A management control system (MCS) is a system that collects and uses information to evaluate the performance of various organizational resources such as human, physical, financial and also the organization as a whole in the framework of the organization's strategy being pursued.
Management control systems affect the behavior of organizational resources to implement organizational strategy. Management control systems may be formal or informal.
Video Management control system
Overview
Management control system is a tool to assist management to direct the organization toward strategic goals and competitive advantage. Management control is just one of the tools managers use in applying the desired strategy. But the strategy can be implemented through management control, organizational structure, human resource management and culture.
According to Simons (1995), Management Control Systems are routines, routines based on information and procedures that managers use to maintain or change patterns in organizational activities.
Anthony & amp; Young (1999) shows the management control system as a black box. The term black box is used to describe operations that are not observable.
Maps Management control system
History
One of the first authors to define a management control system was Ernest Anthony Lowe, Professor of Accounting and Financial Management at Sheffield University, in his 1972 article "About the idea of ​​a management control system." He listed the following four reasons for the need for a planning and control system:
- The need for systems of planning and control in business organizations flows from certain general characteristics of the nature of a business enterprise, which is primarily as follows:
- first, firms have (by definition) an organizational goal, different from those that can be separated and individuals from members who form 'managerial coalitions';
- Second, managers from sub-units of the company must always be ambivalent in their own personal goals, and have a great deal of wisdom in deciding how they should behave and in formulating their parts. of the overall plan to achieve organizational goals;
- third, business situations (and people's behavior) are full of uncertainties, both internally and externally to business firms.
- fourth, there is a need to save, in human efforts we are always concerned with the allocation of efforts and resources to achieve a certain set of goals...
The term 'management control' is given its current connotation by Robert N. Anthony (Otley, 1994).
Management control system, topic
Management control
According to Maciariello et al. (1994), management control deals with coordination, resource allocation, motivation, and performance measurement. The practice of management control and design of management control systems refers to a number of academic disciplines.
- Management control involves extensive measurement and is therefore associated with and requires contributions from accounting especially management accounting.
- Secondly, it involves resource allocation decisions and is therefore related to and requires contributions from the economy especially managerial economics.
- Third, it involves communication, and meaningful motivation is related to and should attract contributions from social psychology especially organizational behavior (see Exhibit # 1).
Alif Aiqal (2007) defines Management Control as a process in which managers influence other members of the organization to implement organizational strategy. According to Kaplan, management control is done on the basis of information received by managers.
Management accounting and accounting management system
Anthony & amp; Young (1999) suggests that accounting management has three main subdivisions:
- full cost accounting,
- differential accounting and
- management control or accounting responsibility.
Chenhall (2003) mentions that the term management accounting (MA), management accounting system (MAS), management control system (MCS), and organizational control (OC) are sometimes used interchangeably.
In this case, management accounting refers to a collection of practices such as budgeting or product costing. But a management control system refers to the systematic use of accounting management for product reporting and organizational control is a broader term that includes a management control system and also includes other controls such as personal or clan controls.
Finally, organizational control is sometimes used to refer to controls built into activities and processes such as statistical quality control, just-in-time management.
Management controls financial-oriented vs. operational oriented
Traditionally, most of the actions used in the management control system are accounting and financial. This emphasis on financial measures, however, diverts attention from important non-financial factors such as customer satisfaction, product quality, etc. Furthermore, non-financial actions are a better predictor of long-term performance.
As a result, the management control system should include a comprehensive set of performance aspects consisting of financial and non-financial metrics. The inclusion of non-financial actions has become an important characteristic of the current management control system, until it becomes the main criterion in distinguishing different systems.
Therefore, depending on the balance between financial and non-financial measures, management control systems can be characterized as being financially oriented or operation-oriented. The financial-oriented control system is primarily based on financial accounting data, such as cost, profit or profitability, while the operating-oriented control system is primarily based on non-financial data that focuses on output and operational quality, such as service volume, employee turnover, or customer complaints.
System control management techniques
According to Horngren et al. (2005), a management control system is an integrated technique for collecting and using information to motivate employee behavior and to evaluate performance. The management control system uses many such techniques
- Financing by activity
- Balanced scorecard
- Benchmarking and Benchtrending
- Budgeting
- Capital budgeting
- JIT
- Kaizen (Continuous Improvement)
- Program management techniques
- Pricing
- Total quality management (TQM)
See also
- Management
- Control (management)
- Health management system
- Management accounting in the supply chain
References
Source of the article : Wikipedia
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