What is a management control system, and more importantly what are the various types of management control systems? The aim of this article it to answer those question for you adequately, and thus help you understand the significance of such systems in order to be able to manage a company effectively.
First of all, what does the term “management control system” refers to? All kinds of methods that can be used for data collection in a company essentially belong to some type of management control system, also known as MCS. The sole purpose of an MCS is to gather as much information as possible that is to be used in order to guide and direct the behavior of the company’s employees, so that it increases the employees’ productivity and performance; the ulterior motive, of course, being the achievement of company goals. The reason there are many types of management control systems is because there are different types of data to be collected. Had it not been for different types of management control systems, neither the techniques used to gather those data would be as accurate and effective, nor would any possible findings be comprehensible; at least not in a way that they could then be used to actually help a company.
There are basically two ways to classify the various types of management control systems; the one is according to the timing with respect to a certain operation or a certain project, and the other is according to the types of data that are to be collected. As far as the first classification goes, there are three types of management control systems: forward concurrent, and feedback control systems. Forward control systems examine a certain project before that project even begins, with an intent to predict any kind of obstacle that could appear along the way, so that it is eliminated early. A concurrent control system is one that is put into effect while a project is running, in it practically includes everything that has to be done so that the project is brought to a successful end. As for the last of the three types of management control systems, feedback control refers to a set of methods used to gather data after a project is finished, in order to be evaluated for its success and in order to make a similar future progress even more successful.
Now, if one looks at management control in terms of the type of data that are to collected, one will ends up with types of management control systems like: performance and productivity control systems that are concerned with the performance and the productivity of a company’s employees; managerial accounting systems that are used by a company to determine business costs (raw material, labor, overhead costs) and allocate them to the final consumer product; financial accounting systems that are used to produce accounting reports relevant to other areas of a business. Typical responsibilities of a financial accounting system is to issue financial statements (which are essentially all of a company’s activities that have taken place within the last year), as well as to ensure that the company’s regulatory requirements have been met.
In any case, different types of management control systems have something different to bring to the table, so that they contribute to a company’s effective management.