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What Are Management Control Systems?

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  • Written By: Simone Lawson
  • Edited By: Jenn Walker
  • Last Modified Date: 30 March 2014
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    Conjecture Corporation
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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. Such a system may use a variety of techniques to evaluate various areas to improve performance and productivity. Some areas addressed by management control systems may include accounting methods, employee incentive programs and performance measurement.

Accounting methods are often implemented and evaluated as part of a management control system. To control financial activities within a company, the area may be broken down into financial and managerial accounting. Financial accounting generally focuses on internal issues, such as reporting sales costs, while managerial accounting may focus on methods for determining product costs.

While both areas cover business accounting issues, their methods of application generally differ, and separate systems implemented by a management control system may aid in ensuring reports remain accurate and impartial. Managerial accounting is typically responsible for providing management with information on controlling costs and improving the production process. Managerial accountants may also provide cost information on new products, make pricing decisions and monitor actual and budgetary costs.

General financial accounting within management control systems aims to focus on a company's internal accounting issues. Financial accounting typically handles payroll and human resource issues affecting employees within the company. Accounts in this area may also manage employee costs and reimbursements under a control system.

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A company's department directors also may benefit from the organization provided by management control systems. Directors often are responsible for coordinating activities with human resources to create employee incentives and to hire upper-level managers. Under this type of system, directors can better analyze production progress, provide appropriate job assignments and more effectively communicate with all company employees.

Measuring performance also is an important component of management control systems. Directors and upper-level managers generally aim to provide fair and effective employee evaluations. Control systems help reviewers develop performance evaluations that provide useful and encouraging employee insight and accurate productivity analysis; these evaluations may even be used as an opportunity to provide performance-based incentives.

Complete and accurate performance evaluations may be one of the most important methods of determining an employee's strengths and retaining the most competitive and efficient employees. Management control systems allow for flexibility and outside factors to affect the evaluation process. For example, if external extenuating circumstances negatively affect sales or productivity, an evaluation may account for this factor and include this as part of the evaluation process.

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Discuss this Article

anon160019
Post 4

Management consists of getting things done through others. A manager is one who accomplishes the objectives by directing the efforts of others.

anon155954
Post 3

Management control system provides that additional opportunity for the management to influence the quality and performance of the end result.

KittenTucker
Post 2

It's so true that outside factors can affect sales or productivity. For example, if you're waiting for materials to be received for a job you're working on, there's a good chance the job won't get finished when it's supposed to. Has anyone ever had that happen to them? Do you feel the management control system used at your company allows for enough flexibility in this case?

anon121420
Post 1

Management control system (MCS) is not only collecting information but also gives information to its stakeholders in order to achieve organizational goals.

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