Management control systems (MCS) are tools used to gather and use information to encourage the behavior of the worker and to assess the progress of the organization (Horngren, 2005). The four MCS are market control, clan control, bureaucratic control and financial control.
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Market control entails the application of price competition to assess productivity. The management evaluates different levels of profits and prices to find out the effectiveness of their company. For the correct use of market control, it is essential to have an appropriate level of competition.
The requirements should also be specified clearly. Market control is not suitable for controlling functional departments. However, it is proper when price for services is determined by competition and it corresponds to the correct value of the services provided.
Bureaucratic control is “the use of rules, policies, hierarchy of authority, written documentation, reward systems, and other formal mechanisms to influence employee behavior and assess performance” (Barnat, 2007). This strategy is best applied when it is possible to control behavior with market or price techniques.
Clan control stands for cultural values, which is nearly the opposite of bureaucratic control since it depends on values, beliefs, corporate culture, shared norms, together with informal relationships that control the behavior of the worker and aid in attaining the objectives of the company.
Companies that employ clan control need truthfulness between their workers given that there is minimal direction and set standards. Workers are presumed to perform well since they take part in coming up with the standards and developing the control systems.
Financial control is whereby planning, assessment of output and bringing together of financial activities is done intended at attaining the preferred return on investment. The overall performance of the organization is controlled by the use of financial statements such as a budget, operating ratios and other financial tools.
Barnat, R. (2007). Bureaucratic control. Oracle/Hyperion Consulting. Retrieved from https://www.strategic-control.24xls.com/en111
Horngren et al. (2005). Introduction to Management Accounting. New Jersey: Pearson.