StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Management Accounting Control Systems of Theatre Calgary - Case Study Example

Cite this document
Summary
This paper under the headline "Management Accounting Control Systems of Theatre Calgary " focuses on the fact that the management accounting control systems (MACS) of Theatre Calgary (TC) proposed by McCabe can be evaluated using Simons’ levers of control theory. …
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER95.3% of users find it useful
Management Accounting Control Systems of Theatre Calgary
Read Text Preview

Extract of sample "Management Accounting Control Systems of Theatre Calgary"

Theatre Calgary Case Study Using appropriate theory, critically evaluate the management accounting control systems and budgeting evident in the Theatre Calgary case study. The management accounting control systems (MACS) of Theatre Calgary (TC) proposed by McCabe can be evaluated using Simons' levers of control theory. If the MACS address the driving levers of business strategy at TC, then the systems could be deemed sufficient. Otherwise, modifications would be suggested to address shortcomings. Belief Systems (Values, Mission, Objectives) McCabe's first step of rebuilding the culture was correct because it was challenged by the crisis, resulting in staff discouragement and departures. The vision of reaching 10,000 subscribers in five years was strategic (long-term), ambitious (it only had 3,000 subscribers now), and challenging (the truly dedicated would remain, whilst those weak of heart would leave). Vision matched the idealism of TC's founders (students of a great drama teacher). Vision also reinforced the mission "to entertain our audiences with plays produced from the Canadian and international repertoires, and to develop the theatrical community." Mission and vision are summarised in Principles that combine artistic excellence, financial stability, and organisational sustainability. Objectives are clear, developed and refined with inputs from everyone (Board all the way to customers). Annual strategic and budget planning sessions inspire commitment to TC's purpose, core values, and vision. TC is in a creative business and has a system in place to get inputs from the creative/production side, including inputs to the budgets and planning system. Belief systems are sound, accepted by all who work there, and as the solutions to past crisis showed, enjoy strong support from customers, suppliers, actors, and patrons. However, there is no clear answer to "how does TC create value for customers" beyond the sentimental ones (tradition, legacy, culture, etc.). TC has to think of a better answer to the question, because this would help solve its revenue-generation problem. Boundary Systems (Codes, Mission, Strategic Constraints) McCabe had an ambitious performance goal: increase subscribers threefold. Backed this up with performance standards, codes of conduct, and incentive systems to motivate, inform, and align staff with the organisation's objectives. Sales teams were given freedom to be creative within limits, and titles changed from "ticket clerks" to "customer service teams". However, strategic boundaries seem incomplete. The case lacks details on defined market position, which affects the theatre's capacity to generate sufficient revenues to cover costs and wipe out deficits. TC has to define what business it is in, who competitors are, whether pricing strategies are competitive, and how to generate loyalty amongst customers. Of course, there are idealistic supporters ready to contribute cash to bridge deficits, but unless TC develops a plan to widen its market base, it cannot sustain profitability. And whilst it evaluates its current customer base, it needs to find ways to target new customers, new age groups (below the present 40 to 65 age group), develop the right pricing for each, and develop new materials to compete with other providers in the market (how can TC compete with video games, peer group activities, extreme activities, etc.). TC has to look to the future, instead of only learning from the past. Related to this is the need to determine which amongst its existing customer groups (the 45-60 years age group is one generation!) are profitable, and whether it can increase their numbers or generate higher profits from those who can afford to pay more. TC may be too concerned with survival, but it has to learn to cut down its level of risks using its accounting system to identify where profitable and sustainable opportunities exist. Interactive Controls (Monitoring, Key Uncertainties) TC has internal control systems, a way of monitoring sales and expenses, getting the staff involved and updated on progress against objectives, structural safeguards, and systems safeguards. Segregation of duties is clear, and levels of authorisation defined. Record-keeping has improved, management reporting systems in place, and there seems to be adequate documentation to ensure budgets are met, variances are analysed, and appropriate actions are taken. However, there are no clear details in the case on the capacity of the theatre and whether occupancy rates can be used as a target to drive the sales and marketing efforts. Other observations are linked to TC's internal controls. Diagnostic Controls (Budgets, Balanced Scorecards, Cash Flows) TC's financial controls, budgets, and cash flows are being managed and the systems in place are designed to prevent future crises. TC employees receive bonuses based on good performance, and actors are paid well and have job security. Budgets are being used not only for diagnostic control but to drive the whole organisation to meet over-all targets, not only in attendance but also customer satisfaction levels, artistic quality, and employee performance. The budget system supports the culture of sales and customer service and delivery of expectations, and empowers employees and managers. However, TC seems too focused on revenue generation and customer satisfaction diagnostics. It may be