ASSIGNMENT

Effectiveness of Management Control System in an Organization

Introduction
Management control is a processes of assuming that resources are obtained and used
effectively and efficiently in the accomplishment of the organizations objectives.
“Management control seeks to compel events to conform to plan.”
-Billy, E.Goaz
Control is a fundamental necessity for the success of a business. It is the function of the
management that helps realisation of the business objectives. It is through control that the
management assures itself that what the organization does conform to management plans and
policies. Management control is that function of managers, next in line to top level, by which
they ensure that the objectives of the organization are achieved. It is not only a process of
comparison of actual performance with the objectives but to initiates steps to achieve the
objective if not achieved. Since Management control involves the behaviour of human
beings, the relevant principles are those drawn from such disciplines as social psychology and
organizational behaviour rather than from economics mathematics or any disciplines.
Management control systems are tools to aid management for steering an organization
toward its strategic objectives and competitive advantage. 

Effectiveness of management control system in an organization

A management control system (MCS) is a system which gathers and uses information to
evaluate the performance of different organizational resources like human, physical, financial
and also the organization as a whole in light of the organizational strategies pursued.
Management control system influences the behaviour of organizational resources to
implement organizational strategies. Management control system might be formal or
informal.

Characteristics of management control system

1. A total system :As it covers all the aspects of the company.
2. Monetary standards :MCS is built around a financial structure and all the
resources and outputs are expressed in terms of money.
3. Definite pattern :The process follows a definite pattern and time table.
4. Coordinated system : Is fully coordinated and integrated system.
5. Line managers : figures themselves are nothing more than marks on pieces of
paper.
Effectiveness of management control system in an organization :

 Document operational objectives – You are able to outline what the organization
wants to achieve in terms of short- and long-term goals.
 This could be directly related to financial performance, but it could also entail social
objectives such as waste reduction.

 Document the operational strategies and policies – Of course, you also need to
ensure you are aware of the how. You will need to document the policies in place in the
organization, the different equipment and resources needed, and the strategies you
implement. This could deal with things like employee management (salary, working hours,
etc.)

 Assess the performance of organizational processes –

Then need the tools to assess the performance of what you are trying to achieve and
how. This includes gathering information from different sources, whether financial or non-
financial. We’ll look at these more in the next section. At this point we are looking closer to
the organization and checking what it is doing and how. we are detailing and outlining what
the result of your policies and strategies are.

 Compare performance in relation to the objectives and policies 

Finally, we compare the actual performance to the objectives you set at the start. You can
clearly notice this is the essence of the business system. We have the structures in place, we
add the resources, and we see what the result is, after which we can check what we got in
comparison to what you wanted to get.

Benefits of management control system

 focus largely on different ways operational efficiency is enhanced and improved.

 MCS can reduce risks. The organization will remove non-conformity by ensuring
the actual performance and results relate to the main objectives of the
organization. The organization doesn’t just set goals and then pursue them blindly, but
has systems in place to ensure the processes are moving the organization towards the
objectives.
 The framework also improves our organization’s ability to plan future actions.
The information flows faster under the MCS system, as each part of the organization’s
process is being monitored and analysed. The enhanced information flow makes it
easier to plan and organize future processes and ensure objectives are set properly.
 Without the kind of information MSC provides, we would find long-term planning
difficult, as we wouldn’t have the right facts or the control to guarantee you are aware
of the current situation and on top of future predictions. 
 Organizational efficiency also improves in the form of better facilitation of co-
ordination.
 For any business to succeed, a good communication between the management and
other parts of the business is the key. With MSC in place, the workers, their tasks and
objectives are aligned with the management’s tasks and objectives.
 The control systems in place create a middleman between the management and the
employees and feeds information to both directions.
 The manager, become more aware that sales numbers are increasing due to a specific
result, you can use the information to tweak and perfect the system further. On the
 other hand, this also improves employee motivation and gives them feedback on the
things they are doing right.
 Managerial problems are much easier to notice.
 Each organization will face problems related to the other managerial functions of
planning, staffing and organizing, but with a proper control system in place, the
impact of these can be limited. We gain more information, you receive early
notifications when the management is not working to its standard, and we are able to
remedy the situation before it gets worse.
 Furthermore, supervision becomes much easier under the systematic control system,
since the deviations are easier to spot. 
 supports organizational decentralization,

 The system creates an environment of knowledge and understanding of the

objectives. A key part of the framework is the proper communication of the goals and
policies in place to subordinates. Since the subordinates and lower level managers are
on top of the current situation and are fully aware of the expectations, they can have
more confidence in doing the right things.

Areas of control

Managerial control, as we know, is an important process in which accounting information is

used to accomplished the organizations objectives. Therefore the scope of control is very
wide that covers a broad range of management activities.

1. Policies control

The success of business hangs on formulation of sound policies and their proper
implementation.

2. Control over organization

If any problem or conflict arises, the management control attempts to remove the causes
of such friction and rationalize the organisational structure as to ensure its efficient
working.

3. Control over personnel

The personnel manager is responsible to draw a control plan for having control over the
personnel of the concerns.

4. Control over wages and salaries

5. Control over costs

The cost accountant who is responsible to control cost set, cost standards, labour material
and overhead.

6. Control over techniques

It implies the use if best methods and techniques so as to eliminate all tge wastage in
time, energy and material.
 7. Control over capital expenditure

various projects entailing huge amounts require control.

8. Production control
9. Overall control

Master plan is prepared for over all control and all the concerned departments are made to
involve in this procedure.

10. Control cover external relations

11. Control over research and development

Conclusion
Essentially means that a management control system is a tool businesses can use to measure
its performance and to compare its desired objectives against its actual objectives. By
establishing a management control system, the business makes it easier to align individual
decision making with the larger organizational objectives. The system is rather
comprehensive, creating a framework in which not only are the internal aspects controlled
and monitored, but the external behaviours and environments are also looked after. Since the
framework doesn’t require constant monitoring by the manager, the subordinates are able to
make decisions and solve problems on their own. The motivation and the belief to know you
can do it is much deeper under the system, since you know the MSC will pick up any key
deviations and help you correct them.

References
 Management control system -Ravindra Vadapalli
 https://en.m.wikipedia.org
 https://www.cleverismt.com
Submitted by
Nadeer PN
th
4 sem MBA