Identifying Characteristics of Management Control System

This document discusses the identifying characteristics of a management control system, including the evolution of control systems within a company and the importance of accounting and budgeting systems. It also explores different types of organizational control systems and the role of leadership in controlling business activities. Additionally, it evaluates the management control system for planning and development, and discusses the nature of control systems in small businesses.

MANAGEMENT CONTROL

TABLE OF CONTENTS
IDENTIFYING CHARACTERISTICS OF MANAGEMENT CONTROL SYSTEM..................3
Evolution of control system within company.............................................................................3
Organizational control system.....................................................................................................3
Importance of accounting and budgeting system........................................................................4
Leadership as a method of control..............................................................................................5
EVALUATING MANAGEMENT CONTROL SYSTEM FOR PLANNING AND
DEVELOPMENT............................................................................................................................6
Core control system within company..........................................................................................6
Relation between planning and controlling.................................................................................6
Contingency framework for strategic planning and development..............................................7
EVALUATING CONTROL SYSTEM OF COMPANY................................................................8
Use of project management tool.................................................................................................8
Nature of control system in small business.................................................................................8
Process of discovering strategic core competence of small business.........................................9
Use of management control system............................................................................................9
REFERENCES..............................................................................................................................11

IDENTIFYING CHARACTERISTICS OF MANAGEMENT CONTROL
SYSTEM
Evolution of control system within company
The control system is referred to as a system which is developed by the company in order
to check that whether the planned things are taking place in same and intended manner or not.
The effective control system within the company ensures that the working and operations of the
company are taking place in the intended manner only (Lowe, 2019). The control system evolved
within the working of Canning foods Ltd because of the reason that the performance of the
company was not going well and this affected the profitability of the company to a great extent.
Thus, when the working of the company was not going well then at that time Canning
foods Ltd understood the importance of control system to be used by the company. The major
reason underlying this fact is that earlier the working of the company was not taking place in the
planned manner. Then after the company realised that there is need for the company to set some
standard or system which is helpful for the company in managing the performance of the
company. Hence, in this manner Canning foods Ltd to use and implement the effective control
system within the company so that they can manage the whole working in effective and proper
manner.
The management and implementation of the control system is very essential for Canning
foods Ltd because this will assist the company in managing the working in proper and effective
manner. Hence, with the different issues being faced by the company the concept of control
system was evolved. However, this is because of the reason that when this control system was
evolved in order to manage the performance of the company in the direction of growth and
development.
Organizational control system
With the evolution of control system there have been many different modification and
upgradation within the within the control system (Berry, Broadbent and Otley, eds., 2016). Thus,
there have been many developments within the different system of controlling all the different
activities of the business. the major different types of organizational control system used by
Canning foods Ltd are as follows-

Strategic control- this is a type of control being used by Canning foods Ltd under which
the company tries to manage and control the strategy being implemented within the business. this
is a major control system because if the strategy will not be managed in proper manner then the
company will not be able to manage the business. under this control system the company will
first evaluate the strategy thoroughly that whether the strategy will be applied in successful
manner or not. Thus, this will assist the company in managing the implementation of the strategy
in effective and efficient manner (The primary types of organizational control, 2018).
Management control- this is also another major type of management control system
wherein the company tries to manage all the different departments within the business. under this
control system the company tries to manage coordination among the working of all the different
department and other activities of the business. this management control is necessary as this will
make sure that all the objectives of the business are being attained in the planned manner only.
Operational control- this is another type of control system being used by Canning foods
Ltd wherein the company is concerned for both the individual as well as group performance of
the company. This control is essential for Canning foods Ltd to be managed because if the
performance both at individual level and the group level is good and effective manner. This is
essential to be used by company as the company will be able to manage and control the overall
performance of the company.
Importance of accounting and budgeting system
In order to control and manage the operations of the company another major important
thing is the proper use of the accounting and the budgeting system. This is also a major tool for
managing and controlling the activities of the business. Under this method the budget is prepared
which is an estimation of the income and expenses which can occur in future. Thus, this will help
the company in managing the cost and the income of the company as they will have an
estimation in advance which the company can attain. Also, this accounting and budgeting system
of the company influences the human behaviour of the employees. This is majorly because of the
reason that the employees know in advance that what are the estimated income and expenses
which the company can in order to run and manage the working of the company.
Thus, this will help the employees that managing their behaviour as they know what is
the estimated expense and now the employees of Canning foods Ltd will try to manage the
working in that particular manner only (Yan and Gray, 2018). Thus, this accounting and

