The Concept of Management Control System and Its Relation to Performance Measurement.

The Concept of Management Control System and Its Relation to Performance Measurement

MID EXAM MANAGEMENT CONTROL SYSTEM

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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: enrollment@president.ac.id, 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.

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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.