Management Control Systems as Packages - Essay Example

?[Your full full November 08, Management Control Systems as Packages Introduction Effective management is essential for every organization to improve its levels of productivity and performance. In this regard, companies make use of management control systems to support organizational objectives, as well as to control processes and improve organizational performance. Without having a proper mechanism for controlling organizational processes, it is impossible for a company to excel in market or achieve the desired set of goals. This essay will include discussion on the importance of using management control systems (MCS) as packages in a company. There will also be a discussion on some of the key challenges and difficulties that companies may face while using management control systems as packages. What are Management Control Systems? As Lawson states, “management control systems are methods of collecting information that are used to guide and direct the behavior of staff members and management in order to achieve a company's goals” (1). Management control system is basically a mechanism companies use to collect information required to manage and control the activities regarding accomplishment of organizational goals and objectives. Management control systems include a set of guidelines and techniques for companies that can be used to operate business processes and activities effectively and efficiently. Both managers and employees make use of those directions or methods to bring improvement in their individual and departmental performances, as well as to achieve organizational goals. In today’s world of competition, companies need to adapt quickly to the use of technology in order to come in line for competition with other companies. In this regard, it is the need of today for the companies to adopt the use of management control systems to benefit from ongoing changes instead of leaving behind in the race of competition. Employees and managers need to use their knowledge regarding change to react positively to the changes in the internal and external business environment to improve organizational level of productivity and profitability. They need to link strategic planning and organizational processes by using the operational guidelines of management control systems. The focus of management control systems is not just on a single form of control, such as, performance measures, rather it covers multiple control systems that work together to achieve organizational goals. Therefore, management control systems can be used to direct all administrative matters, as well as to manage the issues of employees. Management Control Systems as Packages As Sandelin states, “the functionality of a control package depends on internal consistency, specifically on the reciprocal linkages of design and use between a primary mode of control and other control elements” (324). In today’s world, the needs of every company regarding internal controls and functionality of different departments are different from every other company. This shows that proper functionality of a management control package is highly dependent on a company’s internal level of operational consistency, as well as on links between different internal controls and systems. The need to use management control systems as packages can be understood by the fact that using such systems in isolation can lead to various administrative issues and organizational problems because all organizational systems and processes are interrelated. Therefore, it is the need of companies to use management control systems as packages not only to make an efficient use of organizational systems but also to ensure consistency of processes. According to Sandelin, the variety and operational efficiency of a control package is totally dependent on the way employees and managers of a company takes care of its functional requirements and demands (324). This statement shows that use of control package is not same for every company because the internal control requirements vary from company to company. Therefore, companies need to design their control packages in accordance with their internal systems’ requirements in order to make an efficient use of them. In context of using management control systems as packages, lets us take example of a company’s employee benefit program which is linked directly with the accounts system of a company. Now, operating the activities of both these departments in isolation can lead to deadlocks and delays in organizational processes. The reason is that a company can never design a proper employee benefit program without getting timely input from the finance department. Employee benefit programs include such factors that need direct input from the finance department to become applicable, such as, house rent allowance, increase in salaries, and car facility. If a company implements an employee benefit program without having the resources, the program can fail which will consequently cause employee dissatisfaction. Therefore, companies need to use information from finance department while preparing employee benefit programs because of the interrelationship between these departments. Not only the above-mentioned departments, all business processes of a company have some direct or indirect link between them which speaks for the use of an effective management control system for proper functioning. Companies need to develop and implement the use of such management control systems that should be able to meet the needs of every department and business process. They can use both accounting and non-accounting controls to bring improvement in the level of organizational performance. According to Abernethy and Brownell, “non-accounting controls, especially personnel forms of control, contribute to organization effectiveness, particularly where task characteristics are not well suited to the use of accounting-based controls” (233). In organizations, almost every task and every goal that a company sets to achieve has something to do with the accounting system. Therefore, companies need to use control systems as packages instead of using them in isolation not only to keep the interdependence of all business processes intact, but also to run them in a systematic manner. Challenges in Using Control Systems as Packages Although there are many benefits of using management control systems as packages, but managers first need to eliminate all challenges and difficulties related to the of such systems in order to reap all benefits. Some of the main challenges in using management control systems as packages include cost of implementing the package in the organization, knowing the systems to include in the package, and employee skills regarding use of the system. Let us discuss each of these challenges in some detail. Cost of Implementation Cost of implementing management control systems as packages is one of the main challenges that companies usually face while planning for it. A single management control system is comparatively less expensive to implement as compared to a system implemented in the form of a package. To minimize the costs of development and implementation, companies need to design a system that should not put much load on the finances of the company. Knowing the Systems to Include Another key challenge in this regard is the implementation of management control systems as a package. Sometimes, it becomes difficult for the managers to know which systems they should include in the package. To overcome this issue, managers need to be able to understand the relationships between different controls and processes in order to sort out those systems that are accounting-centric and must be included in the system. Inclusion of irrelevant processes adds to the cost of implementing the system. Therefore, companies should understand the interdependence of different business controls and processes to know whether they need to design an accounting-centric package or not. Employee Skills Regarding Use of the System Another challenge in using management control systems as packages is related to the skills of employees. Companies need to train their employees accordingly in order make them able to use the system efficiently. Conclusion Management control systems refer to the process of information collection that needs to be used to carry out organizational activities and processes properly. A management control system helps managers, as well as employees in performing their assigned job responsibilities using the information and guidelines stored in the system. Management control systems deal with all systems and processes of a company that may include human resource activities, accounting processes, development of employee benefit programs, performance appraisal, strategy formulation, and management of organizational goals. However, companies need to use these systems as packages to increase organizational efficiency and performance. Works Cited Abernethy, Margaret, and Peter Brownell. “Management control systems in research and development organizations: The role of accounting, behavior and personnel controls.” Accounting, Organizations and Society 22.3-4 (1997): 233-248. Lawson, Simone. “What Are Management Control Systems?.” Wisegeek.com, 21 Oct. 2013. Web. 08 Nov. 2013. Sandein, Mikko. “Operation of management control practices as a package – A case study on control system variety in a growth firm context.” Management Accounting Research 19.4 (2008): 324-343. Read More