Effect of management control as a strategy in improving organizational performance

CHAPTER ONE

INTRODUCTION

  • Background of Study

One of the most important issues in management is controlling. Control is one of the tasks of managers Fayol, 1949 (Kord et al 2010).Management control system (MCS) is use as a tool for controlling in administration. Obviously managers need criteria to determine how well they do and to control their performance. In this case, measuring performance is an important concept in controlling.

Control is defined as a “process which compares what is done with what is planned” (Kord et al 2010), to establish if there are deviations and to later apply the corrective measures which keep the action within set limits. Both controls have a similar structure, but have underlying differences between them. Jordan (1995) defines management control as an instrument which supports top-level decision making in order to plan objectives, develop an action plan and verify that these objectives have been reached.

A different point of view on management control is that defined by Anthony (1965) as “the process by which managers ensure that resources are obtained and used effectively in the accomplishment of the organization’s objectives”. This definition limited subsequent researchers not only to envisaging management control systems (MCS) as encompassing the largely accounting-based controls of planning, monitoring of activities, measuring performance and integrating mechanisms, but also served to artificially separating management control from strategic control and operational control.

Therefore a system to provide information for execution is needed. MCS helps managers to find information and ensure them those performances and behaviors of employees are consistent with organization objectives. Organizations may use a variety of methods for this purpose like: Balance Scorecard Framework. As a result of dynamism in environment, methods used to measure intangible resources need to be improved especially since assets value has shifted from tangible to intangible, like emergence of knowledge workers.

Halachmi and geert (1996) defines performance as being about doing the work, as well as being about the results achieved. It can be defined as the outcomes of work because they provide the strongest linkage to the strategic goals of an organization, customer satisfaction and economic contributions (boland and fowler 2000). The term “Performance Management and Measurement” refers to any integrated, systematic approach to improving organizational performance to achieve strategic aims and promote an organization’s mission and values (halachmi and geert 1996). In that sense Organizational Performance Management is quite different than individual Performance Management which specifically targets the personal performance of an employee although the latter comprises an essential part of the overall organizational performance framework.

A related issue with control systems is that of efficiency and effectiveness. Efficiency is concerned with minimizing the amount of expenditures or resources needed to accomplish a task. Effectiveness is a concern with ensuring that the correct tasks are being accomplished. Control systems have historically placed a heavy emphasis on efficiency, sometimes ignoring or even undermining effectiveness.

  • Statement of Problem

Strategy plays a key role within organization, yet this role is not fully understood, although a growing body of literature has examined the impact of management control strategy in improving organizational effectiveness and efficiency. Also, there is evidence (Govindarajan, 1988) that high organisational performance results from the matching of an organization’s environment, strategy and internal structures and systems. Miles and Snow (1978) suggest that the strategy choice the company makes will affect its MCS, meaning that different types of organisational plans and strategies will tend to cause different control system configurations. Moreover, scholars (Hope and Hope, 1995; Whittington, 1995) suggest that there is an important link between strategy and MCS and that a congruent match of the two variables is essential to effectiveness and efficiency.

A control system contains the measures or yardsticks that allow managers to assess how efficiently the organization is producing goods and services. Without a control system in place, managers have no idea how their organization is performing and how its performance can be improved. Management control helps in determining the quality of goods and services it also gives managers feedback on product quality.

This research analyses management control as a strategy in improving organizational effectiveness and efficiency in Innoson Technical and Industrial Co. Ltd, Enugu State.

1.3 Research Questions

There is every need to answer some questions in the course of the work as the act will help throw more light on the subject matter. However, some of the questions are

  • What is the relationship between management control and organisational efficiency and effectiveness in Innoson Technical and Industrial Company?
  • Does management control help in determining the effectiveness and efficiency of goods and service in Innoson Technical and Industrial Company?
  • Is management control a yardstick for measuring how efficiently the organization is producing goods and services in Innoson Technical and Industrial Company?

1.4 Objectives of the Study

This research work study is to evaluate management control as a strategy in improving organizational performance. And the following secondary objectives would also be determined.

  • To determine the relationship between management control and organisational effectiveness and efficiency in Innoson Technical and Industrial Company
  • To ascertain if management control help in determining the effectiveness and efficiency of goods and service in Innoson Technical and Industrial Company
  • To determine if management control is a yardstick for measuring how efficiently the organization is producing goods and services in Innoson Technical and Industrial Company

1.5    Hypothesis of the Study

Hypothesis 1

H0: There is no significant relationship between management control and organisational effectiveness and efficiency in Innoson Technical and Industrial Company

H1: There is significant relationship between management control and organizational effectiveness and efficiency in Innoson Technical and Industrial Company

Hypothesis 2

H0: Management control does not help in determining the efficiency and effectiveness of goods and service in Innoson Technical and Industrial Company

H1: Management control help in determining the efficiency and effectiveness of goods and service in Innoson Technical and Industrial Company

Hypothesis 3

H0: Management control is not a yardstick for measuring how efficiently the organization is producing goods and services

H1: Management control a yardstick for measuring how efficiently the organization is producing goods and services

1.6    Scope of the Study    

          The study covers the evaluation of management control as a strategy in improving organizational performance. In the course of the research work, effort shall be made to evaluate the relationship between employee participation and organisational growth. More so, the research work shall examine ways through which employee can be allowed to participate in decision making. The sampled area of study is Innoson Nig Ltd Enugu, Enugu state.

1.7    Significance of the Study

         This research examines management control as a strategy in improving organizational performance. It will be of great significance to employers, employees, government and academia in the following ways;

  1. To the employers: employers will be acquainted with the activities regarding management control to achieve efficiency.
  2. To the employees, they will come to understand how to improve on their performance through management control system.
  3. To the government, the study will provide recommended policies that will assist the concerned agencies in formulating policies towards improving performance, efficiency and development of industrial and labour relations.
  4. To the academia, this study will contribute to Knowledge and literature to be referred to by researchers. It will also throw more light on empirical evidence on the growth.

1.8: Limitations of the Study     

This study is limited to one academic year and also limited as a result of insufficient information and data. This study is also limited by time considering that the researcher had to attend to other aspects of her study other than the research work since both the research work and academic studies have to be done at the same time.

1.9: Belief History of Innoson Technical and Industrial Co. Ltd

Innoson Technical and Industrial Co. Ltd produce the best plastic products in the country. Products include chairs, jerry can, drums, motorcycle parts etc. Innoson Technical and Industrial Limited is a subsidiary of Innoson group of companies and was incorporated in 2002 with its head office at plot W/L Industrial layout, Emene, Enugu state, Nigeria. Full scale operations and production commenced in October 2002. It is an indigenous blue chip company engages in manufacturing of plastic chairs, tables, trays, plates, spoons, cups, jerry cans of different sizes and many other allied products.

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