Management Control System: A Literature Review

Abstract

In the contemporary business landscape characterized by increasing complexity and rapid change, effective and efficient Management Control Systems (MCS) are essential for organizational survival and growth. An adaptable MCS enables organizations to update their management strategies in alignment with evolving structures and functions, distinguishing successful enterprises from less adaptive ones. MCS, an integrative tool for performance measurement, encompasses a range of methodologies including Just-In-Time (JIT), Total Quality Management (TQM), and flexible manufacturing, among others. This system not only supports decision-making and employee motivation but also ensures robust internal control, identifying and mitigating risks swiftly. The literature review highlights a positive relationship between MCS and performance measurement, with studies showing that MCS enhances organizational efficiency, innovation, and strategic implementation. For instance, research by Margaret A. et al. (1995) and Bhadada (1985) underscores MCS's role in improving manufacturing flexibility and decision-making in the textile industry, respectively. However, challenges persist, such as the need for tailored MCS designs that align with specific organizational contexts and strategies. The review identifies gaps in the current research, particularly the need for more comprehensive studies on MCS implementation across different organizational levels and in varied contexts, including emerging economies like India. Future research should focus on developing and validating MCS models that cater to the unique needs of diverse organizational environments. This study aims to bridge these gaps, providing a critical analysis and suggesting directions for future research in MCS development and application.