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Summary Management Control Systems
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Summary of chapters 1 -6 & 8-13 of the book Management Control Systems
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Management Control SystemsChapter 1 – Introduction to management control
The goal of MCS is to implement organizational strategies. It is a systematic
process by which the organization’s higher-level managers influence the
organization’s lower-level managers to implement the organization’s
strategies.
Top-down role of management control systems is to help decentralized
managers decide:
1. What decisions to take
2. What results to achieve
3. Where to lead their employees and how to use their resources
Bottom-up role of MCS is to inform senior managers about:
1. What decisions will be taken or have been taken
2. What results will be achieved or have been achieved
3. Where employees will be led or have been led and which resources
will be used or have been used.
The general managerial functions
1. Planning: concerns the decision that managers need to make about
what the organizational participants need to do in the future.
(Investment decisions or plans to guide others)
2. Organizing: concerns with the physical, human and financial
resources in such a way that the plans can become operational, and
the planned actions can be taken.
3. Staffing: concerns with the managerial responsibility to ensure that
the organization employs the right people to perform the actions.
4. Leading: concerns the managerial function of ensuring that
organizational participants follow the plans and planned activities.
5. Controlling: suggesting the importance of establishing whether the
actions and activities are performed according to plans.
Management control goes beyond these functions in three ways.
1. MC is a systematic process by which the organization’s higher-level
managers influence the organization’s lower-level managers.
2. MC is about different layers in the organizational hierarchy. MC
connects different hierarchical levels to help the organization to
realize its strategies.
3. MC is not just about managerial decisions and actions; it is about the
tools and techniques that managers apply in their execution of MC.
MC is about influencing the behavior of humans in organizations in such a
way that this behavior becomes goal-congruent (helps the organization to
1
, implement its strategies and to reach its goals). Although, not always clear
what goal-congruent is.
Perfect congruence between individual goals and organizational goals does
not exist. One reason is that individual organizational participants may want
as much compensation as they can get while the organizations maintains
that salaries can go only so high without adversely affecting profits. A
second reason is that MC is costly
Sources of managerial motivation:
1. Managers are motivated by goals that they are asked to achieve
2. Managers are motivated by rewards that they may get from their
efforts
3. Managers are motivated by the social context in which they work.
Span of control = how many managers are reporting to the board.
2
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