Outside Influences on Management Control - Essay Example

Lecturer: Outside Influences on Management Control Introduction In a modern context all organizations are getting affected by social structures and cultures from which they emerge. In fact, organizations are complex and external influence on these organizations has always been fascinating for those who want to figure out assumptions on how organizations functions. Therefore, this project description will objectively describe the influence that external environment may have on management control (Horch). The influences will include debt crisis, Affordable Care Act, policy, economic conditions, changes in technology and demographics. These will be discussed against their effects on management functions such as planning, performance knowledge and budget. Effects of Policy on Planning To start with, policy is well understood as a principle that guides decisions and achieves rational outcomes in an organization. It serves as a statement of intent and is implemented as a procedure. Policies are usually formulated by senior officials within an organization to assist senior management in the decision making process (Sr and Swanson). In this respect, policies help in identification of certain programmes within an organization thereby promoting prudent spending priorities. This further helps in choosing among alternatives that are available and the impact that they may have on planning. Consequently, the intended effects of a policy on planning depend on government of a particular nation. For instance, the government may make a decision to increase the tax and this may prompt an organization to make changes in the planning process to cater for such a change. This helps to lessen the chances that the organization will face hardships and unexpected consequences. It is therefore imperative to assess the impacts of a given policy immediately it is enacted because different organizations have different complexities. Economic Conditions on Budgeting Another major factor that determines management control is the economic conditions of an organization. This implies that the state of economic condition of an organization dictates the way budgeting is done. This is because economic conditions change over time which goes hand in hand with business organizations and their management cycles. Budgeting becomes sounder when economy of a country is expanding and this impact positively on the management control of an organization (Donovan). On the contrary, economic conditions can be negative when the economy of a country is not progressing. Due to this, it is important to put into considerations factors such as unemployment levels, productivity, inflation, exchange rate as well as monetary and fiscal policy. In addition, there are so many economic indicators that define the state of economy including Gross Domestic Product (GDP) growth rates, inflation rates and more. For instance, reduction of spending may result in a higher debt to GDP ratio. This forms a fundamental measure of burden of debt carried out by an organization and its employees. These factors will help in assessment of budget and potential changes in it. For this reason, the managers are supposed to be keen on matters that pertain to government reduction of budget deficits when economic conditions of a country are adverse. Some of the policies that accompany this include tax increases. Consequently it becomes important for managers to regulate spending on projects, welfare and other social spending. Changes in Technology and Performance A successful organization must also put performance of employees ahead of its functions so as to achieve quality results as anticipated. For any management to have effective employees there must be a combination of conducive work environment and good skills. In this respect, technology is one major factor that affects performance. In fact, technology improves performance through increased out up a minimal effort (Broadhurst and Machon). Where modern technology is concerned, the amount of energy that an employee is supposed to expend on a job becomes less compared to when they use manual means. This improves motivation of employees to work with less effort. There are many benefits associated with automating of employees to improve management process. This involves organization alignment whereby management software allows the manager to capture departmental, organizational and divisional goals. This helps the supervisors to see how employee’s goals are contributing to the organization and identify any mistakes at a glance. Also it may involve listing job skills and their descriptions and creating learning and development materials. This makes it easier for supervisors to give feedback to their employees in various ways. This way, the manager can proactively identify trends, areas of strength and potential organizational weaknesses, and putting the right development programs learning practices in place to address them in the most effective way. Changes in Demographics In an organization, demographic trends affect the labor force (OECD). Demographics revolve around examination of age, race, gender, class, social status, ethnicity e.t.c. In this case the manager of an organization is supposed to use knowledge when dealing with employees. In fact these demographic differences are bound to bring major differences in interrelations and this may pose a major threat to employment outcomes. This becomes even clearer where the manager is showing favourism towards a given group of employees either because they belong to his or her tribe or race. The basic findings suggest that in some American countries for example, some black employees will feel out of place to work for white managers .On the contrary, some white employees may feel out of place to work for back managers, but in some places this becomes only part of the story. On the other hand promotion and status are a part of management whereby if subordinates work for many years within the same organization without promotion they become demotivated. In this case for instance where the manager is a different race, both blacks and whites are likely to be dismissed and they are less likely to be re invited. Gender differences also count when it comes to management control this becomes obvious when the interviewee is youthful and a female giving her a higher chance to get a job than her male counterparts. The Affordable Care Act The patient protection and affordable care act was introduced by United State federal statute on March 23, 2010. It expands affordable quality and health insurance services which also lowers the insured rate by also enhancing both public and private insurance coverage. This in turn helps managers to make organizations to reduce the health care of individual employees and the government in general. This law intensifies that all managers must ensure registration is aimed to reduce cost and lead to improved outcome of healthcare (Tate). This is possible through increased competition in which involves incentives and regulations to streamline the health care system. In this case, more people within an organization pay less and the premiums become more transparent and stable due insurance regulations. Studies reveal that if this is affected, premium per person is the US would increase by 10% to 13% and that more than half of these people would receive subsidies which in turn would decrease the premium paid. Debt Crisis Management control cannot be successful without proper debt management. This is effected by laying down important strategies that are aimed at supporting future growth and development. The most sound way to do this is by targeting the causes of deficits within an organization. In an organization debt crises occurs when the debts become unpayable (Cline). Also the same scenario may happen when the creditors refuse to lend to an organization on presumption that the organization in question may not honour the obligation promptly. The effects of debt crisis are numerous for instance when international debt crisis begins, monetary services organizations including banks are the most hard hit. This implies that large sums of money are lost and the only way to recoup is by increasing loan interest rates. The organizations also lower the deposit rates. In fact this becomes a negative effect on the wider international economy. Consequently government and organizations that are reliant on countries that are experiencing these crises as trade partners also end up in credit downgrades. In return, the governments of the affected countries may try to fight this by raising taxes. A bigger impact may be felt if more countries end up pulling their trade partners into crises. In fact this can lead to economic growth stagnation due to the need to reduce importations and unemployment may rise to high levels. Additionally most organizations will be unable to create employment. Finally most investments that would be aimed at alleviation of poverty and social issues will instead be used for payment of debts and this is an indication of negative growth. Conclusion To conclude, it is clear that running businesses would be simple if the managers responsible had to think of what goes outside their organizations. This will help them identify external changes that may influence the success of an organization either positively or negatively. To this end they should be in a position to know that some of these changes may present threats to an organization. For instance new government legislation may impose regulations on organizational management. Other threats may involve stiff competition based on modern forms of technology. Conclusively this is what is likely to happen in organizations during management control. References Broadhurst, Susan and Josephine Machon. Performance and Technology. Amazon: Palgrave Macmillan, 2011. Cline, William R. Resolving the European Debt Crisis. London: Peterson Institute, 2012. Donovan, Sandy. Budgeting. Amazon: Lerner Publications, 2005. Horch, Nils. Management Control of Global Supply Chains. BoD – Books on Demand, 2009. Document. OECD. Jobs for Youth. Finland: OECD Publishing, 2008. Sr, David L. Edgell and Jason Swanson. Tourism Policy and Planning. Carolina: Routledge, 2013. Tate, Nick J. ObamaCare Survival Guide. Florida: Humanix Books, 2012. Read More