Mid Exam Management Control System.docx

The Concept of Management Control System and Its Relation to Performance Measurement MID EXAM MANAGEMENT CONTROL SYSTEM

Arranged by: Kristina Kitty 008201700001 Accounting 3 2017

President University Jababeka Education Park, Jl. Ki Hajar Dewantara, Kota Jababeka, Cikarang Baru, Bekasi 17550 – Indonesia Phone (021) 8910 9762-63, Fax (021) 8910 9768 Email: [email protected], http://www.president.ac.id

2019

Regarding the definition of MCS, there is the only agreement in the current literature is that the term itself was first outlined in the seminal work of Robert Anthony (1965). He defined management control as “the process by which managers assure that resources are obtained and used effectively and efficiently in the accomplishment of the organization’s objectives”. Malmi and Brown’s MCS as a package appears to have limited potential, which is probably caused by the additive nature of its origin. That might be why the authors of contemporary contextual frameworks of MCS like go back to Simons’ notion of Levers of Control. They suggest considering belief systems as a form of social controls and not as a standalone control system. The remaining three levers of control formulated by Simons have been reorganized as well, but stayed parts of the basic four control systems, in Fig. 5 represented by rectangles. Diagnostic control systems are part of the operational performance control systems. Interactive control systems correspond to a control system called strategic performance management control. Boundary control systems have been separated into two control systems, one at the operational level and one at the strategic level. Finally, the intention of managers imposing MCS and the actual purpose perceived by employees are signified in the model as well.

Contrary to the above mentioned authors, Ferreira, Otley (2009) claim the PM field to be more important to MCS. However, in our view, this has become a more restrictive term than was the original intention and we prefer to use the more general descriptor of performance

management systems (PMSs) to capture an holistic approach to the management and control of organizational performance. The first research question of this article asked about the prevailing notion of the term MCS. The second chapter described the broadening of the MCS notion over time. Nowdays, MCS is perceived as a set of controls which managers have at their disposal to steer the organization towards the predetermined goals. In addition, more contemporary frameworks emphasize the role of cultural and social controls, as well as the intentions of managers and actual perception of employees regarding the introducted MCS. The second research question of this article asked whether there is any difference between the term MCS and the similiarly used term PM. Because performance is usually perceived as achieving organizational goals, it is obvious that there has to be significant overlap between PM and MCS. Both systems have the same ultimate objective in supporting achivement of the company’s goals and may be, and sometimes are, regarded as synonyms. The term MCS is preferred to PM when it comes to emphasizing the structure of the system. On the contrary, the term PM (or even Performance Management) is preferred to MCS when, primarily, the behaviour of the system in concerned.

I.

Introduction to MCS Management control is the back end of the management process. This can be seen from the various ways in which the broad topic of management is disaggregated. The causes of the needs for control can be classified into three main categories there are lack of direction, motivational problems, and personal limitations. Four prominent avoidance strategies are activity elimination, automation, centralization, and risk sharing. For the control problems that cannot be avoided, and those for which decisions have been made not to avoid, managers must implement one or more control mechanisms that are generally called management controls.

II.

MCS Alternatives Pay for performance is a prominent example of a type of control that can be called result control because it involves rewarding employees for generating good results. The implemantation of results controls involves four steps there are defining the dimension on which results are desired, measuring performance, setting performance targets and providing rewards.

III.

Control Problems This chapter provided an overview of the most direct type of controls, action controls, which take any of several different forms there are behavioral constraints, preaction reviews, action accountability, and redundancy. Action controls are the most direct type of management control because they ensure the proper behaviors of the people on whom the organization must rely by focusing directly on their actions.

IV.

System Tightness This chapter is explain about tight result control, tight action controls, and cultural controls. How tightly to apply management controls is a major management decision that has received relatively little attention in the literature. Effective implemantation of tight control requires that management has a good understanding of how one or more of the control objects- results, action culture – relate and contribute to the overall organizational objectives.

V.

System Control Cost

This chapter is explain about direct cost and indirect cost. MCSs provide one primary benefit there are a higher probability that employees will pursue organizational objectives. The direct costs of an MCS include all of the out of pocket money, monetary costs required to design and implement the MCS. Indirect costs of control caused by any of a number of harmful side effects, including behavioral displacement, gamesmanship, operating delays and negative attitudes.

From my opinion the journal still have many weakness like just put citation from other journal. My suggestion for this journal is more do it research and make this journal more comprehensive. My critics for this journal is make more specific of MCS and PM concepts. So, my argument about this journal is yes, because for do it MCS must see the PM of employee.

References

Kenneth A. Merchant, Wim A. Van der Stede. (2012). Management Control Systems 3rd. Harlow: Pearson. Siska, L. (2015). The Concept of Management Control System and Its Relation to Performance Measurement. Procedia Economics and Finance 25, 141-147.