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Management Control Systems

Management Control Systems

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Published by VIKAS DOGRA

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Published by: VIKAS DOGRA on May 16, 2010
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11/10/2010

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management control systems
(MCS) is a system which gathers and uses information to evaluate theperformance of different organizational resources like human, physical, financial and also the organizationas a whole considering the organizational strategies. Finally, MCS influences the behavior of organizational resources to implement organizational strategies. MCS might be formal or informal. Theterm ‘management control’ was given of its current connotations by Robert N. Anthony (Otley, 1994). 
Robert N. Anthony (2007) defined Management Control is the process by which managers influence other members of the organization to implement the organization’s strategies. Management control systems aretools to aid management for steering an organization toward its strategic objectives. Managementcontrols are only one of the tools which managers use in implementing desired strategies. However strategies get implemented through management controls, organizational structure, human resourcesmanagement and culture.
Anthony & Young (1999) showed management control system as a black box.The term black box is used to describe an operation whose exact nature cannot be observed. MCSinvolves the behavior of managers and these behaviors cannot be expressed by equations. Anthony &Young (1999) showed that management accounting has three major subdivisions: full cost accounting, differential accounting and management control or responsibility accounting. 
According to Horngren et al. (2005), management control system is an integrated technique for collectingand using information to motivate employee behavior and to evaluate performance.
. According toSimons (1995), Management Control Systems are the formal, information-based routines and proceduresmanagers use to maintain or alter patterns in organizational activities
Chenhall (2003) mentioned that the terms management accounting (MA), management accountingsystems (MAS), management control systems (MCS), and organizational controls (OC) are sometimesused interchangeably. In this case, MA refers to a collection of practices such as budgeting or productcosting. But MAS refers to the systematic use of MA to achieve some goal and MCS is a broader termthat encompasses MAS and also includes other controls such as personal or clan controls. Finally OC issometimes used to refer to controls built into activities and processes such as statistical quality control, just-in-time management.
According to Maciariello et al. (1994), management control is concerned with coordination, resourceallocation, motivation, and performance measurement. The practice of management control and thedesign of management control systems draws upon a number of academic disciplines. Managementcontrol involves extensive measurement and it is therefore related to and requires contributions from
 
accounting especially management accounting. Second, it involves resource allocation decisions and istherefore related to and requires contribution from economics especially managerial economics. Third, itinvolves communication, and motivation which means it is related to and must draw contributions fromsocial psychology especially organizational behavior (see Exhibit#1).
 
Exhibit#1: Management control as an interdisciplinary subject
Management control systems use many techniques such as
Kaizen(Continuous Improvement)
Benchmarkingand Benchtrending
Program management techniques, etc.
Total quality management

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