The Current Competitive Environment Accounting Essay

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The current competitive environment in which the business is developed, with the need to respond to the constant changes and the constant uncertainty that organizations have to face, carry a significant modification for the management of the company, it is essential the role of management control because is the largest contributor to improving the performance of the entire company. (Rivera, 2004)

Companies must make strategic decisions that achieve adequate competitive advantage in the pursuit of business excellence through a flexible process of continuous improvement.

This assessment will try to show what is the management control, it evolution and a critical evaluation of the management process control and the model of control systems (Feedback & Feedforward).

Management control theory

One of the first definitions of Management Control was provided by Anthony (1965), according to whom management control is "the process by which managers ensure that resources are obtained and used effectively and efficiently in the accomplishment of the organisation's objectives".

Classical definitions consider three stages: following a plan, determine and explain deviations and, finally, define corrective actions, there is only one way to implement management control, without considering that no two organizations can be the same. In addition, many organizations lack a plan or have policy failures in their plan, making impossible the implementation of management control in the classical way.

In summary, management control can not satisfy with the verification of actual results with a pre-established rule, actually, must focus on continuously reconstruct the efficiency standard in itself, through a permanent diagnostic approach and revalidation the objectives [Lorino, 1993].

The modern approach is to recognize the role of employees in achieving organizational goals as expressed Anthony (1990): "Management Control is the process by which managers influence subordinates to implement strategies and it objectives".

Management control must have warning signs that anticipate potential problems, Freije (1993), such as the mechanisms feed-forward control because posteriori control, based on traditional accounting and as a picture of what happened, it is not able creatively to solve problems. It needs a change of focus of management control systems to help improve productivity by tracking the factors determining business competitiveness (quality, customer service, fast delivery, etc.), systems that achieve motivated staff and evaluate its relationships.

The authors also consider the management control has a close relationship between the image projected by the company towards society and their results, at the same time that form part of the three levels of management (strategic, tactical and operational). It is a dynamic balance between what the company wants to do itself and what the society rules, customs and values suggests to do. Therefore, the management control system includes information necessary to run a business effectively, efficiently and competitively, covering items related to processes, financial resources, corporate culture and the level of customer service, so that balance is achieved between the image and results of business.


Management control has evolved over the years, as organizational problems have required new needs and demands. Today it is possible to differentiate a classical approach, on which there is consensus on and a new approach fragmented in different interpretations. (Blázquez, 2000).

Taylor was one of the pioneers in the industrial management control and its business model was based on four principles: stability, perfect information, the identification of productive efficiency with cost minimization and equivalence of the overall cost to the cost of a single production factor. Even today, in many organizations, are used this management control tools. (Lorino, 1993).

The ways that starts and develops the management control in the U.S. and Europe cover two significant stages: economic control development management and development of integrated management. The first one is in relation with the accounting and monetary area of the company, while the second serves as a nexus of global management. In the last decades have developed a set of tools that improve and strengthen management control, such as: benchmarking, process management, balanced scorecard, etc. (Illescas, 1993).

Se observa un cambio en las variables orientadas hacia el cliente, el desarrollo tecnológico y la innovación, los enfoques de calidad, la cultura empresarial, la creatividad y la gestión de la información, entre otras. (Porter, 1991; Lorino, 1993; Abell, 1995). La competitividad se convierte en el criterio económico por excelencia para evaluar el desempeño dentro y fuera de la empresa. (Freije, 1993).

There is a change in the variables oriented to the customer, technological development and innovation, quality approaches, business culture, creativity and information management, among others. (Porter, 1991; Lorino, 1993; Abell, 1995). Competitiveness becomes the ultimate economic criterion to evaluate the performance inside and outside the company. (Freije, 1993).

Finally, it is proposing an approach to change management control systems that focus in to the key factors of business management, where strategy becomes the key factor of the success of organizations. Therefore, the control system must be designed in accordance with the strategies, objectives and plans, jobs and employees, otherwise would be ineffective.

Management Process Control

From the organisational point of view, Management Control, usually carried out by an organ recognized in the staff list at the company's top management, is implemented according to a constant cycle through the following phases:

Preventive control.

Concurrent control.

Final control.

The Preventive Control gets substantial with the drawing up of the budget where, through the appropriate simulations, the Company' course in the defined stage is anticipated, taking into account all activities, both internal and in outsourcing. (EWF, 2008).

Concurrent Control develops side by side with the management and consists of cyclic measurement of the indicators, transmission of collected information to the responsibility centres and the Top Management, taking on of corrective action, aimed at filling up the difference between the expected results and the actual ones and finally putting into effect of the decisions taken.

