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Management
Management Control
Control
System
System (MCS)
(MCS)
Figure 1: Basic Components of Management Control System
Planning
Control- In a simple sense, control is the power to leverage people's way of behaving or
influence the activities that take place in an organization. In management process, controlling
is the 5th and final action, first introduced in 1916 that requires the organization to evaluate
actual result against desired result and deploy corrective measures if necessary (Fayol,1916).
System- System is a collection of interrelated procedures/ techniques/ structures/frameworks/
components/ parts working together in a sequential or simultaneous manner to accomplish its
goal. Usually all systems maintain input, output and evaluation mechanism.
Evaluation
Mechanism
The term 'Management Control' is used by Robert Newton Anthony first in 1965 (Otley,1994)
who was an scholar of Harvard Business School. According to him management control is a
sequence of steps through which managers make certain that all the resources are in place and
they are utilized constructively and systematically so that organizational objectives are met
(Langfield & Smith, 1997).
In 1988, to describe the function of control Anthony again suggested that managers
manipulate the stakeholders of an organization by management control to accomplish its
goals. It clearly matches with the statement that a manager's one of the prime responsibilities
is to control (Fayol,1949).
In 2001, Dr. Roland Spekle , Professor of Management Accounting & Control at Nyenrode
Business Universiteit described management control as a technique that manipulates the
behaviors of the members of the organization to achieve organizational goals.
Management control can be divided into two categories- one is results control and another is
personnel control (Cunningham, 1992). Results control maintains a formal approach where
MCS involvement is high and monitoring is high as well. On the other hand, Personnel
control usually maintains an informal approach where MCS involvement is low and
monitoring is low as well. Both approach is correct in their way of handling an organization
should not compromise with its performance but when it comes to the stakeholders, they
should be handled in more sensitive and amicable way.
MCS
Category
Simons (1987) suggested that there are four categories of control systems namely:
i. Belief systems
ii. Boundary control systems
iii. Interactive systems
iv. Diagnostic control systems
and they all are essential part of management control systems.
Management Control System makes helpful information available to managers that helps the
organization to operate in a better way (Ferreira & Otley,1999). Anthony (1965) argued that
MCS is different from operational control and strategic planning. MCS primarily focuses on
influencing the behaviors of stakeholders of the organization.
According to Malmi & Brown (2008), MCS is the combination of systems and devices that
managers exploit to make sure that the staffs' behaviors and decisions go side by side with the
objectives of the organization. He suggested that an MCS should monitor an organization
from every corner. Management control systems can be information-derived formal processes
or can be informal ones that managers utilize to modify changes in organizational actions
(Simons, 1995). Another term' Black Box' is used by Anthony & Young (1999) to refer MCS
because they claimed that the real qualities of an MCS can never be contemplated.
From the very beginning, Finance and Accounting play a number of essential roles in
management control system (Mouritsen, 1996). So terms like Management Accounting
Systems (MAS), Management Accounting (MA), Organizational Controls (OC) and
Management Control Systems (MCS) are sometimes used interchangeably (Chenhall, 2003).