budgeting system are important for working of Canning foods Ltd as this will provide a direction
to the employees in which they have to work. This is basically due to the fact that the employees
will know that in what way they have to work and this will make sure that the all the working is
done in the intended manner only which is specified in the budget only (Bedford, Malmi and
Sandelin, 2016). Thus, this will give a proper guidance to the employees in what manner they
have to work.
Leadership as a method of control
In order to control the activities of the business the leadership also plays a major role
within the controlling of the business activities within company. The leadership is referred to as
the giving direction to the employees and guiding them that how they have to work and try to
integrate all the activities of the employees in attaining the aim of the company. The leadership is
also a good method of control as this will assist the company in managing the working of the
company in more effective manner.
This is due to the fact that the leader makes and formulates the policies and procedures
which the employees need to follow and this will provide a guideline to the employees that how
they have to work. Then as the working of the employees is going on the leader will evaluate and
monitor the fact that whether the employees are working in the decided manner or not. If the
employees are not working in the intended and required manner, then the leader need to take
some actions in controlling the working and the activities of the employees.
For controlling the working and the activities of the business the most effective style of
leadership is the participative leadership style. This is majorly because of the reason that under
this style of leadership leaders takes into consideration the views and suggestion of employees as
well. Though the decision making power is in the hands of leader only but then also they ask for
suggestion from the employees. This makes the employees feel that they are also a part of the
decision making process of the company (Berry, Broadbent and Otley, eds., 2019). Hence, this
will motivate the employees to work in more effective manner and in this manner the leader can
try to control the activities and working of the employees and the business.

EVALUATING MANAGEMENT CONTROL SYSTEM FOR PLANNING
AND DEVELOPMENT
Core control system within company
There are many different aspect of controlling system within the operations of the
company (Crutzen, Zvezdov and Schaltegger, 2017). But the major types of core controlling
system used by Canning foods Ltd are listed as follows-
Financial forecasting- this is a controlling system which is helpful for the company in
managing the financial aspect of the company. This is important for the success of the company
as this will assist the company in managing the financial aspect of the company. The finance is
the most important part of the business and if this will not be controlled then the company will
not be able to manage the performance of the company.
Management by objective- this is another core controlling system used within the
company in order to manage the performance and objectives of the business to a great extent.
The MBO is a strategic tool which is used by Canning foods Ltd to improve the performance of
the company by focusing over the attainment of the objectives of the company. Under this the
company focuses on the attainment of the objectives being set by the management of company.
Under this method the goals are set first and then the policies and strategies are set for the
attainment of the objectives.
Management information system- this is also another important tool of controlling the
business activities by Canning foods Ltd. This is a controlling system which includes hardware
and software system which is the backbone of the company. Under this method all the
information is stored in the computerised form and as and when the company requires any sort of
information then it can be easily accessed.
Relation between planning and controlling
The planning is referred to as an activity which is being used by the company in order to
plan all the thing which the business need to do in order to manage the work of the company.
The planning is defined as the act through which the decisions are taken as what work will be
done by whom and in what manner in advance (Lueg and Radlach, 2016). Thus, this will make
sure that all the working and the activities of the business are planned in appropriate manner.
Moreover, planning will be helpful for the company in managing the business and activities of