neglecting one of the reasons why it was established, which is to develop the theatrical community. It has to find ways to tap low-cost theatre groups from schools and universities, other communities in Calgary, and look for new material produced locally, instead of producing tried and tested shows that may be good for finances but bad, in the long-term, for the arts. TC can budget for activities that serve a dual purpose: part marketing and part artistic development. It can sponsor acting or playwriting competitions and invite students to act and watch together with TC's usual group of customers. Theatre is a part of any society's cultural heritage, and what better way to ensure that TC grows by getting buy-in from surrounding communities TC can follow the example of theatre groups in England, where tourists from all over come to experience theatre as part of learning the local culture. Internal Controls (Internal Audit, Asset Management) There are no details on the internal audit system and audit trails. This should be included amongst the metrics for evaluation, important for a non-profit like TC. If it is not careful, it might have bigger problems once the funding problem is solved. Without an internal audit system in place, it can alienate loyal and potential donors in the future or push employees to do everything they can to meet surplus targets to earn incentives at all cost, and worse, tempt them to "sell" intellectual property and artistic assets. The case does not elaborate a system to track receivables and payables, or to show that grants/donations go where they are intended. Without an internal audit system, TC faces risks of scandal in accounting, funds usage, and asset management issues. Summary To summarise, TC's MACS contains almost all the components of a strategic management accounting system, although it needs to improve on: (1) its internal audit system, (2) allocating a portion of revenues or "profits" to develop new target markets or to expand the types of clients that it serves, and (3) finding out how it creates value for the customer. In general, what McCabe instituted is strategic in content and scope and meets the requirements of a system that acts as levers to control formulation and implementation of business strategy. Provide reasoned recommendation regarding how Theatre Calgary should modify its control and budgeting systems to ensure long-term stability. TC's long-term stability depends on improving revenue-generation and expense-control aspects, discovering a way to create value for customers, and instituting an internal audit system to manage its finances. Revenues are below budget and administration and fundraising costs are above budget whilst barely reaching their targets (almost break-even, a bad sign). Several tools can be used. A customer account profitability analysis would help determine which market segments are profitable, or which ones do not show up at the gate. Using Porter's value chain analysis would assist in discovering ways to enhance the TC cultural experience and value creation, which should never stop when the customer steps out of the theatre. This analysis would determine which activities along the value chain add the highest value, and TC must come up with strategic intervention to capitalise on this knowledge. For example, it may discover more middle-age professionals who attend Saturday evening shows with their wives than with their young children, so it should offer not only shows appealing to this age group, but also health food and drinks, during that time slot. TC can use strategic management accounting or cost management tools to focus on critical success factors to generate higher revenues from ticket sales and fundraising, and to raise ticket prices and bring down production costs. Higher ticket prices may help TC's image as a quality form of entertainment. This requires dividing the seats in the house (the case does not mention how many there are) and marketing different segments at different prices, or discovering new experiences customers would enjoy, such as being given the "privilege" to discover future big stars at the theatre. There are several possible outputs of using these strategy tools. One is to develop a season pass that doubles as a loyalty card or a shopping discount card. This helps management in customer analysis by using relationship management systems. The Balanced Score Card methodology based on the Kaplan and Norton can be used to refine the MACS in the design of TC's internal audit system because this tool proposes four perspectives for looking at TC's vision and strategy: financial, customer, internal business processes, and organisational learning and growth. TC is a non-profit that is beginning to act like it is not. Focus and dedication are easy when there is a crisis, but once the good manager McCabe solves the problem, a new set of problems would arise - success and having too much money. Without the audit system, TC is a scandal waiting to happen. And for a non-profit theatre group that a crisis could not sink (because people believed in it), a scandal is something it may never be able to afford. Reference List Heisz, M. and Ewart, T. (2006). "Theatre Calgary: Control Systems in an Organization in Crisis". Richard Ivey School of Business Case No. 9B06B005. Ivey Management Services. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Management Accounting Control Systems of Theatre Calgary Case Study, n.d.)
Management Accounting Control Systems of Theatre Calgary Case Study. Retrieved from https://studentshare.org/finance-accounting/1525416-management-accounting-assignment
(Management Accounting Control Systems of Theatre Calgary Case Study)
Management Accounting Control Systems of Theatre Calgary Case Study. https://studentshare.org/finance-accounting/1525416-management-accounting-assignment.
“Management Accounting Control Systems of Theatre Calgary Case Study”, n.d. https://studentshare.org/finance-accounting/1525416-management-accounting-assignment.
  • Cited: 0 times

