Management Control System – Why You Should Know About This
What to include in a management control system
A management control system is made up of various elements. Here is an illustration of how each component might function in a smaller company, like a restaurant:
Clear managerial assignments
There are likely to be managers with varying responsibilities the bigger the company. It’s critical to comprehend the goals of each department so that managers can be held accountable for achieving goals.
Example
Two managerial categories are made by a restaurant owner, one for the kitchen and one for the dining area. The service manager is in charge of the dining room, while the executive chef oversees the kitchen. For the restaurant to be profitable, both must be successful. Each has different daily and monthly goals, manages a different staff, and has a different budget.
Bureaucratic controls
The policies and procedures of a business operation designed to increase effectiveness and preserve organization are known as bureaucratic controls. They outline the chain of command and assign duties to each operation’s division. Well-designed bureaucratic controls provide as many answers up front as possible, enabling problems to be resolved in a systematic way. Establishing bureaucratic controls early in management control systems is crucial for giving employees and management a shared vision of what the future should entail.
Example
Each new line cook and server is given a handbook when they begin work. Some details, like vacation policies, restaurant history, and conduct codes, are consistent. However, a lot of the details might vary depending on the division they work in. The managers, schedules, and expectations for the cook and the server may differ. The employees feel prepared to carry out the tasks their various managers have given them because of the transparent bureaucratic controls in place.
Financial controls
The objectives that a business sets for financial controls are growth and profitability. For instance, this might be the cost of production or the profit from sales. Managers closely monitor financial data in management control systems to spot changes that are necessary to maintain alignment with the organization’s objectives.
Example
The service manager and chef both have distinct financial objectives for their management control systems. Goals for average check total and nightly revenue are sought after by the service manager, who also keeps an eye on labor costs. The chef determines menu prices that minimize loss while maximizing profit while avoiding turning away an excessive number of diners.
Quality controls
Quality checks make sure that a company’s goods or services adhere to its own standards. By ensuring that their clients and customers are happy, they ensure that the sales they are making will contribute to their continued growth.
Example
To determine whether diners are receiving good service, the service manager may try to speak with each table once during a meal and review each server’s tip averages. The executive chef may check online reviews to see how diners feel about various preparations or taste dishes throughout the evening to ensure that cooks are doing them correctly.
Normative controls
Behavioral patterns known as normative controls unify a team’s approach and attitude toward goals. Compared to other types of controls that rely on success indicators based on numbers, they are frequently less formal. You might not be able to address every aspect of behavior in the workplace in writing, but by repeating certain behaviors, you can encourage them. There are two types of normative controls to consider:
Example
When one cook calls in sick, it might be accepted practice for the team that another cook will voluntarily forfeit a day off. This might be due to the fact that one cook working two stations is much more difficult than one server managing additional tables. To foster a culture of timeliness and exceeding expectations, a restaurant’s organizational culture norm may require all staff members, including cooks and servers, to arrive at work fifteen minutes early.
What is a management control system?
Businesses use management control systems (MSCs) to track their progress toward productivity, financial, or operational objectives. They continuously assess a company’s performance to determine whether a desired result is likely. Progress is typically measured using business software or employee-collected data in easily understood metrics like dollars, hours, or units of product.
Businesses frequently have independently run departments with distinct duties that are necessary for the success of the entire company. Each of these departments is intended to be adaptable to management control systems. A single business may utilize multiple management control systems simultaneously.
A management control system aids managers in identifying areas where daily operations can be improved. The system should provide clear feedback that identifies the specific roadblocks impeding goal achievement and offers workable solutions. Ideally, this feedback would aid in problem prevention as opposed to problem diagnosis.
Tips for management control systems
Your company might achieve its goals more frequently and anticipate problems if the elements of a management control system are in place. Here are some pointers for maximizing your management control systems:
Make informed comparisons
As you gather data for your quality and financial controls, take into account how to get the most out of it. Your company might be working to increase productivity, compete with rivals, or concentrate on producing the same amount of goods more effectively. To verify each department’s success, you might need to modify the numbers you aim for.
Understand variation from goals
Finding the root of a deviation from a goal should be your first priority. The management control system’s goal is to identify what’s causing the difference, whether you’re exceeding sales targets or falling short of quotas.
Plan to correct variations
Plan for the future using the knowledge you have gained from analyzing variations. Perhaps you can increase sales or you realize that a supply shortage that could have been avoided decreased your productivity. A small adjustment to the plan can reduce errors and increase success.
Repeat the process
Even if your business is reliably guided by excellent management control systems, it is still crucial to stay involved with them. Your bottom line might start to change if the cost of the materials you order changes or if employees start putting in more overtime. Maintaining consistency with the systems you use will help you navigate these changes more quickly.
FAQ
What is meant by management control?
To achieve organizational goals, management control refers to the methods used to restrain the behavior of individuals or groups within an organization, requiring them to take certain actions while refraining from others.
What are the 4 types of management control?
There are five different types of management control systems: (i) administrative controls, (ii) reward and compensation controls, (iii) cybernetic controls, and (iv) planning controls.
What is the role of management control?
The good conduct demanded of managers and subordinates, such as loyalty to the organization and respect for the organizational culture, would serve as an example of an informal control system. The organization has established clear policies, procedures, and guidelines that explain the various managerial requirements.
