Toward Better Management Control Systems

by William Sihler



In a full-employment society, where resources are by definition scarce in the sense that it is not possible to have more of one item without sacrificing another, a common criterion for measuring a system's value is whether it helps allocate resources efficiently. This criterion can be applied in two ways. For programs where the output is not measurable in physical terms such as pounds, feet, or dollars, it is possible but difficult to substitute a subjective measure of "psychic-emotional" benefit. Before the managerial planning and control system can be made to support the organization's specific objectives, it is important that the substantive objectives themselves are worked out with some degree of clarity and that they are internally consistent. For example, if an organization's major objective is to minimize reporting errors, the control system will be designed differently than if the objective is to serve the customer in the shortest possible time. In the former circumstance, a report might be double checked in several ways by different men before the transaction is reported. In the latter situation, the system will be designed to keep errors in reporting to a minimum within the constraint of the desired speed of service.

California Management Review

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