Management Accounting and Control
Hoorcollege 7 (16-9-2025)
,
,- A higher level manager has to make a judgement about the managers: below/above/at
par
- Suppose you are a controller at Citibank, at the end of the year, this is what you get.
- You know what the bonus is for each manager, you know the overall par score, you know
the separate par score and you get a massive amount of data
- You want to know which PMs managers use to determine par scores and how does 3
KPIs lead to 1 par score and which PMs are they really using in the judgement. And you
want to know whether there is variation.
o Variation: you run a regression for each manager, there is variation over time and
variation over managers.
- What could we do with this data? You want to explain the overall financial par score (the
dependent variable), what are the independent variables (drivers of overall financial par
score)? 3 measures (zie slide 1 hierboven).
-
- The higher the beta, the higher the weight in explaining the financial par score.
- What is the error term in the regression? Variation in the dependent variable that’s not
explained by the independent variables.
, - What does the error term reflect? Subjectivity. It’s a qualitative measure. If you run the
regression over years, then you have an idea about the variation in the subjectivity that
managers use. What other factors are you relying on.
Principal y
Agent a X
- What does agent want? PSV (presicion, sensitivity, verifiability)
- What does principal want? Congruence
- How do we set a target on this X? We discuss it today.
- What should be the distance between the carrot and the employee, that’s what target
setting is.
Hoorcollege 7 (16-9-2025)
,
,- A higher level manager has to make a judgement about the managers: below/above/at
par
- Suppose you are a controller at Citibank, at the end of the year, this is what you get.
- You know what the bonus is for each manager, you know the overall par score, you know
the separate par score and you get a massive amount of data
- You want to know which PMs managers use to determine par scores and how does 3
KPIs lead to 1 par score and which PMs are they really using in the judgement. And you
want to know whether there is variation.
o Variation: you run a regression for each manager, there is variation over time and
variation over managers.
- What could we do with this data? You want to explain the overall financial par score (the
dependent variable), what are the independent variables (drivers of overall financial par
score)? 3 measures (zie slide 1 hierboven).
-
- The higher the beta, the higher the weight in explaining the financial par score.
- What is the error term in the regression? Variation in the dependent variable that’s not
explained by the independent variables.
, - What does the error term reflect? Subjectivity. It’s a qualitative measure. If you run the
regression over years, then you have an idea about the variation in the subjectivity that
managers use. What other factors are you relying on.
Principal y
Agent a X
- What does agent want? PSV (presicion, sensitivity, verifiability)
- What does principal want? Congruence
- How do we set a target on this X? We discuss it today.
- What should be the distance between the carrot and the employee, that’s what target
setting is.