the business. On the other side, controlling is defined as the comparison of the planned
performance and the actual performance and trying to find out the deviation among both. The
controlling helps the company in assessing the fact that whether the company is able to attain the
objectives of the company in same way as it was planned (Kraus, Kennergren and von Unge,
2017).
Both the planning and controlling are the inter related aspect in the management of the
company. This is majorly because of the fact that the planning helps the company in setting the
goals and the controlling help the company in ensuring that whether the company is successful in
attaining the aim and objectives or not. Also, if the plans are not made in proper and accurate
manner then the company will not be able to manage and control the activities of the business. in
the same manner, if the company is not having effective control system then the company will
not be able to plan for the future working of the company. This is majorly because of the reason
that when the company will control the activities then they will come to know about the future
steps and then they will plan for it.
Contingency framework for strategic planning and development
The strategic planning is a concept wherein the business plan for the strategies which are
essential for the working of the company and the attainment of the company. This is essential
because of the fact that strategic planning involves the analysis of different options and
alternatives which the company can use in order to manage the work of the company. The
strategic planning is the most essential thing for the company as this help Canning Foods Ltd in
managing all the different strategies which are helpful for the company in attaining the objectives
of the business. the business exists in the environment which is very dynamic and ever changing
and it is essential for the company to manage all the different changes taking place in the
environment and this will also improve the working of the company to a great extent.
Thus, for this reason that contingency framework is very much essential for the company
as this will help the company in planning for these changes taking place in the external and
internal environment as well. The contingency framework is referred to as the planning for the
alternative solution which will can be used by the company if the intended strategy does not
work in place (Guenther, Endrikat and Guenther, 2016). This contingency framework is used by
the company in the situation when the actual plan of the company is not working as it supposed

to work. Thus, in this case the contingency framework will be helpful for Canning foods Ltd for
controlling the activity.
EVALUATING CONTROL SYSTEM OF COMPANY
Use of project management tool
The project management is very helpful for the company as this help the company in
managing the project since its initiation till the project is being successfully closed down (Bisbe
and Sivabalan, 2017). There are many different types of project management tool which are used
by Canning foods Ltd which are as follows-
Gantt chart- this is the most important tool for the management of the project and this is
because of the reason that this help the company in diagrammatically present the whole project.
The Gantt chart is a horizontal bar chart which represent whole of the project and the steps in the
completion of the project are listed in the form of graphs.
Time sheets- this is another important project management tool which help the company
in managing all the dates on which the activities of the project need to be completed. This is
essential as this time sheet has the starting as well as the end date which is helpful for the
company in managing all the different stages of the project. This time sheet assists the company
in getting the dates of initiating the activity and ending the activity.
Reporting- this is another important tool for the management of the project in successful
and effective manner. This is majorly because of the reason that when it comes to project
management then it is essential for the company to report all the details relating to the stage and
this will assist the company in managing that position of company.
Nature of control system in small business
From all the above analysis and evaluation, it is clear that the control system is very
essential for the company in managing the performance of the company to a great extent. The
nature of the different controlling system within the small business is that the controlling is the
function of the management. This is majorly because of the reason that if the control system will
be good and effective then this will help the company in effectively manage the working of
whole organization (Luft, 2016). Thus, this is the nature of control system wherein the company
tries to manage the work in proper and effective manner.

Another major nature of the control system is the controlling is a dynamic process. This
is due to the fact that the business operates in a dynamic process and because of this reason the
controlling is very essential. As this will help Canning foods Ltd in managing all the changes
taking place in the external environment as well. Thus, it is very much necessary for the
management and controlling of the changes taking place in the external environment such that
the settlement of the changes take place in the working of the company (Controlling: meaning,
nature and principles, 2019).
Process of discovering strategic core competence of small business
Understanding of the competency of the business is the most important and essential
thing which the business need to do in order to successfully manage the working of the company.
This is majorly because of the reason that the competencies are the point or areas in which the
company is good and excellent. Thus, it is very much essential for Canning foods Ltd to identify
the competency and then work on improving it. Thus, there is a process through which Canning
foods Ltd can use to identify the competencies of business-
The first stage is to first to start by analysing the mission and vision of the company and
then try to find out that in which direction the business need to work. Thus, if the mission and
vision of the company will be clear then it will be easier to find out competency of the company.
Another step is to list out the understanding of the business and the policies and practices
being used by company. Thus, this will assist the company in finding out the areas in which the
company is good and the areas in which they require development. The areas in which they are
good are the competencies of the company.
The next stage is listing out of all the competencies which the company is having and
possessing. Here the company brainstorm all the areas in which they are good and they excel and
then they list out.
The last stage if of validating that is confirming that it is the competency of the company
and then they implement that competency into practice. Thus, this will increase the working
efficiency of the company as this will increase the qualities of the company.
Use of management control system
As per the thinking of De Harlez and Malagueno (2016) management control systems are
very helpful for the company in managing the work of the company. This is majorly due to the
fact that the use of these management control system assists the company in proper management

