Question Management Control is about an attempt by management to influence the behavior of employees (through various mechanisms) towards the

attainment of the organization goals with managers being informed all the way. Discuss with the examples to illustrate why organization needs management control.

1.0. INTRODUCTION Control can be defined narrowly as the process a manager takes to assure that actual performance conforms to the organization's plan, or more broadly as anything that regulates the process or activity of an organization. The following content follows the general interpretation by defining managerial control as monitoring performance against a plan and then making adjustments either in the plan or in operations as necessary. A management control systems (MCS) is a system which gathers and uses information to evaluate the performance of different organizational resources like human, physical, financial and also the organization as a whole considering the organizational strategies. Finally, MCS influences the behavior of organizational resources to implement organizational strategies. MCS might be formal or informal. The term management control was given of its current connotations by Robert J. Mockler (1970). Robert N. Anthony (1970) defined Management Control is the process by which managers influence other members of the organization to implement the organizations strategies. Management control systems are tools to aid management for steering an organization toward its strategic objectives and competitive advantage. Management controls are only one of the tools which managers use in implementing desired strategies. However strategies get implemented through management controls, organizational structure, human resources management and culture. James G. March (1958) showed management control system as a black box. The term black box is used to describe an operation whose exact nature cannot be observed. MCS involves the behavior of managers and these behaviors cannot be expressed by equations. James G. March (1958) showed that management accounting has three major subdivisions: full cost accounting, differential accounting and management control or responsibility accounting. Management control process is the process where managers at all levels ensure that the people they supervise implement their intended strategies.

2.0.

THE CONCEPT OF CONTROL AND MANAGEMENT CONTROL SYSTEM

In order to understand the reasons as to why organizations need to know management control, first the concept of control and control management system should be understood well in the way they operate. The below description provided by Samuel Eilon (1979) highlight on the two as follows;

2.1.

CONTROL AS A FUNCTION The control function is concerned with ensuring that planning, organizing, staffing and leading functions result in the attainment of organizational objectives. In other words, control is a tool that helps organizations measure and compare their actual progress with their established plan. Supervision is a part of control; it helps identify deviations from the established standards of performance.

2.1.1. THE ELEMENTS OF CONTROL There are six elements of control: (a) (b) (c) (d) (e) (f) Authority Knowledge Guidance Direction Constraint Restraint

To be in a position to exercise control, the manager must know what the situation is, what it should be and how to correct it. Besides, he must have the authority to take the appropriate action.

2.1.2. CHARACTERISTICS OF MANAGERIAL CONTROL Managerial control has the following characteristics: 1. The control process is cyclical.

2. Control is a function of management; a follow-up action to other functions of management. 3. 4. 5. Control is a dynamic process. Controlling is often viewed negatively by employees. Control is both, anticipatory and retrospective.

6. Ideally, each person in the business views control as his/her responsibility. The organizational culture should prevent a person walking away from a small problem which can be solved. 7. Controlling is related to each of the functions of management.

Controlling builds on planning, organizing and leading.

8.

Control by its nature is both restrictive as well as regulative.

However, the modern concept of control is concerned more with regulation than with restriction as the latter is a very limited form of activity. 9. The authority to control vests with the higher levels of management because it is the superior who has delegated authority to the subordinate to carry out certain activity. Each higher level of management seeks to ensure that the plans are adhered to by those over whom they have authority. 10. Controls are a method measuring progress and the present direction of management thinking is towards the desirability of self-discipline in this respect.

2.1.3.

IMPORTANCE OF CONTROL

The control function is gaining importance in today's organizations due to a number of factors. These factors include:

(a) (b)

The need for accountability. The need to detect environmental changes that significantly affect organizations.

(c) The growing complexity of present day organizations and the need to identify operational errors in organizations to avoid incurring excessive costs.

2.1.4.

