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The word 'control' in an organizational context has traditionally been used interchangeably with 'financial control'. It is very closely associated with terms such as 'budgets', 'variances', and 'audits', and in a broader sense, with 'rigidity', 'bureaucracy', 'imposed by management', and 'preserving the status quo'. In this view, the emphasis is on controlling the numbers with a top-down orientation to management.
On the other hand, 'effectiveness' and 'efficiency' are not merely about 'doing the right things' and 'doing things right'. The business environment is dynamic; competition cuts across product categories and national boundaries, and consumers are well-informed and willing to explore the choices at hand. At all levels and across all functions of the organization, excellence of execution requires 'double-loop learning'- the habit of anticipating changes and adapting to them in a proactive manner. Often, this adaptation is simultaneously required on multiple aspects such as strategy, structure, systems, and culture. And such adaptation is required both for guarding against possible declines in an organization's performance and for gaining competitive advantage.
In this second edition of the book Management Control Systems, we take an integrated approach to performance and compliance. We look at organizations as open systems where people in different functional areas use resources to perform a variety of activities that result in outputs and outcomes that satisfy stakeholders and realize the organization's objectives, while complying with the law and adhering to ethical principles. Therefore, to ensure that the organization achieves its objectives, management control has to address all its sub-systems. Management control thus has four broad objectives - effectiveness, efficiency, disclosure, and compliance.
In this book, in addition to the underlying concepts and techniques of management control, we discuss its applications in different contexts (such as in international business and service organizations) and in different functional areas.