Management Control Systems

This article discusses the importance of control system costs in management control system design for an organization. It also explores the conflict faced by people like Philip and evaluates the use of control mechanisms at Stuart and Co. The article concludes with recommendations for controls specific to the situation to ensure appropriate behaviors can be achieved at Stuart & Co.

Running Head: MANAGEMENT 1
Management Control Systems
Name
Institutional Affiliation

MANAGEMENT 2
1. Explain why consideration of control system costs is important for MCS design.
Consideration of control system costs is important in management control system design for
an organization since it involves key organizational components such as strategic planning,
budgeting, resource allocation, evaluation and reward as well as performance measurement
(Verbeeten, & Spekle, 2015). Control systems in an organization are set up to ensure the
organization meets its strategic goals. While control systems play vital roles in the success of
an organization, it is vital to ensure that the benefits of these systems outweigh their costs
(Verbeeten & Spekle, 2015).
2. Based on your reading and analysis of the case study, explain in detail the nature of the
conflict apparent in the case that people like Philip face. (Hint: Use evidence from the case to
support your answer.)
Philip is faced with the conflict of meeting professional and career goals and long-term
customer satisfaction goals in an environment that seems to allow just one option. Philip's
bosses have set goals for his branch that are more aligned with selling specific products and
meeting various objectives according to his sales budget. Philip has chosen to concentrate on
selling products that are best for his clients.
3. Critically evaluate the use of control mechanisms at Stuart and Co. Clearly categorise,
where possible, the types of controls constituting the challenges you have identified.
Stuart and Co. seems to be employing both bureaucratic and output controls. This system is
however limited by the long distance between the head office and subsidiaries. Furthermore,
output controls employed with regard to meeting specific sales target is limited by the degree
of uncertainty in the market (Bedford, 2015).
4. Recommend controls specific to the situation to ensure appropriate behaviours can be
achieved at Stuart & Co.
A corporate culture approach would be more suited to the specific situation Philip finds
himself in. In this approach, employees internalize corporate objectives and build strong sets
of values to guide the management towards these goals (Bedford, 2015). It is such a culture
that lured Philip to the company to first. Furthermore, this approach would acknowledge
Philip's accomplishments in other spheres such as an increase in clientele base and client
retention.

MANAGEMENT 3
References
Bedford, D. S. (2015). Management control systems across different modes of innovation:
Implications for firm performance. Management Accounting Research, 28, 12-30.
Retrieved from
https://pdfs.semanticscholar.org/2218/e466f0fb95bdcc7d7ba7a794d713940b5a3c.pdf
Verbeeten, F. H., & Spekle, R. F. (2015). Management control, results-oriented culture and
public sector performance:: Empirical evidence on new public management.
Organization studies, 36(7), 953-978. Retrieved from
https://dialnet.unirioja.es/servlet/articulo?codigo=5100002