The Final Control ends the control cycle and validates itself into the communication, to the responsibility centres and the Top Management, of the information about the final measurement of the indicators, with the aim of following the succeeding budgeting cycle, providing basics for the evaluation of the background where the responsibility centre works. (EWF, 2008).

Managements should not forget about the problems that can occur in the management control process. The causes of the needs for control can be classified into three main categories: lack of direction, motivational problems, and personal limitations.

Lack of direction. Some employees perform poorly simply because they do not know what the organization wants from them. When this lack of direction occurs, the likelihood of the desired behaviours occurring is obviously small. Thus, one function of management control involves informing employees as to how they can maximize their contributions to the fulfilment of organizational objectives. (Lublin, 2002).

Motivational Problems. Even when employees understand what they are expected to do, some choose not to perform as the organization would have them perform because of motivational problems.

Motivational problems are common because individual and organizational objectives do not naturally coincide; individuals are self-interested. (KPMG, 2005)

Personal Limitation. The final behavioural problem that Management Control Systems must address occurs where employees who know what is expected of them, and are highly motivated to perform well, are simply unable to do a good job because of certain personal limitations. They may be caused by a lack of requisite intelligence, training, experience or knowledge for the tasks at hand. (Landekich, 1989)

Models of control systems (Feedback & Feedforward)

A manager has to review the decisions that need to be taken in connection with the information that he receives. To start an effective control system, these data should be compared with the objectives and standards and corrective actions are carried out from now. At this point it is necessary to use the feedback and feedforward control.


Feedback is the practice of adjusting future actions based on past performance information. The feedback principle is applied in many fields where the idea is to get control immediately. It is based on the interdependence of the different parts of a system. The following diagram shows how a feedback control system works:




Simple Feedback


Desired values of Outputs

Corrective action Information

 

Managers contrast the actual performance with the standards and the he classify and analyze the deviations. But then, to make the necessary corrections, must develop a corrective action program and implement this program in order to reach the desired results.

A manager in charge of the control should always update the information related to the actual implementation so that deviations are quickly detected and corrected. Information flowing back to the operator for this purpose is merely feedback. There could be an informal feedback or a formal feedback. The first one can flow by the individual contact, informal dialogue and personal observations. The second is through the financial statements, reports, statistical analysis, and other written communications.

A disadvantage found in the Feedback method is that does not mind the efficiency in date feedback, management control may not be as immediate as an electronic way.

Even when the differences are recorded quickly, it takes time to analyze them and implement them. So, even with a faster data collection the results will not be automatically corrected.


Feedforward control is focus on the regulation of inputs to ensure that they meet the standards necessary for the transformation process.

One of the problems founded while using the historical information, is that the information is not on time and the reorganization is not achievable. One can only refer to the information and make changes for the future.

The need is elevated for a system that can let know the managers, over time, to take coactive measures. While the future control is addressed seriously in practice because managers have been overly dependent on accounting and statistical data for monitoring purposes.

However, the feedforward concept has been applied along the story. A common way managers have practiced is through careful and repeated projections using the latest information available, the comparison of what you want with forecasts, and changes to the program so that forecasts may be more significant.

Managers have to build up new advertising campaign and sales promotion strategies to get better predict sales growth. In the majority of the companies, managers carefully prepare the availability of cash to meet the requirements.

One of the problems faced with Feedforward is the need to look out for factors known as "disturbances". These are factors that are not taken into account in the input form, but they do have an effect on the outcome. It will not be convenient to take all variables that can possibly affect the operation of a program.

However, while uncertain and inopportune things appear and may upset a wanted output, monitoring of standard inputs must be supplemented with taking into account the unpredicted "disturbances".


Feedforward is really like a reverse of the feedback. As a result, corrections can be made on the inputs side of Feedforward system so that the output lies unaffected. Moreover, there is no denying that, even with a Feedforward control, mangers still want to measure the output results of the system because nothing can be expected to work well enough to ensure that the final product will always be perfect.

We can see that Feedforward control seems to be much more efficient than Feedback. This does not imply that managers should never give feedback. But it shows that Feedforward can often be preferable to feedback in the work routine.

A good communication between people at all levels is the key that help the organizations to stick together. By using feedforward managers can considerably improve the quality of communication in their companies. (Goldsmith, 2009)


In this assessment try to analyse and demonstrate the need for management control as key tool to get business effectiveness, developing a process that guarantee the monitoring of the business system to which it applies.

Management control as a tool for improvement and change presupposes the dedication of top direction with the pursuit of getting these goals and the existence of an efficient and flexible information system.

A good manager should be prepared to attend all the problems that could appear during the process and solve them. Also should know which system is the best one for the company and make everyone work as a whole to get the best communication possible, which is the key of the management control.