Question

Discuss the basic concept of Management Control Systems (MCS)

Answer 1

Basic Concepts

 A control system is a set of formal and informal systems to assist the management in steering the organization towards its goals. Controls help in guiding employees effectively towards the accomplishment of the organization’s goals. Establishing a control system in an environment of distributed accountability, reengineered processes, and local autonomy and empowerment is a challenging task.

 

Important Features of Management Control Systems

Nature of Decisions

Management control decisions are based on the framework established by the organization’s strategies. Management control decisions also take into account the quantity and quality of resources available. Within the constraints of the available resources and the policies of the organization, a manager should be able to implement activities that are best suited for a particular business unit. Decisions are made at the highest level, but their actual implementation may require some time. For instance, employees need time to adapt to a new technology.

Decisions are Systematic and Rhythmic

Decisions in management control process are systematic and rhythmic i.e. they are in accordance with the strategies and procedures laid down by the top management. Plans developed for a unit must encompass the whole organization, and the plans for each of the organization’s units must be coordinated with one another, so that there is a balance between different activities. For example, operations and distribution should be balanced with the sales program.

Strategy Implementation Tool

Management control helps an organization to move towards its strategic objectives. It is an important vehicle for the execution of strategy. It explains how strategies are implemented through management controls, organizational structures, human resource management, and culture. Effective execution can take place with the help of an efficient organizational structure, human resource management and culture. All these are influenced by the system of management control, and hence it is an important aspect of strategy implementation. Did u know?

What are the categories that correspond to the generic MCS components?

The criteria are organized into five categories that correspond to the generic MCS components. The five categories are: Organization, Planning and Budgeting, Accounting, Analysis, and Revisions/Access.