VMD Medical Imaging Center

Susanna  Gallani; Eva  Labro

Case | HBS Case Collection | August 2016

VMD Medical Imaging Center

Abstract

VMD Medical Imaging Center, a local independent provider of medical imaging services, is facing some important challenges. Despite efficiency improvements and cost cutting initiatives carried out over the past few years, their profitability is shrinking; their prices are becoming uncompetitive; and their main customer, a large regional research and teaching hospital, is threatening to seek alternative, more cost-effective, suppliers. The case addresses a number of important challenges that firms typically face with respect to designing and maintaining their costing systems, including the need to keep the costing system in line with the business processes of the firm throughout its life cycle; the setting of transfer prices, which highlights the interdependencies between costing systems and pricing strategies; and the demand-induced death spiral, which is brought about by a shift in sales mix from labor intensive to technology intensive imaging services. In addition, this case offers an opportunity to develop the class discussion in multiple directions, at the discretion of the instructor, such as the role of costing systems in organizations, the relationship between costing and strategy, and the facilitating role of costing with respect to cross-functional coordination.

Keywords: Costing; Death Spiral; Transfer Pricing; Activity Based Costing and Management; Competitive Strategy; Medical Specialties; Health Industry;

Language: English

Format: Print

6 pages

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Citation:

Gallani, Susanna, and Eva Labro. "VMD Medical Imaging Center." Harvard Business School Case 117-002, August 2016.

Working Paper | HBS Working Paper Series | 2019

The Effect of Systems of Management Controls on Misreporting

Aishwarrya Deore, Susanna Gallani and Ranjani Krishnan

Organizations use systems of controls to encourage goal congruent employee behavior. Some control instruments within the system (e.g., cultural controls) guide employees and align their behavioral choices with organizational values, while other instruments (e.g., budgetary controls) facilitate resource allocation in the presence of asymmetric information. We explore how a system of controls comprising of cultural controls (i.e., mission statements) and budgetary controls influence budgetary misreporting. Experimental results indicate that a mission statement that emphasizes integrity results in lower misreporting when combined with budgetary controls that assume self-interested managers relative to its combination with budgetary controls that assume honest managers. Mission statements that emphasize financial performance do not reduce misreporting when combined with either type of budgetary controls. Organizational stewardship partially mediates the effect of systems of controls on misreporting. Our study contributes to the literature on systems of controls by providing evidence that certain combinations of control instruments are more effective than others in achieving important organizational objectives such as reducing budgetary misreporting.

Keywords: directing controls; misreporting; mission statements; participative budgeting; stewardship theory; systems of management controls; Management Systems; Governance Controls; Mission and Purpose; Financial Reporting;

Citation:

Deore, Aishwarrya, Susanna Gallani, and Ranjani Krishnan. "The Effect of Systems of Management Controls on Misreporting." Harvard Business School Working Paper, No. 20-053, October 2019. View Details

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VMD Medical Imaging Center

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VMD Medical Imaging Center

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