MANAGEMENT CONTROL SYSTEM

© R A M E S H R A S I K PA U D E L
 MANAGEMENT CONTROL SYSTEM:

• A Management control system is a system

which gathers and uses information to evaluate
the performance of different organizational
resources like human, financial, physical and
also the organization as a whole considering
the organizational strategies.
• Management control systems are the formal
and informal structures put in place by the
organization that compare the goals and
strategy of the organization against the actual
outcomes.
• This comparison is then reviewed and used to
drive managerial decisions.
• The management control system knits the
organization together so that each part, by
exercising the autonomy given to it, fulfills a
purpose that is consistent with and contributes
to the fulfillment of the overall purpose of the
organization.
•Management control systems are tools to
aid management for steering an
organization toward its strategic
objectives and competitive advantage. 
•Both formal and informal control systems
co-exist in the management control
system:

•Formal control system

•Informal control system
 FORMAL CONTROL SYSTEM

• A formal control system is comprised of well-defined

and explicit procedures, rules and guidelines relating
to different managerial aspects.
• This system guides, motivates and directs the
management, as well as other employees, to perform
their tasks and coordinate their behavior to achieve
organizational goals.
 FORMAL CONTROL SYSTEM…

• The formal control system comprises several

systems, such as cost accounting system,
management accounting system, production
engineering systems, human resource system,
quality maintenance system etc.
 INFORMAL CONTROL SYSTEM

• Informal management control systems include

unwritten and implicit policies derived from
organizational culture. However, they contribute
greatly in the implementation of business goals and
strategies and help the organization to attain high
degree of motivation and goal congruence.
 INFORMAL CONTROL SYSTEM

• Examples of informal management control

systems are unwritten norms about good
behavior of managers and employees, loyalties,
shared values, organizational ethics, mutual
commitments among managers and employees.