BASIC CONTROL PROCESS

When exercising the control function, a manager measures the performance of an individual, a plan, or a program against certain pre-determined standards and takes corrective action if there are any deviations. The process involves the following steps: 1. Determining areas to control: It covers all the areas of business, namely, policies, procedures, men, money, machines and equipment, public relations, human relations, research and development and so on. 2. Establishing standards: Although the temptation may be great, lowering standards to what has been attained is not a solution to performance problems. The need to lower standards arises when they are unattainable due to resource restrictions and factors external to the business. 3. 4. 5. 6. 7. Measuring performance Comparing performance against standards Recognizing good or positive performance. Taking corrective action when necessary Adjusting standards and measures when necessary.

2.1.5. 1.

REQUIREMENTS OF EFFECTIVE CONTROL Control should reflect plans, positions and structures
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2. 3. 4. 5. 6.

They should be understandable. They should be cost-effective Controls should identify only major/important exceptions. Control systems should be flexible Control systems should provide accurate information.

2.1.6. CHARACTERISTICS OF EFFECTIVE CONTROL SYSTEMS Effective control systems have the following characteristics: 1. 2. 3. 4. 5. 6. 7. 8. 9. Control at all levels in the business Acceptability to those who will enforce decisions Flexibility Accuracy Timeliness Cost effectiveness Understanding Balance between objectivity and subjectivity Coordinated with planning, organizing and leading.

2.1.7. DYSFUNCTIONAL CONSEQUENCES OF CONTROL Employee resistance can easily make control efforts dysfunctional. The following behaviors demonstrate means by which the manager's control efforts can be frustrated: 1. 2. 3. 4. Game playing Resisting control Providing inaccurate information Following rules to the letter
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5. 6.

Sabotaging Playing one manager off against another.

2.2. MANAGERIAL CONTROL Management control is the process of assuring that resources are obtained, used effectively and efficiently in the accomplishment of the organization's objectives. Management control can be defined as a systematic effort by business management to compare performance to predetermined standards, plans or objectives in order to determine whether performance is in line with these standards and presumable in order to take any remedial action required to see that the business and human and other corporate resources are being used in the most effective and efficient way possible in acquiring corporate objectives. The actual performance is compared with the expected. Depending upon the evaluation of any variation from standard, some sort of action is taken.

2.2.1. STEPS IN PROBLEM SOLVING/ DECISION MAKING PROCESS 1. Diagnose the situation and review all of the facts in order to find and define the problem. 2. Examine the problem and review the facts in order to find the key factors affecting the problem and its solution. This step is sometimes referred to as 'premising'. 3. 4. Develop alternative solutions to the problem. Test and evaluate the alternatives to determine the best solution.

5. Construct a clear statement of the solution selected, and convert the decision into a plan of action.

2.2.2. FACTORS AFFECTING MANAGERIAL PHILOSOPHY Application of the concept of management control requires the following:

1. Identifying key factors in the business operation which need to be controlled in order to achieve a given over-all result. 2. Specifying the basis for establishing standards of performance for each control factor, such as forecasts, budgets, standard costs, turnover ratios and lead times. 3. Defining the information-accounting and operating data and statistics that must be accumulated to measure status and performance. 4. Establishing a reporting structure that identifies performance in each control area, relate causes and effects, signals, trends, and identifies results by responsibility under the plan of organizations.

2.2.3. MANAGEMENT CONTROL PROCESS IN ORGANIZATION Management control is the process by which managers influence other members of the organization to implement the organizations strategies. Management control process involves informal interactions between one manger and another manager and his or her subordinates. Informal communications occurs by means of memoranda, meetings, conversations, and even by facial expression. The informal interactions take place within a formal planning and control system. Such system includes the following activities: 1) Strategic planning: it is process of deciding on the major programs that organization undertakes to implement its strategies and appropriate amount of resources that will be devoted to each. The output of the process called as strategic planning. This is the first step in management control cycle. 2) Budget planning: budget represent fine tuning of the strategic planning, incorporating most current information. In budget, revenue and expenses are rearranged from programme to the responsibility centre, thus budget shows the expenses that each managers expected to occur. The process of budget preparation is essentially one of the negotiations between the managers of each responsibility centre and their superior. 3) Execution: managers execute the programme or part of the programme for which they are responsible and also report on what has happened in the course of fulfilling that responsibility. Reports on responsibility centre may show budgeted and actual information, financial and non-financial performance measures, internal & external information. 4) Evaluation of performance: the process of evaluation is comparison of actual expenses and those that should have been incurred under circumstances. If the circumstances assumed in the budget process are unchanged, the comparison between budgeted and
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actual amounts. If circumstances have changed, these changes are taken into accounts. Ultimately, the analysis leads to praise or constructive criticism of the responsibility centre managers.

