, Inc., in Robert N. Anthony and Vijay
Govindarajan, Management Control Systems, Twelfth Edition,
McGraw-Hill Irwin, 2007, pp. 31-33.
3. Read only as background for Lincoln Electric (B)—Lincoln
Electric Company (A) in Robert N. Anthony and Vijay
Govindarajan, Management Control Systems, Twelfth Edition,
McGraw-Hill Irwin, 2007, pp. 536-553.
4. Lincoln Electric Company (B) in Robert N. Anthony and Vijay
Govindarajan, Management Control Systems, Twelfth Edition,
McGraw-Hill Irwin, 2007, pp. 712-716.
5. “The Performance Development System,” adapted from
Joseph A. Maciariello, Lasting Value, John Wiley & Sons, 2000.
6. “Who is the brightest hamster in the laboratory,” Case Number
36, Peter F. Drucker, Management Cases, HarperCollins, 1977,
Revisied, 2006, pp149-153.”
7. “The corporate control panel,” Case Number 39, Peter F.
Drucker, Management Cases, HarperCollins, 1977, Revised,
2006, pp.161-163.

Module Format
There are questions assigned for each case. Your participation in
class discussions with examples of application of these topics to your
experiences will help to bring these topics to life for all of us.

You should turn in a typewritten paper for each of the five

assignments. Each assignment should be turned in on the date it is
assigned. This is intended to provide the basis for your contribution to
class discussions. The quality of your papers will be graded on a
check plus (roughly “A”), check (B) and check minus (C) basis.
Assignments turned in late will be graded down one grade. No more
than one late assignment will be accepted.

Please note each class will meet for 3.5 hours. We will not meet on
April 14. Four of the five case assignments are due after April 14 thus
providing extra time to complete cases on schedule.

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Computation of Grades

Final grades will be computed as follows:

Case Analyses 60%

Class Contributions 40%

Module Syllabus
March 24 Introduction: Trends in the Assignment for
Class
Design of Contrtol Systems Read, The Future
of Work

March 31 Model for the Design of Coordination & Study, “Leading

Control Systems Complex
Collaboration in
Network
Organizations”

April 7 Application of the Model for the Design Prepare, Nucor

of Coordination & Control Systems Corporation
(A),
Questions 1-6
Read Wal-Mart

April 21 Management by Objectives & Read, MTRP

Self Control Chapters 6, 26, 28
Prepare,
Performance
Development
System
Questions

April 28 Setting Managerial Controls & Read, MTRP

Chapters
Budgeting 31 and 32
Cases Number 36
and
39

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May 5 Cultural Differences: Adapting Read, Lincoln
the design of systems to Electric (A)
Cultural Differences Prepare, Lincoln
Electric (B),
Question at end of
case