Definition: Management control systems are the formal and informal structures put in place by a business that compare the goals and strategy of the organization against the actual outcomes. In other words, it measure how well the functions of a business and the business as a whole perform and meet objectives. This comparison is then reviewed and used to drive managerial decisions.
What Does Management Control Systems Mean?
What is the definition of management control system? In a general sense, these systems are put in place so that an organization is sure to be consistently checking on its performance and goal alignment. One of the main benefits of having control systems is communicating goals and objectives to the business and ensuring that managers in the business understand their role in achieving them.
Most businesses that successfully use MCS use both financial and nonfinancial measures. While it makes sense to use financial measures since the data is usually readily available and most businesses are very conscious about dollars and cents, it is important not to discount nonfinancial measures. Nonfinancial measures significantly impact businesses of all types, and must be monitored.
Let’s look at an example.
Leah is the director of human resources at a small company. Lately, she’s been feeling like more employees have been leaving this year than last year. She would like to have some kind of system in place so that she can have data to either back up or refute her feeling and use that data to coach her team in the future. How can a MCS help Leah to keep track of this metric in the future?
Leah should track employee turnover. By using this control system, she will know if more employees are leaving than usual and can look into why this might be happening.
Define Management Control Systems: MCS means the methods put in place to make sure the actual company performance is on track with the company goals for the period.