2.2.4. MANAGEMENT CONTROL SYSTEMS A Management Control Systems (MCS) is a set of inter-related communication structures that facilitates the processing of information for the purpose of assisting managers in coordinating the parts and attaining the purpose of an organization on a continuous basis. All organizations use control system both formal and informal. The purpose of management control system is to encourage managers to take actions which are in the best interests of the company.

2.2.5. ELEMENTS OF A CONTROL SYSTEM Any control system has four basic elements: 1. A detector or sensor: a device that measures what is actually happening in the situation being controlled. 2. An assessor: A device for determining the significance of what is happening; i.e., comparison with some standard or expectation. 3. An effector: A device that alters behavior if the assessor indicates the need. This device is often called 'feedback'. 4. A communication network: Devices that transmit information between the detector and the assessor and between the assessor and the effector. The management control process is more complicated than what has been described in detectors, assessors, effectors and a communication system. These are as follows: 1. 2. The standard is not preset. Like controlling an automobile, management control is not automatic.

3. Management control requires coordination among individuals. All the separate parts of an organization are required to work in harmony with each other. 4. The connection from perceiving the need for action and the action required to obtain the desired result, may not be clear.
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5. Control in an organization does not come about solely or even as a consequence of actions. Much control is 'self-control'

2.2.6. ACTIVITIES IN MANAGEMENT CONTROL Management control involves a variety of activities including: 1. 2. 3. 4. 5. 6. Planning what the organization should do. Coordinating the activities of several parts of the organization. Communicating information. Evaluating information. Deciding what, if any, action should be taken. Influencing people to change their behavior.

2.2.7. SYSTEMS A system is prescribed way of carrying out activity or activities, usually the activities are repeated. Most systems are less precise than computer programs, their instructions do not cover all eventualities and the user of the system must make judgments when these eventualities occur. Nevertheless, a system is characterized by more or less rhythmic, recurring, coordinated series of steps that are intended to accomplish a specific purpose.

2.2.8. PURPOSE OF MANAGEMENT CONTROL SYSTEMS The purpose of an organization can be analyzed as follows: 1. Mission of the organization, which is directed, first and foremost, towards meeting needs of customers and society. 2. The term objectives to refer to specific, short-term and predominantly quantitative pursuits of an organization. We can term goals to refer to specific long-term pursuits of an organization. 3. Each part of an organization has a purpose, objectives and goals. The MCS knots the organization together so that each part, by exercising autonomy given to it fulfills a
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purpose that is consistent with and contributes to the fulfillment of the overall purpose of the organization.

2.2.9. MANAGEMENT CONTROL PROCESS Two aspects involved; namely: (a) (b) System Process

System outlines the following: (a) (b) (c) (d) (e) Authority relationships Autonomy delegation Intra-organizational relationships (among sub-units) Parameters for performance Rewards and punishments for achievement and non-achievement

Process involves the managerial processes involved in: (a) (b) (c) (d) (e) (f) Establishing goals and objectives Performance appraisal of responsibility centers Ensuring achievement of targets and budgets by various organizational sub-units Follow-up of remedial action plans Implementation of decisions taken in performance review meetings Information flow among responsibility centers in the organization

Generally the process of control is as follows: (a) Review of past performance of various units of the organizations and targets and specifications for the next year (b) Periodical review of actual results and its comparison with targets

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(c) Identification of areas which require improvement. This also includes identification of shortfalls and their reasons (d) Deciding remedial actions

2.2.10. DESIGNING MANAGEMENT CONTROLS There are a few aspects which must be considered while designing a control process. These are as follows: (a) (b) (c) The process of control should be constructive Standards should be challenging but attainable Objectives should be expressed in measurable terms

(d) Control should focus on the objectives and key results of an activity and should be limited in number. (e) A single person must be assigned the responsibility of achieving a single objective.

