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Management control system Essay

In contemporary terms. This paper provides a critical review of findings from contingency-based studies over the past 20 years, deriving a series of propositions relating MASC. to organizational context. The paper examines issues related to the purpose of MASC., the elements of MASC., the meaning and measurement of contextual variables, and issues concerning theory development (Robert H. Channel 2003). On the effect of contextual variables on the design of Management Control System (MASC.). It is tests the effect of each contextual variable on the relationship between MASC. design and performance by using survey Instruments.

It Is demonstrates that contextual variables contribute to the design of MASC.. The following sections describe how to address each of these questions. What it is the organization Objectives and, more importantly, strategies that are derived from a good understanding of the organization’s objectives often provide important guides to the actions that are expected. A better understanding of objectives and strategies yields a larger set of feasible control alternatives, provides a better chance of being able to apply each alternative tightly, if so desired, and reduces the chance of creating behavioral displacement problems.

The understanding of what is desired is most valuable . If it is defined in

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terms of the actions desired, since the purpose devised also an understanding of some of management control is to Influence actions. One way to understand what must be controlled Is to Identify the key actions that must be performed In order to provide the greatest probability of success. Choice of controls ; as the behavioral constraints do not help solve lack-of-direction problems, it direction a significant problem is in the area of concern, managers will have to consider other forms of control.

In seceding among the many management control alternatives, managers should consider whether personnel or cultural controls will be sufficient. Personnel / cultural controls are first consideration . The most significant advantage of action controls Is direct form of control. Action controls also provide several other advantages. But action controls have a number of significant disadvantages. First, there is a severe feasibility limitation. Second, most action controls also often discourage creativity, innovation, and adaptation. Third, action accountability, in particular, can cause sloppiness.

Fourth, action controls often cause negative attitudes. Finally, some action controls, particularly those that require pre-Acton reviews are costly. Results controls have a few advantages . One common advantage Is feasibility. Another advantage Is autonomy. The final is compare to some forms of action control. It is usually relatively inexpensive. Results controls, have some major disadvantages First, results measures usually provide less than perfect indications of whether good actions had been taken. Second, when results are affected by anything other than the employee’s own skills and efforts.

Third, the performance targets set as part of result control systems often fulfill two important, but competing, control functions. Finally, not all employees like being empowered to produce results as they best see fit. Personnel / cultural controls have several advantages over results and action controls. They are usable to some extent in almost every setting; their cost is often lower than more obtrusive forms of controls; and they usually produce fewer harmful side effects. But the degree to which personnel and cultural controls are effective can vary significantly across individuals, groups, and societies.

They also have limitation in addressing motivational problems. Personnel / cultural controls are sufficient only if the employees in the particular roles being considered understand what is required, are capable of performing well, and are motivated to perform well without additional rewards or punishments. The environmental uncertainty, It has been long established in the literature that the external environment exerts a strong influence on the design of MASC. (Duncan, 1972; Fisher, 1996;Gordon & Maryanne, 1984; Sahara, 2002).

At a fundamental level the MASC. is designed to address decision- Akers informational needs, which are known to be influenced by the nature of the external environment. MASC. are an instrument used by organizations to reduce uncertainty and insulate against changes in the environment (Abernathy & Sidewinder, 1991; Falmouth, 1983; Thompson, 1967).. As organizations face increasingly uncertain environments they will tend to increase their use of new MASC. techniques, since these techniques have been developed in recent years and are therefore more likely be able to address contemporaneous organizational needs.

Activity based costing, balanced scorecard, economic value added, and benchmarking re examples of MASC. techniques that have been proposed as means of responding to the new challenges posed by the changing environment faced by contemporary organizations. The contingency theory suggests that effectiveness of MASC. is a function of the extent to which it has been tailored to match the organizational context (Hayes, 1977; Outlet, 1980; Sells, Renee & Young, 1995).

This means that there is no single best MASC. design but rather an adequate MASC. design for every combination of contextual variables. Prior research has found support to the contingency hypothesis. Governance (1988) has found performance was contingent pong a match between differentiation strategy, MASC. design and locus of control, while Abernathy & Sidewinder (1991) findings suggest that the match between task uncertainty and budget use is moderated by goal orientation. To some extent, my experience of worked at import department was confirmed by this point.

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