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A management control system (MCS) is a system which gathers and uses

information to evaluate the performance of different organizational resources like
human, physical, financial and also the organization as a whole in light of the
organizational strategies pursued.
Management control system influences the behavior of organizational resources to
implement organizational strategies. Management control system might be formal or
informal. Management control systems are tools to aid management for steering an
organization toward its strategic objectives and competitive advantage. Management
controls are only one of the tools which managers use in implementing desired
strategies. However strategies get implemented through management controls,
organizational structure, human resources management and culture.
According to Simons (1995), Management Control Systems are the formal,
information-based routines and procedures managers use to maintain or alter
patterns in organizational activities.



To know about Management control systems.
To evaluate the Simons Levers of Control.
To learn what Simons levers Control mechanism are highly seen of control in
the corporate sectors of Bangladesh.
To study How Simons Levers of Control can effectively be used in
Bangladesh corporate houses.



Essential data were collected from company websites, reports, newspapers,

electronic database, magazines and online publications. The report examines the
importance of Simons Levers of Control and management control.


To make a report on Simons Levers of Control needs enough time, opportunities,

statistical informations and various local organizational surveys which we really
lack. After all, this study suffers from lack of information which should be




A management control system is a logical integration of management accounting

tools to gather and report data and to evaluate performance Purposes of a
management control system are clearly communicate the organizations goals,
ensure that every manager and employee understands the specific actions required
of him/her to achieve organizational goals, communicate the results of actions
across the organization and ensure that the management control system adjusts to
changes in the environment Management Control Systems as defined by Anthony is
the process by which managers ensure that resources are obtained and used
effectively and efficiently in the accomplishment of the organizations objectives.
Management Control Systems is a system used in an organization which collects and
uses information to evaluate the performance of the organizational resources that
will eventually influence the behavior of the organization to implement
organizational strategies. A perfect Management Control Systems has to monitor not
only the internal environment but also has to be sensitive to external changes.
Information technology plays a central role in this process. Since, there is no
complete and comprehensive system for all organizations. Indeed, every
organization needs their own system, which is unique for them, and is adjustable
with structure and strategy.



Begin by specifying the organization's goals, sub-goals and objectives

Goals are what the organization hopes to achieve in the long run
Sub-goals or key success factors are more specific and provide more focus to
guide daily actions

Objectives are specific benchmarks which management would like to see

Important to keep all three in balance to avoid concentrating solely on shortrun achievements at the expense of long run goals

Establish responsibility centers


Develop performance measures


Measure and report on financial performance


Measure and report on non-financial performance



The Levers of Control model proposed by Robert Simons (1995) suggests a

control system directly and explicitly related to the competitive strategy and
its continuous development. The model has received an intense attention in
literature, even though it is just descriptive and it does not explain causal
relations among variables. This may be explained by the fact that it shows the need
of arriving to a strategic fit in the design of the management control mechanisms as a
way for solving the control problem from a strategic perspective. The concept of
levers of control has been put forward as a descriptive model identifying the
existence of sets of control mechanisms: belief systems, diagnostic systems, limits
systems and interactive systems. Below these mechanisms are briefly discussed.


Belief Systems are basically the core values of an organization, its mission and
vision, used to inspire and lead the search for new opportunities and each start each
strategic decision making throughout the organization. It is found out that the more
strategically relevant for the client the outsourced activity is, the higher the need
for an intense use of belief systems. This type of control mechanisms (in

combination with others) drives individuals to explore ideas and potential

innovations. Even small improvements in strategically relevant tasks could be
rewarding for the strategic positioning of the client. The evidence suggests a
non-linear relationship between cultural similarity and the intensity of use of
formal belief systems through the managerial path, as follows. When the IOR
presents low cultural similarity, the effort

in formalizing

these control

mechanisms will have, possibly, no effect in the provider behavior. When it

presents high cultural similarity, the client could expect that the provider will
behave according to the same values; hence, there is no need to spend time
and effort in the design of formal mechanisms. When it presents a medium
cultural similarity, the client could find that the effort in formalizing and inducing
some aspects of the belief systems on the provider could have an effect on their
behavior. As observed in the cases analyzed, high task uncertainty could raise the
need of an intense use of belief systems given that continuous and quick
decisions related to the activities and processes must be taken. The client
needs that those decisions are aligned with the overall strategy and values.


Limit systems are used to set clear limits to behavior and decision making
through the formalization of rules and prohibitions. When high idiosyncratic
assets are involved in the activity, the intensity

of use of contractual

agreements through the managerial path is increased in order to protect those

assets from the risk of opportunistic behavior. As it was already discussed, there are
subtleties when intangible assets are involved. In general terms the client should use
the limits systems through the managerial path if any efficient safeguard could be
included on it (contracts). If the outsourced processes present high task uncertainty,
then the limits systems should include a lower level of details to boost flexibility, for
it is too costly to update the documentation every time a small adjustment is made to
procedures and other limits mechanisms. Changes in mechanisms through the
managerial path seem to cost more than those in the direct path, and even

more than those in the operative path, since more top management time
would be spent. Given that, a high intensity of use of the operative path should be
expected if task uncertainty is high.

In a similar way, the impact of a high

environment uncertainty could be seen in a lower level of details in contracts and

procedures through the managerial path. However, low operative interrelation does
not allow to considering the possibility of using the operative path.