(f) For achieving true control in the current period, projected performance should be compared with the desired performance. g) It is necessary to identify early warning predictors of the variables

that the management seeks to control. (h) (i) It is better to carry out sampling by direct observation. An acceptable range of variation for the value of each variable

that has to be controlled. (j) The severity of the problems should be considered and its causes should also be reviewed.

2.2.11. DESIGN OF THE MANAGEMENT CONTROL SYSTEM The MCS is designed by incorporating the following basic steps:1. The classification of organization into responsibility centers.

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The term responsibility center is used to denote any organization unit that headed by a responsible manager. A responsibility center exists to accomplish one or more purposes known as objectives. There are four types of responsibility centers: (a) (b) (c) (d) Revenue centers Expense centers Profit centers Investment centers

2. Fixing up responsibility in accordance with the firm's objectives and deciding critical variables/ key factors for each responsibility centers: A critical variable is that aspect of operation at the responsibility center, which affects the realization of goals and objectives; if it is carried out ineffectively. The point selected for control should be critical

this facilitates the manager to increase his span management, effect cost savings and improve communication.

3. Developing information system which facilitates real time information regarding operations which deviate from desired results, specially critical variables and relate results to individual accountability. The word information means data relevant for a particular purpose. Information about a critical variable is a must for managerial control process. The formal information system should be structured such that it: (a) (b) (c) Provides regular collection of data regarding each and every responsibility center. Yields, processes and summarizes data Presents relevant information to managers for control as and when needed.

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3.0.

REASONS FOR MANAGEMENT CONTROL NEEDS IN ORGANIZATIONS

Management control seems to be the basic mechanism to ensure that organization meets its mission and vision in an efficient way. In a competitive era of globalization organizations should be working hard to learn and practice control mechanisms for their own survival. This is to stress the fact that all organizations need to know the details of management control as presented here below the importance or needs for management control as to why organizations should go for that.

(a)

To Know Quantity

It is important for the management to know how many products needed by customers, how many products that are in the stock at the time, what is the production projection etc. The aspect of quantity is important because once managers know about that can easily execute control as to whether they want to produce more and reduce production basing on some factors.

A good example is for bottling company like Coca Cola Kwanza Ltd in Dar-es-salaam Tanzania whereby because of strong competition from Pepsi, the sales of Coca Cola has declined at some percentage, worse enough new entrants such as Azam Cola and Soyona got into the market to add competition hence this situation has taken management to think of suitable control mechanism as a result the distribution in Dar-es-salaam has been reduced and some other stock being sent to upcountry. This is just a short term mechanism while they think of re-entering the market in a more aggressive manner.

(b)

To Know Quality

This is another important aspect as to why organizations need to know about management control. As presented earlier that now days there are so many alternatives for services and products hence the choice remains to consumer. For consumer a number of factors come into consideration as to where he/she should purchase his/her needs. Among those factors quality plays a vital role. This means that an organization which focuses on quality will always get more customers and also this will be reflected even in revenue. Therefore management should always focus on quality to ensure that credibility of the organization is recognized.
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There is an example of the global company known as Samsung whose management emphasized two things known as quality and innovation, this company has designed quality products with up to date technology in electronics. Samsung has managed to compete with other brands such as Sony, Hitachi, HP, Panasonic and many others. The success towards this is hard working and constant ensuring of quality by management thats why all over Europe and America Samsung is also a lead seller despite its origin is in Korea and large production plants are in China.

