Challenges in design and implementation of management control systems
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Challenges that the top management may face when designing and implementing effective management control systems in organizations. There is always no guarantee that the management control system design and implementation of the top management will always be effective as they, just like any other functions in an organization do face numerous challenges. These management controls are always designed in such a way as to enable continuous monitoring of the involved control activities as this helps identify and provide feedback on the effectiveness of these control systems (Rangaraju
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The impact of this is that the entire top management is considered to have failed the organization without pinpointing specific individuals. These control systems tend to guide the employees in doing what is entirely not at par with the organization’s objectives and strategies. Though the employees carry out their duties as efficiently as possible, the organization does not achieve its set goal at the end of the day. For proper achievement of the goals of the company, there should be a clear statement of the duties of the employees by the entire management of the organization to ensure unofficial duty allocations by some top management individuals (Cliffsnotes.com, 2014). The top management also experiences difficulty in implementing the management control systems which they have designed because in some instances, the employees are not well trained and developed to accommodate the control systems (Epstein and Lee, 2003). Problems like this one do arise in cases where a very effective management control system has been put in place by the management, but because the employees or subordinate staffs lack the proper knowledge to implement this type of strategy, the organization does not benefit from it at all. A good example is the introduction of computer based check-in system which might end up being a difficulty for the majority of the employees who are not conversant with computer systems. It is this challenge which calls for the
The control structure is the means used to ensure that organization members are doing what they are supposed to do; it describes the nature of and methods for communication in an organization. Due to lack of a structural job design and absence of coordination within departments and lack of autonomy employees are irresponsible and do not perform the task to
“The control environment sets the tone of an organization, influencing the control consciousness of its people. It is the foundation for all other components of internal control, providing discipline and structure.” The Committee of Sponsoring Organizations of the Treadway Commission (COSO) published the Internal Control–Integrated Framework in 1992. As summarized above one can see the importance of the implementation of an effective control environment, as it sets the foundation for the other 4 components of internal control. The control environment is made up fundamental smaller components. The ones that were particularly relevant to BMIS are the use of board of directors and audit committee, management philosophy and operating style, and human resource policies and practices. If management doesn’t prioritize control, then the rest of the organization will not put precedence on following policies and procedures either. This was clearly evident at Bernard L. Madoff Investment Securities LLC (BMIS), and ultimately led to their downfall.
The design and implementation and objectives of company controls are not adequate to meet the control objectives. The control environment control objective is ineffective. This control objective lacks a written policy on ethical conduct, is lacking oversight from the board of directors and audit committee, lacks a consistent style and philosophy from management, and lacks a strong commitment to competence. The risk assessment control objective is effective but lacks any antifraud program and controls. The information and communication control is ineffective. A virus has been detected and is affecting the files of the company. This control is lacking a strong IT department. The general controls financial reporting control objective is effective but is weak in detecting or preventing material misstatement. The monitoring control objective is ineffective; this control has need of an internal auditor.
Ahrens and Chapman go on to introduce their article by giving a background knowledge of modern perceptions of management control systems through their mention of related literature. Some key points discuss pertain to the author’s
Overall Strength: in general, the article provides structure to a concept that is very intangible by: (a) describing the nature and the functions of control; (b) segregating the MCS into categories: core control system, organizational structure, and organizational culture; (c) illustrating how to apply the control model (satisfied my approach) (d) provides a basis for designing and evaluating the system. The manner, in which the model is presented, with its use of figures, further emphasizes the structure of the model. See below on further emphasis on parts (a) -(c).
The second aspect of management used to investigate the issue is Controlling. Control is a concern that is facing every manager in every organisation today. Many businesses continually look to improve relationships between all levels of staff in order for a healthy working environment. To effectively control a business the organisation requires information about
A concept we learned about in Business Leadership that relates to the main point in this book is control systems. We looked at the importance of control in management and learned about various different systems. In this book, systems are shown to greatly help customer service. Systems are predetermined ways to get a specific result and still ensure consistency. Andrew, the plant manager said “Systems give you a floor, not a ceiling”. Thus, a system is the sort of thing you build on, a starting point. An external control measure, for example, involves
● Monitoring — Internal control systems need to be monitored–a process that assesses the quality of the system’s performance over time. This is accomplished through ongoing monitoring activities, separate evaluations or a combination of the two. Ongoing monitoring occurs in the course of operations. It includes regular management and supervisory activities, and other actions personnel take in performing their duties. The scope and frequency of separate evaluations will depend primarily on an assessment of risks and the effectiveness of ongoing monitoring procedures. Internal control deficiencies should be reported upstream, with serious matters reported to top management and the board.
Dalman and Lei have a problem that should have never happened. Team leaders were overlooking the employees at each site, and the managers were overlooking the entire crew at each site. Having a control system in place for Sandwich Blitz Inc. will alleviate any future problems that may appear. There are four steps to a control system of which Dalman and Lei need to learn in order for their business to run smoothly. The steps include setting performance standards, measuring performance, comparing performance against the standards and determining deviations, and taking action to correct problems and
The authors do not intend to iIIustrate either effective or ineffective handling of a managerial situation. The authors may have
Over the past hundred years management has continuously been evolving. There have been a wide range of approaches in how to deal with management or better yet how to improve management functions in our ever changing environment. From as early as 1100 B.C managers have been struggling with the same issues and problems that manager's face today. Modern managers use many of the practices, principles, and techniques developed from earlier concepts and experiences.
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A good control system provides timely information to the manager which is very much useful for taking various decisions. Control simplifies supervision by pointing out the significant deviations from the standards of performance. It keeps the subordinates under check and brings discipline among them.
In order for an organization to have effective management, it must have a well-designed management process (Koontz & Weihrich, 1990).
The case is analysis on management control system that is implemented in various multinational organization and how MCS helps maintain relationship between the organization and monitor work and improve performance of the entire group. When designing the control system certain thing needs to be considered like organizational structure,