Management Control System Essay

1388 words - 6 pages

Introduction
Management control system (MCS), as a vital part of an organization, which purpose allows organizations to ensure that their activities achieve the objects they desire. The process of designing and improving MCSs requires addressing three basic questions. What is desired? What is likely to occur? And What is the effect of contextual factors ?Then managers must address each of these questions. What controls should be used?
In recent years, contingency-based research has maintained its popularity with studies including these variables but redefining them in contemporary terms. This paper provides a critical review of findings from contingency-based studies over the past 20 ...view middle of the document...

One way to understand what must be controlled is to identify the key actions that must be performed in order to provide the greatest probability of success.
Choice of controls - as the behavioral constraints do not help solve lack-of–direction problems, it direction a significant problem is in the area of concern, managers will have to consider other forms of control. In deciding among the many management control alternatives, managers should consider whether personnel or cultural controls will be sufficient. Personnel / cultural controls are first consideration .
The most significant advantage of action controls is direct form of control. Action controls also provide several other advantages. But action controls have a number of significant disadvantages. First, there is a severe feasibility limitation. Second, most action controls also often discourage creativity, innovation, and adaptation. Third, action accountability, in particular, can cause sloppiness. Fourth, action controls often cause negative attitudes. Finally, some action controls, particularly those that require pre-action reviews are costly.
Results controls have a few advantages . One common advantage is feasibility. Another advantage is employees’ behaviors . it can be influenced even and while they have significant autonomy. The final is compare to some forms of action control. It is usually relatively inexpensive. Results controls, have some major disadvantages First, results measures usually provide less than perfect indications of whether good actions had been taken. Second, when results are affected by anything other than the employee’s own skills and efforts. Third, the performance targets set as part of result control systems often fulfill two important, but competing, control functions. Finally, not all employees like being empowered to produce results as they best see fit.
Personnel / cultural controls have several advantages over results and action controls. They are usable to some extent in almost every setting; their cost is often lower than more obtrusive forms of controls; and they usually produce fewer harmful side effects. But the degree to which personnel and cultural controls are effective can vary significantly across individuals, groups, and societies. They also have limitation in addressing motivational problems. Personnel / cultural controls are sufficient only if the employees in the particular roles being considered understand what is required, are capable of performing well, and are motivated to perform well without additional rewards or punishments.
The environmental uncertainty, It has been long established in the literature that the external environment exerts a strong influence on the design of MCS (Duncan, 1972; Fisher, 1996;Gordon & Narayanan, 1984; Sharma, 2002). At a fundamental level the MCS is designed to address decision-makers informational needs, which are known to be influenced by the nature of the external environment. MCS are an...

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