Control system definition pdf

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 control system definition pdf desired strategies.

However strategies get implemented through management controls, organizational structure, human resources management and culture. The term black box is used to describe an operation whose exact nature cannot be observed. 1972 article “On the idea of a management control system. According to Maciariello et al. The practice of management control and the design of management control systems draws upon a number of academic disciplines.

Management control involves extensive measurement and it is therefore related to and requires contributions from accounting especially management accounting. Second, it involves resource allocation decisions and is therefore related to and requires contribution from economics especially managerial economics. Management Control as the process by which managers influence other members of the organization to implement the organization’s strategies. In this case, management accounting refers to a collection of practices such as budgeting or product costing. But management control systems refer to the systematic use of management accounting to product reporting and organizational controls is a broader term that encompasses management control systems and also includes other controls such as personal or clan controls.

Finally organizational controls are sometimes used to refer to controls built into activities and processes such as statistical quality control, just-in-time management. Traditionally, most measures used in management control systems are accounting-based and financial in nature. This emphasis on financial measures, however, distracts from essential non-financial factors such as customer satisfaction, product quality, etc. Furthermore, non-financial measures are better predictors of long-run performance. Consequently, a management control system should include a comprehensive set of performance aspects consisting of both financial and non-financial metrics. The inclusion of non-financial measures has become an essential characteristic of current management control systems, to the point of becoming the main criterion in distinguishing different systems. Therefore, depending on the balance between financial and non-financial measures, a management control system may be characterized as finance-oriented or operations-oriented.

Finance-oriented control systems are primarily based on financial accounting data, such as costs, earnings or profitability, whereas operations-oriented control systems are primarily based on non-financial data that focus on operational output and quality, for example service volume, employee turnover, or customer complaints. Management Control Systems, Chicago, Mc-Graw-Hill IRWIN. Simons, 1995, Levers of Control, Boston: Harvard Business School Press, p. On the idea of a management control system: integrating accounting and management control. Journal of management Studies 8. Management control in contemporary organizations: towards a wider framework, Management Accounting Research, 5, 289-299. Management Control Systems – Using Adaptive Systems to Attain Control, New Jersey, Prentice Hall.

Facebook Comments