Diagnostic systems in IOR aim to monitor, evaluate, correct and make
decisions about predefined goals and objectives related to the outsourced processes
or activities. The use of these systems could include a combination of the three
control paths. When high environment uncertainty is present; the possibility of
including credible and useful goals is dramatically decreased. This could lead the
client to lower his intensity of use of diagnostic systems. However, monitoring
strategic results is critical in order to, eventually, have fast reactions to environment
changes. Hence, environment uncertainty should call for higher flexibility in the use
of diagnostic systems but not necessarily for a lower intensity of use. The task
uncertainty seems to have a similar impact on diagnostic systems, calling for a
flexible use of them.


Interactive systems are used to stimulate learning and the upcoming of new
ideas through the direct and intense involvement of top management with
their subordinates, discussing the strategic uncertainties and challenging known
truths. These systems aim to focus on the strategic uncertainties of IOR in
order to have a positive impact on process innovation and competitive adaptation.
If high intangible assets specificity, it could be recommended to use interactive
mechanisms through the direct path since managers of the client could be

closer to the key activities and decisions regarding those assets, decreasing the risk
of opportunistic behavior. Environmental uncertainty might boost the need for
interactive systems through the managerial path in order to react to the new
situation and define the new terms of the relationship. Task uncertainty is a
strong determinant of the interactive systems through the indirect operative
path. When minor but constant operative joint decisions must be made in order to
get the jobs done in an efficient manner, there is a strong need to be in permanent
contact between client and supplier operative teams. Depending on the type of
decisions in play, however, the interactive systems may be developed through all the
management control paths.



As an employee of ACI Limited (ACIL), my observation is Simons levers Control

exist in my company though within a minimum application. Mainly Diagnostic
control systems in ACIL exist according to the definitions of Simons, during the
early period, ACIL were continuously updated. Performance reports exist, as do
detailed and complex reports on budget deviations. Sales deviations are portrayed
and explanations provided. Margin overviews are provided. The problem is that
reports are not always systematically acted upon and incorporated into top
management decision-making. The great opportunity in this area is a new ERP
system implementation that has already begun. It will provide real time information
on financial report, vehicle tracking, equipment cost measurement, spare parts
inventory etc.
Variance analyses are also conducted in the reports, focusing on discrepancies
between actual and planned, and last years performance, on the individual
elements. The role of this review is also to find the employees responsible when
variations occur so that they can be asked to explain. Reports also contain nonfinancial performance measures, for example customer satisfaction and different
quality measures. As regards non-financial measures, managers in ACIL are aware

that they require a great deal of management evaluation, so measures become more
subjective, but thats the way it is, especially as these measures are exceedingly
important to the company. Key processes are derived from the corporate strategy,
which is updated annually at the Strategic business conference, at which key factors
are defined as follows: customer satisfaction, employee satisfaction, good business
results and a positive attitude towards the environment.



In Bangladesh perspective until now any local company is not following Simons
Levers of Control perfectly and its not impossible to apply Simons Levers of Control
mechanisms thoroughly. Reasons are that the most of the owners are mainly
emphasize on profit maximization without following the balanced scorecard which
relies on non-financial measures.
Local managers gives more importance on minimizing cost by compromising with
quality, cost reduction in research and development, promotional activities,
branding, marketing. These types of decision may helpful for short run goal but in
long run it may become harmful for the company and can directly effect on product
life cycle. Because the company business will gradually loose comparative
advantage which will lead them in extinction.
To establish Simons levers of Controls the top level manager need to play the more
crucial role of an organization. Organizational vision statement, mission statement,
goal must have to be known by all the employees. Organization should have HR
policies and other rules which must has to be ethical. Managers have to understand
their strategies incredibly well. They have to stick to them. They have to understand
the true causal relationships between strategic and operating decisions and how they
are linked to financial performance. As a result, Levers of Control will most likely
prove to be far more valuable to an organization that has already been through a
strategic renewal process and is seeking a rich array of reinforcement mechanisms,
than to a company just starting down the path.


As i pointed out in the introduction, the goal of this paper is to understand the
phenomenon of using the levers of control in inter-organisational relationships,
through the use of the management control paths.
I found out that managers implicitly consider that the most efficient design to
control an inter-organisational relationship is to use the indirect managerial path,
followed by the indirect operative path, and lastly the direct path. The less the time
of high ranked managers needs to be dedicated to the task, the better. On the other
hand, the lower the operative interrelation, the lower the possibility of use of the
indirect operative path. Belief and Interactive levers in inter-organisational
relationships might be seen by managers as usually not fact oriented, too time
consuming, and long term oriented, hence costly and potentially messy. Therefore,
managers might decrease the intensity of use of those levers even when they are
The first contribution of this paper is that this work presents for the first time
empirical evidence that supports the relevance of the concept of management control
paths. The model seems to present high explanatory potential of the complex
phenomena analyzed and, at the same time, it might become practical tool for the
design of management control systems in inter-organisational relationships.
From a managerial perspective, a model with high explanatory power with key
insights and contingent factors has been put forward. Important limitations of this
work must be stated. The relationship between two organisations is a dynamic
phenomenon that changes over time due to deliberate rational design and accidental
incremental adjustments. Future research should focus on the relationships between
the three steps of the extended make or buy decision, and the dynamic relationships
between variables of the model studying - for instance - the impact of each
management control path on goodwill and competence trust.

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Appendix A
MCP: Management Control Paths
LOC: Levers of Control
IOR: Inter-organisational relationships
TCE: Transaction Costs Economics
RBV: Resource Based View of the firm.