(c)

Time available

Things are rushing and time is never sufficient for everything, time is a resource which once goes never gets back. Services and products are time conscious that means management needs to exercise control over it. Management needs to know what time is available to implement any thing. Time is such a resourceful thing in such a way that a company or person who is aware of this beats away competitors only because they know how to value time. However the time factor when comes to the services delivery is depending on nature of activity and number of staff available therefore management should always be aware of the fact that some other activities have got deadlines therefore accuracy and hardworking are needed. Exim bank has resolved to serve customers as quickly as possible. Knowing the fact that many customers they serve are business people who look for money and to them time is money as well. This means that management has established serious control as no customer who is kept pending. Therefore organizations should know about management control because it enables utilization of time effectively and efficiently.

d)

Knowing availability of personnel for doing the work Management controls help to know the availability of employees at work as to who is currently available and who is not, who is a good and capable employee and who is not. This can go as far as to the filling employment post. Therefore management control plays a vital role in shaping an organization. The fact that many organizations possess attendance books for employees to sign, that book is not there for show, in fact it is useful as it can be used as a reference to show who is present at work and who is not.

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e)

Knowing availability of material for doing the work Management control enables the organization to know whether there are sufficient materials available for running day to day activities of the organization or not. If materials are not available or the number is insufficient then management has to find an alternative to rescue the situation. Through doing that management will be doing what is known as the control.

Achievement of organizational goals depends on the availability of resources such as people, materials like stationery, computers and other office tools so management control ensures the availability of those materials in an organization.

f)

Recognition of delays and variation Management control enables an organization to know immediately of any delays, hold ups or variation of products or services and goes as far as to examine what happened, its cause and remedy. The purpose for this is to make sure there is achievement of the core objectives of the organization despite any incoming challenges.

The Japanese are world sellers of new and used vehicles in the globe, they sell cars to all continents. In Africa, used cars are the commonest. The Japanese government knowing that used cars are not as good as new ones and in effort to protect this business because the government is earning a lot and also to make sure that the buyer is get something of a given standard, they have established Japanese Agency for Inspection (JAAI) which among other duties can identify variation of products and if the car is just a cramp no inspection certificate given.

g) Management control establishes the need for accountability. Through management control an organization can easily know what is being done, remove such hindrances as to who is doing, how is it being done, what is it costing, when will it be completed. This is serious sense of accountability as because of management control systems everything can easily tracked, management can know what is being done at the moment and who is the assigned person, if there are some challenges can be noticed easily and better solution can always established at the convenience of the organization.

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In most public offices in Tanzania this aspect is missing and also pauses great challenge in execution of normal objectives of an organization. It can easily be noted that a junior or head of department is doing something without notifying his/her supervisor. The recent case at the ministry of infrastructure whereby a minister and deputy minister are not in good terms as one claiming not to be informed on some of key issues in the ministry.

i)

Protection of resources

Misuse of resources, misallocation of resources and embezzlement of funds are some of the core challenges facing many African organizations. The sense integrity is at low level. The office stationeries are being used for personal and family use, the office furniture are being used for personal use, the office vehicle is being used for typical private matters and so many other examples. Therefore the need for management control is important and one of the reason as to why this is very much needed in our Tanzanian community is for protecting our resources. This starts in our homes, office and even national resources.

The internal audit department serves for this purpose in many organizations as to see if everything has been used properly or some individuals got person benefits out of this. For the government level there is Controller and Auditor General (CAG) who is making sure that everything is being under proper use and if it is not reports to the government for proper action.

j)

Management control provides for periodic inspection

It is common for organization to undertake stock taking so as to satisfy themselves whether the stock is in a proper manner or not. Recently the government conducted inspection to know who real employees are and who ghost employees are as all employees were required to appear in person. This is one of the benefits of management control as organization is never going to regret because it is very watchful on everything taking place in the organization.

One of the areas where inspection is regularly conducted is in education department whereby to ensure a given standard in education, the government has established various

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zonal inspection department to inspect and control the quality, reports for some problems to the government for action taking.

k)

Controls make plans effective. For the objectives of an organization to be effective, managers need to measure progress, offer feedback, and direct their teams so to succeed. This is very important because management control will always prevent deviating away from the core mission of an organization and that consistency will always make plans effective and also efficient.

l)

Controls make sure that organizational activities are consistent. Consistency is an important ingredient in an organization. This means that there is order and chain of authority. Through management control all organizational activities are settled to be consistent, also the policies and procedures help to ensure that efforts are integrated. This means that an organization with management control can be in better chance to succeed because the activities are in order because everyone knows his/her role also the policies and procedures are supporting easy operation contrary to an organization without this.

