The main purpose of writing this text is to gain the better understanding of control of managements on the different organizational systems. As the management control has main concerns with the allocation of resources, performance measurement, coordination and motivation, so the text written over here provides the strategic view of the organization management control systems. This text can also help in understanding how to tackle with the organizations systems and how to handle with the different managerial aspects. This text can easily help in analyzing the performance management and measurement. This shows that these management and performance practices are helpful not only from the standpoint of the finance but also has the greater importance in the managerial, social and behavioural standpoint.
Reference to the reviewed article:
Otley, D., 1999. Performance management: a framework for management control systems research, Management Accounting Research, 10, 363-382.
Purpose of reviewed article:
Get your grade
or your money back
using our Essay Writing Service!
This main purpose of this article is to put forward such a framework which is capable of analyzing of the management control system operations. As the organization measure their performance by keeping in view the financial aspects of the organization. Managers think that if organization is financially strong then its performance is good but they use to neglect the internal matter that's re also related to the success of the organization. Through this article author wants to draw the attention towards other matters that are linked with the performance of the organization.
The author structured the framework keeping in view five main issues that are part of any organization's performance. The framework discusses the five main issues which are related to the setting goals, making strategies and implementing plans to attain goals, setting targets, preparation of incentive plans and feedback sphere. The main focus of this article is on the performance of the organization.
Methods used by the author to fulfil the purpose
Author developed the framework inductively based on five questions that are related to the organizational performance and examined its relevance against the three foremost organizational control systems i.e., balanced scorecard, budgeting and economic value added. In all three major areas of organizational control system, mistreated areas were uncovered.
Author developed five questions for all five main issues of the organizational control system. He pointed out the following five main issues:
Main objectives of the corporations success and ways of its evaluation
Adopted plans and strategies and ways for their implementation and measurement
Performance targets in achieving objectives and strategy implementation
Incentives and penalties plans for the employees
Information system necessary for organization
Author examined all the issues with the balanced scorecard, budgeting and economic value added in order to show ways to measure the performance of organization.
Theoretical framework used for the analysis
All five issues were tested with the three major areas of the organization to examine the organizational control on systems.
Budgeting is the main area focused by any organization and it is also determines the inputs and outputs of the organization. In order to do the good budgeting organizations need to firstly develop objectives and then to prepare plans to achieve those objectives. This planning can control and manage the cost structure of the corporation which underlies budgeting.
In the process of budgeting, targets have always been settled with participation and output process. Reward system is also linked with the budgeting and also information loops occurs in the budgeting because of monthly reporting. In budgeting all the information is recorded in one financial statement which shows the performance of the organization. Through this process output of the corporations can be monitored easily. To develop a good budgeting plan answer to the above questions is very essential.
Economic value added
Economic value added was developed in order to measure the financial performance of the organization and how much value organization gives to the stakeholders. This area discusses all the five questions. Taking in view the first question the main objective of the economic value added is to provide value to the stakeholders to improve the performance of the organization. EVA is the best predictor of the financial success of the organization. EVA doesn't answer the second question of the framework. This is because ways are not cleared how to attain the specified outcomes. EVA also discusses targeting setting, incentives and rewards and targets. Therefore EVA shows the good performance management practice being used in the organizations.
Always on Time
Marked to Standard
Balanced scorecard is the multidimensional approach towards measuring the performance of the organization. It draws the attention of the businesses towards the customer's satisfaction and processes and continuity. It is powerful strategic tool which can motivate the managers to concentrate on key issues of successful deployment of the cooperation's main strategic objective. Its main concern is to establish links between performance criterions and strategic objectives. It also leads the organizations to the expected ends. Even though targeting setting has the main role in balanced scorecard still its role is explicated. Information systems and incentives structures are taken for granted. These areas provide more chances for the future researches.
By reviewing all the three areas, it's clear that perspective of the organizational management performance and implementation of strategies are suitable for use in the control systems of the organizations. This article shows the importance of detailed knowledge of the control systems for the managers to escape form the huge disasters. It also highlights the importance of framework in all three major areas which are considered as the success of the organization. This article opened more areas of the research and more opportunities for the researchers to work in the management control system. This framework can easily help in analyzing the performance management and measurement. This shows that these management and performance practices are helpful not only from the standpoint of the finance but also has the greater importance in the managerial, social and behavioural standpoint. This article delineates such practices which would be helpful for the practitioners to develop and maintain control systems.
This article is related to the literature of the management control system as it explains the different aspects in which management process can be broken down. Author explained the small steps in managing the three major management process that are budgeting, balanced scorecard and added economic value. In all three major management process control is necessary and this control can come by following the small steps of performance measurement. Especially by goal setting and strategy formulation, performance measurement, target setting, incentives planning and information feedback systems, organizations can control their management processes which would also be successful for their future.
Personally, I have the same opinion that to control the management process in the organization managers need to focus on all the aspects. Managers must keep in mind all five issues (goal setting and strategy formulation, incentives planning, targeting setting and information feedback) listed above, while handling any management process. Elements of management control system gives particular direction to the managers. Management control systems give useful knowledge to the managers that how to perform their jobs and how to support cooperation's in mounting and maintaining feasible ways of behavior. The framework provided in this article is not only useful for the measurement of performance for different managerial processes but it is also helpful for the other researchers and open ways for them to make different researches.