Management Control Overview

Management Control

• Management control emerged in some large American industrial companies around the 1920s, and in Europe in the early 1970s.
• The primary mission of management control was cost management through cost accounting.
• Today, management controllers are assigned advisory and organizational steering tasks, focusing on performance management.

Content Outline

• General Guidelines
• Definitions of Management Control (Anthony, 1965; Garmilis, Arnaud & Vignon, 1988; Burlaud and Simon, 1997)
• Evaluation Criteria (Relevance, Effectiveness, Efficiency)
• Definition of Control
• Management Control Tools

Definitions of Management Control

• Anthony (1965): The process by which managers ensure resources are obtained and used effectively and efficiently to achieve organizational objectives.
• Garmilis, Arnaud & Vignon (1988): A set of actions, attitudes, tools, and procedures that enable a company to establish long-term, medium, and short-term objectives and ensure their achievement.
• Burlaud and Simon (1997): A system for regulating human behavior in the exercise of their profession, especially within an organization.

Evaluation Criteria

• Relevance: The suitability of the means used in relation to the objectives.
• Effectiveness: The ability to achieve the objective, meaning to attain a result that aligns with the goal.
• Efficiency: The use of the minimum resources necessary to achieve the result.

Management Control Triangle

• The management control triangle is a visual representation of the key elements in management control with objectives at the top, resources on the bottom left and results on the bottom right of the triangle.
• Elements include relevance, effectiveness, efficiency, and resources connected with those elements.

Definition of Control

• Control, in the context of management, refers to mastery, not supervision, analogous to a driver controlling a vehicle.
• Control in management is the ability to master a situation and direct it to the desired direction.
• Management control aims to measure results, comparing them to predetermined objectives to identify whether there is agreement or divergence.

Control - Mastery

• Mastery in management control implies a thorough causal analysis leading to corrective action proposals.
• The goal of management control is to steer the company to stay on its intended path.

Management Control = Mastery of Management

• The key objectives of management control are to measure, analyze, and improve company performance.
• Mastery is achieved through the combined efforts of operational managers and general management.
• The role of the management controller is to assist operational managers and general management by providing tools to set objectives, develop action plans, and monitor performance.

Management Control System

• The management control system entails various elements, including:
  • Defining objectives as a trajectory
  • Forecasting
  • Measuring outcomes
  • Comparing outcomes with forecasts
  • Taking corrective actions

Management Control Tools

• Management Accounting/Managerial Accounting: Involves the calculation and analysis of costs for improved forecasting, measuring and controlling outcomes.
• Budgets and Budgetary Control: Quantified forecast of objectives and resources for responsibility centers, typically for a short period.
• Balanced Scorecard: Management tools for implementing action plans to achieve objectives, incorporating KPIs for rapid evaluation and providing competitive analysis of the company.
• Internal Transfer Prices: Prices used for valuing transactions within responsibility centers to assess each department's contribution to overall company performance, reflecting market constraints.

Explore the evolution and principles of management control, tracing its history from the 1920s to the present. This quiz covers essential definitions, evaluation criteria, and tools utilized in effective management control. Test your understanding of how management controls can drive performance and efficiency within organizations.