Management control is one of the academic disciplines related to management sciences, just like marketing or finance; but it is above all a function that occupies a growing place in all organizations, not just in companies, and a profession that requires specific qualifications.
In this article we answer this main question: What is management control?
Management control consists of a number of procedures aimed at enabling management to ensure that objectives are achieved efficiently, i.e. by making the best use of the scarce resources entrusted to it.
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As it is generally necessary, due to the division of labor, to delegate responsibilities (management cannot do everything…), management control must make it possible to ensure that individual behaviors are in line with these objectives (we can speak of “convergence of goals”).
The efficiency of management decisions depends on the information available to the manager. There can be no good decision without an information system. Management accounting is an information system designed to inform the manager’s decisions, but if management control is based on management accounting, it is not reduced to management accounting.
In other words, management control is a control exercised by the manager over his subordinates so that they achieve a goal. But it should be noted that the term “control” has two dimensions:
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Verification
This is the meaning taken when we talk about an identity check, or a time-limited check.
Mastery
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This is the meaning taken in the expression “to be in control of the situation”. This second dimension refers directly to the manager’s role as a pilot, that of guiding the decisions of his subordinates, that of incentive.
Ultimately, to define management control is inevitably to develop the two dimensions (verification/incentive):
- Management control is a set of procedures that allow the manager to set objectives, and therefore to encourage his subordinates to work in the direction set for the organization.
- Management control is a set of procedures that allow the manager to verify that the objectives he sets for his subordinates are achieved.
Management control may use information other than accounting information. For example, customer satisfaction indices, payment or delivery times, quality indices, etc., allow the manager to “control” his subordinates.
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If we compare the definitions of management accounting and management control, we find that management accounting is an “information system” (essentially quantitative and expressed in monetary value) while management control is a “process”, a “set of procedures” enabling control.
Management control is broader than management accounting. Management control includes issues of delegation of authority, division of the company into responsibility centers, budgetary control procedures, internal transfer pricing, dashboards, mathematical modeling, risk assessment.
Effectiveness and efficiency
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In management science, it is customary to distinguish between effectiveness and efficiency. An action is effective when the objective is achieved, but it is only efficient if the resources used to achieve the objective have not been over-consumed, i.e. if the “cost-benefit” balance is favorable. In everyday language, efficiency is included in effectiveness.
Note that management control only really appears in a formalized way in companies of a certain size, due to the need to divide labor, delegate responsibilities, and therefore control results.
The small shopkeeper who manages his shop alone does not really need management control, but management as such (nor does he really need accounting, which is seen essentially as a tax constraint); the large company, with several factories and several regional sales offices, does… We will then speak of a control system, which mainly (but not only) uses information of accounting origin.
In summary, management control is a strategic management process that aims to improve the performance of the organization by providing accurate and up-to-date information on financial results and operations to help decision-makers make informed decisions.