Management control system

Final assignment
Keltoum GHENJAOUI

INTRODUCTION

Codman and shurtleff was established in 1838 in boston by thomas codman. The company
deals with designing and fashion surgical instruments. The enterprise was acquired by
johnson & johnson inc in 1964.

Johnson & johnson is an american multinational medical devices, pharmaceutical and

consumer packaged goods manufacturer . It was founded in 1886 .Presently have 250
subsidiary companies in 57 countries ,Johnson & johnson is headquartered in new brunswick,
new jersey. Worldwide sales of $65 billion for the calendar year of 2011.

Initially, codman and shurtleff , the culture was defined in a focused mission which was
product oriented. J&J was oriented by medical speciality.After codman and shurtleff was
bought by johnson & johnson, they had to achieve a compromise on a new mission
statement.To achieve the compatibility, the new worldwide mission was defined " medical
speciality in neuro-spinal surgery business".

Each operating company prepares its own plans and strategies.

Three factors for success :

 Decentralized management
 Sense of responsibility to key constraints.
 Desire to manage for long term.

Financial estimates :

 Unit sales volume

 Sales revenue
 Net income 
 ROI

Planning focus on 2 years only and remains fixed over a 5 year period. Work starts in january
and takes 6 months. The draft plans are prepared by depts and approved by board of directors.

CURRENT FINANCIAL PLANNING AND BUDGETING PROCESS /REPORT

EFFECTIVE?

FINANCIAL PLANNING

Financial planning of J&J Comprised of annual budget for the upcoming operating year
and second year forecast. Budgets are prepared till the expense centre level for each
operating company.Plans were done on bottom up basis.
 Management control system
Final assignment
Keltoum GHENJAOUI

BUDGETING PROCESS

Accuracy of budget projections is revised on three occasions

 March Meeting
o Update on the basis of recent estimates of sales and profits for each operating
company.

 June Revision
o Requires managers at codman and shurtleff and all other subsidiaries to re
budget in may.
o Re-Checking of all budget estimates.

 November update
o Focussed on results for the ten months just completed and revised projections
for the remaining two months.
o Involves performance estimates from all departments

DO INCENTIVES AND STRUCTURE PROVOKE THE RIGHT BEHAVIOR?

Management by objectives is a comprehensive managerial system that integrates many key

managerial activities in a systematic manner and that is consciously directed toward the
effective and efficient achievement of organizational and individual objectives
It includes 4 main points :
 Specific Goals or Goals Specificity
 Proper Feedback
 Participation in decision making
 Explicit Time Period

THE CONTROLLING ACTIVITIES IN CODMAN AND SHURTLEFF

 Profit Plan and 2nd Year forecasts were used to evaluate managers on planning,
forecasts and achievements.
 Why and how the estimates have changed over time.
 Revision in thinking regularly on the basis of 5 and 10yr plans.
 Executive Board accepts 9/10 actions and plans and allows managers to go ahead.
 Management control system
Final assignment
Keltoum GHENJAOUI

 Managers are not free from Challenges . Constanty asked on their work and objectives
 No short term bonus plans.
 Salary and Bonus reviews are subjective and qualitative.
 Managers are forced to review their businesses in depth for costs, trends,
manufacturing, efficiency.
 Long Term plans helps in financial forecasts and setting aspirations.
 After Bottom Up Process begins, the quantitative targets are issued.
 No punishment, they try to find & correct the problems.
 Challenging of IDEAS.
 Frank discussions and revisions.

IS THE COMPANY’S R&D PROGRAM COST EFFICIENT AND RESPONSIVE?

The company compromises on a new Mission statement.

 Advantage : Same frame of mind as corporate HQ.

 Ease of functionality : Common Goal
 Shared Philosophy : Decentralised Management

Short term profits were not a focus of the divisions.Bonuses were paid Qualitatively and
Subjectively on performance.

 A regular Check on the managers, to eliminate challenges and have Healthy conflicts.
 A political when an employee comes up with a New strategy or idea. Anyone can
express, his/her ideas.
 The company is always working towards new STRATEGIES AND IDEAS

DIVISIONAL FORM : Each subsidiary is a division. Autonomous and accountable.

 Re-evaluation of budget takes place.

 Interdepartmental Coordination.

The R&D cuts were proposed , could have opened the doors for the other companies. Short
term cuts did not hinder long term goals.Inventory was set at LOW level. can impact
Reputation if not careful in addressing issues that could arise with a limited inventory.

 INTER-FIRM COORDINATION
 Reduction of commercial expenses
 Staff downsizing
 Management control system
Final assignment
Keltoum GHENJAOUI

IMPACT OF REDUCTION IN COMMERCIAL EXPENSES & STAFF

 Morale Problems
 Can create chaos amongst the employees
 People might become defensive.
 Can affect market image
 Affect employee productivity

SWOT ANALYSIS

WEAKNESSES

Codman Shurtleff Inc.'s Planning and Control System Weaknesses refer to the situation in
which the company's existing capabilities and resources are weaker or insufficient compared
to other organizations in the market. In other words, these are the areas in which the
organization is less effective and needs to improve in order to align with market trends. These
aspects negatively affect the overall performance of the organization by making it weaker
compared to its competitors.

These are the factors that are lacking in an organization and make it underperform compared to organizations
operating in the same market at the same level. It is an insufficiency or limitation of resources, capabilities
and skills that primarily affect the effective performance of organizations. Management capabilities,
facilities, financial resources, marketing skills, and weak brand image can be sources of weakness.

OPPORTUNITIES

Codman Shurtleff Inc Planning And Control System Opportunity is an advantage and the driving force of an
organization. It is an opportune moment or situation that is present in the environment that will help the
organization achieve its goals. It is a factor that contributes positively to the growth of the organization. It is
a condition existing in the external environment that allows the organization to build on its strengths,
overcome its weaknesses, and neutralize the threats present in the environmen

THREATS :
 Management control system
Final assignment
Keltoum GHENJAOUI

Threats are those factors that prevent the organization from performing an activity. It is an
unfavorable situation that exists in the environment that makes it difficult for the organization
to achieve its defined objectives. It is a situation that arises as a result of changes in the
immediate or distant environment, preventing the organization from maintaining its existence
and superiority in the growing competition and is disadvantageous for the organization.

All environmental factors are considered as a threat to an organization that could affect the efficiency and
effectiveness of the organization.

CONCLUSION

Management at J&J and Codman and shurtleff appears to be just effective due to several
reasons

1. The corporate vision was clear and concise

2. It was communicated between them with no misunderstandings.

The autonomy of Codman & shurtleff enables them to take charge of their own destiny.
Completely accountable for their performance.

They were concentrated on long term success, not short term, so the tactics implemented were
proper and favourable.

The company was not planned for any contingency planning apart from using the contingency
funds.