Organization context of Management Control Systems
Organization is divided into subunits having independent autonomy andobjectives
MCS lowers cost to coordinate them
MCS brings out efficiency and effectiveness
It facilitates adaptation and innovation
It helps to maintain inducement-contribution balance among stakeholders
To maintain MCS there is need to understand human behavior becausehuman beings are rational, creative, they have strong/weak morals, theyhave desire to be associated or to be in community.
Steps in designing Management Control Systems
A well designed management control supports and coordinates the decision-making process and motivates individuals throughout the organization to act inconcert. The first and most basic component in a management control system isthe organizations' goals. Because the focus of the management control system ison motivating decisions that help achieve the organizations goals. A basic adageof management control system is that "you get what you measure". It means themeasures of performance will influence managers' decisions; therefore measureof performance should be consistent with the organizations goals. To design themanagement control system that meets the organizations' goals or organizationsneeds, the designing has to be done according to the following stages.Stage 1: Identifying Responsibility Centers
nder this stage the whole organization is divided into responsibility centers andfor every responsibility center their goals are decided and responsibilities are alsofixed.Stage 2: Developing
erformance MeasuresFor every responsibility center the performance measures are fixed. Means if some responsibility has been assigned then the method of their measurementsare developed at this stage.
nless we measure the performance, no objectivitycould be introduced in the system. To practically implement this performance