CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Management Control Systems (MCS) is the process by which managers ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organization s objectives . MCS is a system used in an organization which collects and uses information to evaluate the performance of the organizational resources that will eventually influence the behaviour of the organization to implement organizational strategies (Armesh et al., 2010).
The term “management control systems” means the use of a number of techniques in organisations to observe and evaluate employee performance against certain management targets. Therefore, conventional management control systems focus on getting better operational efficiency. But as operational efficiency is no longer adequate to create sustainable competitive advantages, management control systems must be expanded to managerial practices that cultivate employee cooperation and creativeness in the discovery and development of new business
opportunities. This is especially the case in the high-tech industries that are at the faced with the challenges of globalisation and employee teams must combine efficient communication with creativity. Simons (1987 and 1990) argued that control systems is in four categories, namely
- Diagnostic control systems
- Boundary control systems
iii. Interactive systems
- Belief systems.
These four different management control systems are identified recently by companies as effective categories of controlling system, companies must apply them in a way that maximizes operational effectiveness without limiting employee creativity. This task can be accomplished by using diagnostic measures as a way to improve operational effectiveness and the other three types of control measures as a way to mitigate its negative effects on employee creativity (Kimura and Mourdoukoutas, 2000).
Here we see the importance of competition as a powerful tool to impact on MCS As competition in global industries intensify, the traditional competitive strategies that are based on operational efficiency and are no longer sufficient to generate sustainable competitive advantage. They must be joined by strategies that cultivate collective entrepreneurship, i.e. strategies that empower employees to discover and exploit new business opportunities. To pursue such strategies successfully, companies must integrate successfully four different control systems, the beliefs system, the interactive system, the diagnostic system, and the boundary system.The beliefs system should be used to define a corporation’s character and mission and to set guidelines both for performance targets and for acceptable employee behaviour in pursuing such targets. The interactive system should be used to adjust the organisation guidelines to changing market conditions, while the diagnostic and the boundary systems should be used to set standards for improving efficiency and creativity (Armesh et al., 2010).
One of the most important issues in management is controlling. Control is one of the tasks of managers (Fayol, 1949).Management control system (MCS) is use as a tool for controlling in administration. Obviously managers need criteria to determine how well they do and to control their performance. In this case, measuring performance is a important concept in controlling. Therefore a system to provide information for execution is needed. MCS helps managers to find information and ensure them those performances and behaviors of employees are consistent with organization objectives.
1.2 Statement of the Problem
Management control is a critical function of organizations. Management control problems can lead to large financial losses, reputation damage and possibly even to organizational failure. Organizations that lack effective management control have a low probability of success. Resources are easily mis-managed when there is no effective management control and this negatively impacts on the attainment of the organizational goals and objectives. In addition, poor management control also affects operational efficiency of the organization. Employees may be performing below expectations as there is no management control system to constantly evaluate their performance in order to maximize their productivity. There is no co-operation among employees when there is no management control.
1.3 Objectives of the Study
The study intends to achieve the following objectives:
- To find the role of management control system in attaining organizational objectives.
- To investigate the impact of management control system on the efficiency of organization
- To determine the functions of management control system.
- To reveal the importance of management control system in organizations.
1.4 Research Questions
The following research questions were formulated based on the objectives of the study:
- What are the roles of management control system in attaining organizational objectives?
- What is the impact of management control system on the efficiency of organizations?
- What are functions of management control system in organizations?
- What are the importance of management control system in organizations?
1.5 Statement of Hypothesis
As a guide to achieve the objectives of the study, the following hypothesis were formulated:
- Ho: The roles of management control system in attaining organizational objectives are not aiding the monitoring of employees performance, reduction of financial losses and efficient management of organizational resources.
Ha: The roles of management control system in attaining organizational objectives are aiding the monitoring of employees performance, reduction of financial losses and efficient management of organizational resources.
- Ho: The impacts of management control system on the efficiency of organizations are effective control of daily operations and quick attainment of organizational goals.
Ha: The impacts of management control system on the efficiency of organizations are effective control of daily operations and quick attainment of organizational goals.
- Ho: The functions of management control system in organizations are not management of organizational resources, planning and monitoring of organization activities and measuring performance.
Ha: The functions of management control system in organizations are management of organizational resources, planning and monitoring of organization activities and measuring performance.
- Ho: The importance of management control system in organizations is not promotion of organizational growth, prevention of bankruptcy, and enhancement of organization image.
Ho: The importance of management control system in organizations is promotion of organizational growth, prevention of bankruptcy, and enhancement of organization image.
1.6 Significance of the Study
It is believed that this research work will be significant in the following ways:
- It will help in revealing the importance of management control system in organizations.
- It will enable the management of organizations to know the roles played by management control system in the attainment of their objectives.
- The study will encourage the implementation of effective management control systems in organizations.
- The study will serve as a useful reference material for other researchers seeking related information.
1.8 Limitations of the Study
The study was limited by the following factors:
Financial Factor: Inadequate funds affected the way data were collected since the researcher had to travel long distances for the distribution of the research questionnaire forms.
Time Factor: This affected the reduction in the size of the sample used for the study because the researcher had less than two months to complete the study.
Material Factor: Shortage of relevant materials for literature review posed a great difficulty.
The study was also limited to the information gathered from primary and secondary records.
1.9 Organization of the Study
In this research study, the researcher took a critical look on the strategies for managing the survival and growth of SMEs, a case study of selected SMEs in Uyo Urban. The research work was divided into five chapters.
Chapter one was on the background of the study, as well as statement of the problem, objectives of the study, research questions, statement of hypothesis, significance of the study scope and limitation of the study, organization of the study and definition of terms.
Chapter two reviewed the related literature on the subject matter and contributions of different authors.
Chapter four takes care of the data presentation, analysis and interpretation as well as discussion of findings.
Chapter five (5) encapsulates the summary, findings, conclusion and recommendations made by the researcher.
1.10 Definition of Terms
Management
Control:
Management Control system
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