of all the activities of the business. The use of this management control system assist the
company in ensuring the proper functioning of the company and this will make sure that the
profitability of company is increased to a great extent.
But in against of this Lopez-Valeiras, Gonzalez-Sanchez and Gomez-Conde, (2016)
argues that if the company exercises too much control then employees and workers of the
company will not like this. Thus, this will decrease the working efficiency of the workers and
will negatively impact the working of the company to a great extent. Hence, it can be said that
too much control within the management of company will definitely result in the
mismanagement of the whole working of the company. Also, the more control by the top
management may result in resistance from side of the employees.

REFERENCES
Books and Journals
Bedford, D.S., Malmi, T. and Sandelin, M., 2016. Management control effectiveness and
strategy: An empirical analysis of packages and systems. Accounting, Organizations
and Society. 51. pp.12-28.
Berry, A.J., Broadbent, J. and Otley, D.T. eds., 2016. Management control: theories, issues and
practices. Macmillan International Higher Education.
Berry, A.J., Broadbent, J. and Otley, D.T. eds., 2019. Management control theory. Routledge.
Bisbe, J. and Sivabalan, P., 2017. Management control and trust in virtual settings: A case study
of a virtual new product development team. Management Accounting Research. 37.
pp.12-29.
Crutzen, N., Zvezdov, D. and Schaltegger, S., 2017. Sustainability and management control.
Exploring and theorizing control patterns in large European firms. Journal of Cleaner
Production. 143. pp.1291-1301.
De Harlez, Y. and Malagueno, R., 2016. Examining the joint effects of strategic priorities, use of
management control systems, and personal background on hospital
performance. Management accounting research. 30. pp.2-17.
Guenther, E., Endrikat, J. and Guenther, T.W., 2016. Environmental management control
systems: a conceptualization and a review of the empirical evidence. Journal of Cleaner
Production. 136. pp.147-171.
Kraus, K., Kennergren, C. and von Unge, A., 2017. The interplay between ideological control
and formal management control systems–a case study of a non-governmental
organisation. Accounting, Organizations and Society. 63. pp.42-59.
Lopez-Valeiras, E., Gonzalez-Sanchez, M.B. and Gomez-Conde, J., 2016. The effects of the
interactive use of management control systems on process and organizational
innovation. Review of Managerial Science. 10(3). pp.487-510.
Lowe, E.A., 2019. On the idea of a management control system: integrating accounting and
management control. Management Control Theory, p.63.
Lueg, R. and Radlach, R., 2016. Managing sustainable development with management control
systems: A literature review. European Management Journal. 34(2). pp.158-171.
Luft, J., 2016. Cooperation and competition among employees: Experimental evidence on the
role of management control systems. Management Accounting Research. 31. pp.75-85.
Yan, A. and Gray, B., 2018. Linking management control and interpartner relationships with
performance in US-Chinese joint ventures. In Management Issues in China: Volume
2 (pp. 106-127). Routledge.
Online
Controlling: meaning, nature and principles. 2019. [Online]. Available through: <
https://www.businessmanagementideas.com/management/functions/controlling-
meaning-nature-and-principles/3576 >
The primary types of organizational control. 2018. [Online]. Available through: <
https://www.strategic-control.24xls.com/en113 >