Management control system

Definition

A Management Control System (MCS) is a framework used by organizations to ensure that resources are obtained and used effectively and efficiently in the accomplishment of organizational goals. It includes tools and processes for planning, budgeting, performance evaluation, and incentives.

5 Must Know Facts For Your Next Test

1. MCS helps align individual objectives with organizational goals.
2. It is crucial for both centralized and decentralized management structures.
3. Components of MCS include financial measures, non-financial measures, and behavioral controls.
4. Effective MCS relies on accurate data collection and analysis.
5. In decentralized management, MCS empowers lower-level managers with decision-making authority while maintaining overall control.

Review Questions

• What are the primary components of a Management Control System?
• How does a Management Control System benefit a decentralized organization?
• Explain how MCS aligns individual objectives with organizational goals.

Related terms

Responsibility Accounting: A system that involves assigning accountability to managers for specific activities or segments within the organization.

Decentralization: The distribution of decision-making authority to lower levels in an organization's hierarchy.

Performance Evaluation: The process of assessing the effectiveness and efficiency of employees or business units in achieving organizational objectives.