Assessment of Flamholtz and Management Control Systems

Topics: Organizational structure, Goal, Lenovo Pages: 6 (2215 words) Published: November 5, 2008
1.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). (a) Strength: (put something about the definition) One of the four functions of control is to motivate people to treat the organization’s goals as their own. Thus, they behave in a manner that helps achieve organizational goals. Since economic theory stipulates that rational individuals are self-interested, this increases the likelihood of achieving the company’s objectives and ensuring success for the company. This idea is reinforced as control imposes goal-setting and strategic planning on a company. It also provides individuals with autonomy, which helps asses if individuals are acting out of self-interest, which, in turn, is indicative of the effectiveness of the MCS. (b.i) The Core Control System¬—Strength: By categorizing the MCS, it enabled Flamholtz to provide such great amount of detail regarding the core control system. The planning subsystem further stresses the need for strategic planning and goal setting as it provides a focus towards which employee efforts should be directed. It also introduces the idea that these goals can be used as a benchmark to measure actual performance and motivate performance. Weakness: Since the measurement subsystem relies heavily on the accounting system, employees are usually evaluated and rewarded on accounting measures. This encourages fraudulent financial reporting when employees fail to meet goals. Such an outcome is very likely from this model due to the lack of emphasis on the feedback system, which can be used to ensure that management is setting achievable goals for the employees and not imposing unattainable goals on employees. Theses are all problems associated with managing by objectives and results (MBO), which has been cited as the driving force behind huge market failures such as Enron. (b.ii) Organizational Structure—Strength: Since the company’s structure details the expected performance of an employee in their respective roles, goals can be set to each employee’s specific duties. This element of relevance makes the goals clearer and more attainable, and facilitates isolating weaker areas of the organization, within which MCS is ineffective due to employee behaviour that is not directed towards organizational goals. Weakness: No explanation provided as to how the structure is a response to market, technological and environmental requirements. In general, this framework does not bridge the external activities of an organization with its internal activities [see part (3)]. (b.iii) Organizational Culture—Strength: The text defines culture as a set of values, beliefs and social norms which tend to be shared by members, in turn, tends to influence their thoughts and actions. If goals are set taking into account the company’s culture, it ensures the success of MCS since most of the employees’ behaviour can be directed towards the set goals. Weakness: Flamholtz under-invests in the pervasive impact culture and structure has on the optimal control system. Although he provides diagrams, such as the schematic representation of MCS (Figure 1) to portray this idea, he does not provide sufficient explanation. Culture, particularly that of fear, plays a crucial role as it increases the likelihood of MBO and fraudulent financial reporting from this model [see section (b.i)]. (c) Weakness: The order in which the illustration presents the framework is culture first, followed by structure, then the core...
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