CHECK THESE SAMPLES OF Management Accounting Control Systems of Theatre Calgary

Evaluating accounting control systems

The task was to evaluate the accounting control systems of Stone Creek Church in Urbana, Illinois on the basis of the interview of the Stone Creek manager and the attached notes on COCO framework.... Finance and Accounting November 27, 2011 Evaluating accounting control systems  Introduction: The COCO framework is one of the models of internal accounting control, which is used by many firms to maintain accurate financial reports.... hellip; This COCO method is thought to be more concrete and user friendly method of Internal accounting control system....
4 Pages (1000 words) Essay

Management Control Systems

The holistic view on management control systems (MCS) is not fresh.... … Running Head: Management control systems Management control systems [Writer's Name] [Institute's Name] Management control systems The holistic view on management control systems (MCS) is not fresh.... Management control systems (MCS) facilitate businesses to raise the possibility that workers take decisions and actions that are in the businesses' best interest....
5 Pages (1250 words) Term Paper

Management Control Systems

The aim of this essay is to know the way management control systems (MCS) can be used as packages in a company.... We will start by defining management control systems and their usage as packages.... Further, we will discuss some of the key challenges and difficulties that companies face while using management control systems as packages.... Companies use management control systems to support organizational objectives, control activities, and drive organizational performance....
8 Pages (2000 words) Essay

International Business Ethics

Different cultures seem to provide different models of moral virtue, and there may be several, some conflicting, within a given culture.... For instance, the ancient Greeks had a place for the virtue of pride (an appropriate sense of one's honor), while medieval Christian monks thought humility more important....
10 Pages (2500 words) Essay

Movie Theaters and Digital Distribution

The chance of survival of theatre groups, as against competition from home video, piracy and online distribution, is pretty good.... However, the reason for the decline is more because of the theatre's nonchalance to the audience's sensibilities and needs rather than competition from any quarter.... theatre owners are changing over to multiplexes in a big way in order to lure viewers.... Pirates or DemonsI think the issue of home theatre, piracy and online distribution is being overblown....
5 Pages (1250 words) Essay

Case Study - Drotos Theaters (Auditing)

The purpose of this paper is to discuss eight important areas which will point out the strengths… This paper gives information that they include: an evaluation of the manual and computerized control activities, internal control existing and lacking in the present system, internal control limitations, and risks, concerns as to why the previous auditing firm resigned, a recommendation of controls to prevent and detect financial misstatements....
9 Pages (2250 words) Essay

Business Consultant Proposal for Formulating Costing & Pricing Consultancy Services

This proposal has been developed by in response to Nafees request for a proposal for consultancy services to review costing and pricing framework in addition to review theater utilization and staffing level to support the growth and development of the hospital. Before… Hospital is a place where the patients who are suffering from some critical illness are treated....
8 Pages (2000 words) Essay

Devolvement as a Strategy in Human Resource Management

“Thus, the HRM function positions itself in two ways: as the architect of new organizational structures and work systems, and as coach in management development processes and companion of employees in turnaround processes” (Van Marrewijk & Timmers, 2003, p.... A trip down memory lane reveals that it was initially the accounting department, which took care of administrative transactions that concerned personnel.... This essay discusses that Human Resource management has evolved from its origins to include a wider scope of responsibility and a multitude of functions....
11 Pages (2750 words) Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us