Management Control Systems - Essay Example

Management Control Systems Insert Insert Grade Insert 10 November Management Control Systems The business world has become very dynamic in the recent past. Various trends in business management are cropping up each day. Employees and the management in general are often than not getting themselves on the receiving end with lots of uncertainties of their effectiveness in the business operations. One key area that has resulted in an untold fear is the emerging trends in management control systems. It is evident that the study curriculum changes with region, country and also as per new innovations. The business world is now an equally dynamic sphere with a reason to keep updated for effectiveness. This study therefore chose to evaluate on this catchy trend in management control systems. Management control systems in the world differ. These differences make management practices in various parts and organizations different. One country’s proven management systems may not work appropriately in a foreign country. Lere and Portz (2005), in the CPA Journal, undertook a research to establish possible reasons that may inhabit the working of a management control system in the United States with a multinational corporation firm in a foreign country. Taking a case study of a U.S based Multinational Corporation; the effectiveness of her management control system would evidently differ from one country to another or even from one branch with diverse cultural inclination to another in the same country. Therefore, the following is a report from the investigation carried out. John and Kris’ research sought to analyze two main issues: 1) How cultures differ? 2) The effect of cultural difference to the working of control system in management. The report from an earlier research conducted by Hofstede was that culture differs in the following aspects; power distance, gender, individual versus collectivism and uncertainty avoidance. Three regions and fifty countries were used in the analysis. However, his taxonomy added another aspect that was used to analyze twenty three nations and this is Confucian dynamism. Hofstede found out that those cultural differences has numerous implications to the effectiveness of a management system. Countries with cultures regularly referred to as the small power distance countries are associated with participative decision making and decentralization whereas large power countries are normally associated with less participative decision making and centralization. This implies that different control management systems will suit a country on the basis of their mode of decision making. For instance, in a decentralized organization, management remains at low organizational levels while in a centralized system, management control system is at high organizational levels. On the dimension of individualist or collectiveness, individuals tend to act on their best interests in the individualistic cultures. This means that policies are to be designed in such a way that individual interests coincide with organizations interests. On the other hand, management to collectiveness organizations may be prompted to encourage cohesiveness and group work. The policies designed should thus focus on the collective wellbeing to both the organization and the workers as units Other countries and regions define themselves as being either masculine or feminine. In feminine cultures, work is considered low in priority to life unlike the case in masculine cultures. On the other hand, assertiveness, material possession and heroism are all basic characteristics of a masculine culture. They believe work is more important to life. Financial rewards are a great motivator in management in masculine culture while vacations and time offs, are key management issues in feminine cultures. There are other countries that have low tolerance to ambiguity and strong uncertainty avoidance. Unfamiliar situations and discomfort are major characteristics of these cultures. Management practices here are then dominated by many formal and informal rules. This limits decision making by managers. Differences are evident in short term orientation cultures and the long term orientation cultures. This explains Confucian dynamism. Profit based measures characterize short term oriented cultures as they tend to concentrate more on performance. In long term oriented cultures however, rewards and promotions dominate. There are many factors to consider while designing management control systems for different countries and countries with diverse employee cultures. These include: a. Cultural differences can affect the effectiveness of the policies employed by a management control system. Policies that are very efficient in the U.S are unlikely to be effective in countries with different cultures. b. The gap between management control system policies and culture can be bleached by training. c. A company culture ought to be considered while bench marking. This is due to the fact that a culture can adversely affect the effectiveness of any policy employed in a management control system. In responding to cultural differences, a number of studies have been carried out and their findings put forward on the different ways multinational corporations have adopted to overcome the effects of the cultural differences. Some companies have modified their indigenous cultures to reflect and accommodate the subsidiary cultures prevalent in the country. Others have adopted a mechanism where their managers are selected on the basis of compatibility with the new culture. Nevertheless, the following key considerations have to be put forward in order to modify (or design) a management policy that will suit the diverse cultures. Performance measures may be more important in long-term orientation cultures. These may include market share as well as sales growth. In other cases, non financial rewards may be more meaningful than financial rewards. a. In many instances, less external incentives are needed in collectivism. b. Relatively more centralized mechanisms are more appropriate. c. In feminine cultures, rewards to target life comfort are relatively more effective than financial rewards as is common practice in the United States. d. In collectivism countries, policies that are relatively more inclined to individual working are less effective as the culture predominantly advocates for collective responsibility. Delegation to individuals is common in the U.S but it might not work in other cultures with different cultural alienation. In conclusion, the findings are clearly portraying a need for any multinational or local company to consider cultural background of the employees as well as the management in policy making mechanisms as not all policies, having been proved effective in one place must be effective elsewhere. Reference Lere, C. J. and Portz, K. (2005). Management Control Systems in a Global Economy, The CPA Journal, 75, 9; ABI/INFORM Global pg.62 . Read More