Concept of Management Control

Management control refers to the process of directing and guiding the activities of individuals and groups within an organization to achieve organizational goals (Referenceforbusiness.com, 2024). It encompasses a wide range of mechanisms and techniques used to monitor and influence the behavior of organizational members to ensure alignment with strategic objectives and desired outcomes.

Types of Management Control

There are two broad categories of management control: regulative controls and normative controls (Referenceforbusiness.com, 2024).

Regulative Controls

Regulative controls are formal, structured mechanisms that explicitly define acceptable behaviors and boundaries for organizational members. These controls include:

• Bureaucratic Controls: These controls are based on the organization’s hierarchy and chain of command. They involve policies, procedures, and rules that guide decision-making and behavior.
• Financial Controls: These controls focus on the financial aspects of the organization. They include budgets, cost control systems, and financial reporting mechanisms.
• Quality Controls: These controls are designed to ensure that products and services meet predetermined quality standards. They involve quality assurance processes, inspections, and certifications.

Normative Controls

Normative controls are informal, unwritten rules and expectations that shape organizational behavior. These controls include:

• Team Norms: These are the shared values, beliefs, and behaviors that guide the conduct of team members. They influence how team members interact, collaborate, and make decisions.
• Organizational Cultural Norms: These are the deeply ingrained values, beliefs, and assumptions that shape the overall culture and behavior of the organization. They influence how employees perceive and respond to various situations and challenges.

Purpose of Management Control

The primary purpose of management control is to ensure that organizational activities are in line with the organization’s strategic objectives and to monitor performance (Referenceforbusiness.com, 2024). It helps organizations achieve the following:

• Goal Alignment: Management control systems ensure that individual and departmental goals are aligned with the overall strategic objectives of the organization.
• Performance Monitoring: Management control systems involve the collection and analysis of data to monitor performance and identify areas for improvement.
• Resource Allocation: Management control systems assist in allocating resources effectively and efficiently to achieve organizational goals.
• Risk Management: Management control systems help identify and mitigate potential risks that could hinder the achievement of organizational objectives.

Influence on Behavior

Management control systems influence the behavior of individuals and groups within the organization by providing feedback, setting targets, and rewarding or penalizing performance (Vancil, 1973). These systems shape employee behavior in the following ways:

• Feedback: Management control systems provide feedback to employees on their performance, allowing them to adjust their behavior accordingly.
• Target Setting: Management control systems set specific targets and goals for employees, motivating them to achieve desired outcomes.
• Rewards and Penalties: Management control systems often involve rewards for achieving targets and penalties for failing to meet them, reinforcing desired behaviors.

Measurement and Evaluation

Management control systems involve the collection and use of information to measure and evaluate performance (Vancil, 1973). This includes both financial measures, such as profitability and return on investment, as well as non-financial measures, such as customer satisfaction and product quality. These measures help organizations assess their progress towards achieving strategic objectives and identify areas for improvement.

Conclusion

Management control is a critical aspect of organizational management that helps organizations achieve their goals, monitor performance, and influence the behavior of their members. By implementing effective management control systems, organizations can ensure that their activities are aligned with their strategic objectives and that resources are used efficiently and effectively.

References

1. Referenceforbusiness.com. (2024). Management Control. Retrieved from https://www.referenceforbusiness.com/management/Log-Mar/Management-Control.html
2. Vancil, R. F. (1973). What Kind of Management Control Do You Need? Harvard Business Review, 73(3), 95-106.

FAQs

What is management control?

Management control is the process of directing and guiding the activities of individuals and groups within an organization to achieve organizational goals. It involves the use of various mechanisms and techniques to monitor and influence the behavior of organizational members to ensure alignment with strategic objectives and desired outcomes.

What are the two broad categories of management control?

The two broad categories of management control are regulative controls and normative controls. Regulative controls are formal, structured mechanisms that explicitly define acceptable behaviors and boundaries, while normative controls are informal, unwritten rules and expectations that shape organizational behavior.

What are the different types of regulative controls?

The different types of regulative controls include bureaucratic controls, financial controls, and quality controls. Bureaucratic controls are based on the organization’s hierarchy and chain of command, financial controls focus on the financial aspects of the organization, and quality controls ensure that products and services meet predetermined quality standards.

What are the different types of normative controls?

The different types of normative controls include team norms and organizational cultural norms. Team norms are the shared values, beliefs, and behaviors that guide the conduct of team members, while organizational cultural norms are the deeply ingrained values, beliefs, and assumptions that shape the overall culture and behavior of the organization.

What is the purpose of management control?

The purpose of management control is to ensure that organizational activities are in line with the organization’s strategic objectives and to monitor performance. It helps organizations achieve goal alignment, performance monitoring, resource allocation, and risk management.

How does management control influence behavior?

Management control influences behavior by providing feedback, setting targets, and rewarding or penalizing performance. Feedback allows employees to adjust their behavior, target setting motivates them to achieve desired outcomes, and rewards and penalties reinforce desired behaviors.

What does management control involve in terms of measurement and evaluation?

Management control involves the collection and use of information to measure and evaluate performance. This includes both financial measures, such as profitability and return on investment, as well as non-financial measures, such as customer satisfaction and product quality. These measures help organizations assess their progress towards achieving strategic objectives and identify areas for improvement.

Why is management control important?

Management control is important because it helps organizations achieve their goals, monitor performance, and influence the behavior of their members. By implementing effective management control systems, organizations can ensure that their activities are aligned with their strategic objectives and that resources are used efficiently and effectively.