m)

Controls make organizations efficient. Efficiency probably depends more on controls than any other management function because this is concerned with resources. The question is how those resources are used when it comes to production. As the matter of fact resources are scarce so meeting organizations objectives with fewer resources could be the option of most managers, but this possible only when there is management control. Kenyan Bureau of Standards is one of the pubic organizations which are performing well in Kenya, within the limited budget allocated still it is performing better in a sense that now it is hard to import any fake materials in Kenya. This is due to serious management control and a keen commitment found in employees.

n)

Controls provide feedback on project status. Feedback is an important aspect in an organization. Always employees are happy when they get feedback about anything. Management control not only measure progress, but
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controls also provide feedback to participants as well. Feedback influences behavior and is an essential ingredient in the control process. This means when a manager used to provide feedback frequently to employees the room for errors is being minimized because when there are problems solutions can be obtained because feedback provides room for discussion and recommendation.

o)

Controls aid in decision making. The ultimate purpose of controls is to help managers make better decisions. Controls make managers aware of problems and give them information that is necessary for decision making. In other language lack of control leads to poor results because poor decisions will always be taken by those in the authority. Decision making is important and it is routine because everyday organization decides on a variety of issues so through better control mechanism an organization will not need to worry about the quality of decision because it will be already assessed critically.

p)

Control enable budget consistency Many organizations are facing this critical challenge as budget is never enough to enable accomplishment of all key objectives. However sometimes it can be found that despite the budget limitation yet it is misused to the maximum order. Therefore management control is there to make sure that no deviation from the budget established and through the auditing works budget is kept followed.

Vodacom Tanzania is one of the companies with better budgeting procedures. From the revenue estimation to revenue realization the budget is going as planned. All departments are required to use money as it is in the budget and not otherwise. If there is a vital reason authorization can be made by managing director.

q)

The need to detect environmental changes that significantly affect organizations.

In the management control a lot of things can be noticed and one of them changes in the working environment which in one way or another can affect performance of an
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organization. Through management control those changes can be identified and better options can be developed for further implementation of the organizational goals.

r)

Lastly management control is important so as to identify operational errors. The growing complexity of present day organizations and the need to identify operational errors in organizations to avoid incurring excessive costs. As it is well known errors are happening many times in organizations. However the problem is not errors but the problem is how to deal with those errors. So whenever there is management controls errors can be easily managed and in so doing a lot of excessive costs which should come through repetition are avoided.

4.0.CONCLUSION Management control is a prerequisite for modern organizations operating in the competitive and globalized world. Management control is the only remaining way to ensure quality, consistency, feedback, efficient and effectiveness of organization objectives. Management control is operating in some organizations in various ways such as auditing department, quality assurance department and any other format that an organization can prefer. As presented above an organization with management control can be easily identified because the level of deviation from its core objectives is minimal comparing to an organization without management control because it will be hard to collect feedback. Therefore it urged that all organizations which intend to achieve supper success in their operation should always opt and implement management control because it is cheaper and can be conducted in a convenient way of a respective organization also it has a lot of benefits as explained above.

REFERENCE James G March; Herbert A Simon (1958). Organizations. New York: Wiley. pp. 911. ISBN 0471567930 9780471567936.

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Richard Arvid Johnson (1976). Management, systems, and society : an introduction. Pacific Palisades, Calif.: Goodyear Pub. Co.. pp. 148142. ISBN 0876205406 9780876205402. Robert J. Mockler (1970). Readings in Management Control. New York: AppletonCentury-Crofts. pp. 1417. ISBN 0390644390 9780390644398. Robert N Anthony (1970). The management control function. Boston, Mass.: Harvard Business School Press. pp. 1417. ISBN 0875841848 9780875841847. Samuel Eilon (1979). Management control. Boston, Mass.: Harvard Business School Press. ISBN 0080224822 : 9780080224824 0080224814 9780080224817.

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