Implementation and administration of a management control system

Abstract

The study, reported in this dissertation, had two objectives: 1. To identify the problems arising during implementation and administration of management control systems and recommend methods to reduce these problems; 2. To identify variables which contribute to effectiveness of implementation and administration, and wherever possible, to suggest methods to bring about desired states in the variables with a view to increase their effectiveness. This research was carried out in the telecommunication branch of the Posts & Telegraphs Department of the Government of India. Design variables of the management control system were similar for all the subjects and thereby observed differences in effectiveness of the system could be attributed to variations in implementation and administration only. The indicators, namely, commitment to the system and attitude towards the system were taken to measure effectiveness. Two research approaches were followed in the study - the exploratory and the empirical. Through the exploratory approach, problems of implementation and administration were identified, and methods employed by the P&T Department to tackle these problems were listed. These were further examined by an expert panel consisting of senior and chief executives from four different organizations. Based on the panel's observation, suitable modifications were made. The panel believed that most of the problems and the solutions thereto were common to all organizations, and therefore the findings are, to a large extent, generalizable. Based on the exploratory study, and other published research findings, hypotheses regarding variables and their effect on implementation and administration were formulated. It was hypothesized that six variables, namely degree of behavioral association, perceived usefulness of the system, managerial style, patterns of group process, perceived organizational environment, and perceived clarity of MES influenced the effectiveness of implementation and administration. Seven groups of problems were identified - four of them being implementation problems (problems primarily of a short-term nature and arising during early days of implementation), and three of them being administration problems {problems of long run and repetitive nature). Within the former category, problems arising out of days, functionalities of organization structure, lack of clarity, and in consistencies of managerial styles, and in the latter category, problems arising from unfavorable group processes, & inappropriate incentive systems, were considered important. Empirical evidence suggested that two indicators of effectiveness (namely, commitment, and attitude) were affected by two different sets of variables. Favorableness of group process, perceived clarity and perceived usefulness positively influenced commitment; and behavioral association, managerial style and perceived environment had positive effects on the attitude towards the system. Among the variables influencing commitment, inter-correlations were very high. Among the seven incentive systems, "recognition" was the most preferred one, followed by "prospect for advancement and promotion." Grant or withdrawal of fringe benefits was the least effective of all the incentive methods. Communications were more effective when they were written, less forcing in nature, and dealt with a single variable or a subsystem at a time. The findings of the study may have the following implications for management: 1. It is possible that some employees may be more committed than others but at the same time may have unfavorable attitudes towards the system. Since commitment and attitude are influenced by different sets of variables, managers can selectively use methods to bring about improvements in commitment or attitude as the need may be. 2. Often financial limitations are shown as constraints for implementing incentive systems. It seems from the study that management can successfully use other incentive methods like recognition, and advancement in jobs and get the desired results. 3. Managers should use written communications for bringing about greater clarity of understanding. This seems to be more effective than methods like using the telephone, interviews and discussions. At the same time, efforts should be made to put as little pressure as possible on the recipients of the communications. 4. Perceived usefulness of a system leads to effectiveness of implementation and administration. This usefulness, in turn, depends on the perceived clarity of understanding of the system, and the task orientation of groups. This suggests that the review Meetings should be conducted and written follow-up action should be initiated to increase perceived usefulness and there by improve effectiveness.