Management control

economic-dictionary

Management control is a way of monitoring the organization's strategic plan, through management indicators that are aligned with objectives, goals, and managers.

When companies plan a period, be it a year, a semester or a quarter, they must consider what is the main objective they want to achieve. And, based on it, establish specific and strategic objectives on the part of all the functional areas of the organization.

What is a primary goal?

It is the reason for the operation of the company in that period, which must be exceeded in the following period and so on. Everything, so that the company keeps up with the competition and the industry.

What could be a main objective?

For example: "Be the company with the largest market share."

That is, if the company in your sector currently occupies 40% market share, you must set a goal to become the one with the highest percentage of market share.

Goal example for this main objective

"Increase market share by 20% by the end of 2019."

With this additional 20%, the company will go from having 40% of the cake, to having 60% of the cake. This makes it the company with the largest market share.

Management control moment

Just as goals are established, they must also establish responsibility for those goals and define a quantitative indicator to measure the performance that each area of ​​the organization is having to achieve the objective. That is why a tool known as a balanced scorecard is used for management control.

What is the balanced scorecard?

It is what in English is called “Balance Scorecard” and it is a chart that defines 5 perspectives: customers, shareholders, business, learning and growth. For each perspective, a goal and an indicator are defined.

In this case, if your primary goal is to increase market share, you should set a goal related to that goal. For instance:

  • Clients: Maintain current clients and increase the number of new clients by 20%.
  • Client indicator: Percentage (%) of current clients and percentage (%) of new clients.
  • Shareholders: Reach 10% of new shareholders and increase investment per current shareholder by 10%
  • Shareholders indicator: Percentage (%) of new shareholders and Investment ($) per shareholder.
  • Business: Strengthen the marketing and sales strategy for the most profitable clients, increasing sales by 20%.
  • Business indicator: Percentage (%) of sales in the period after having implemented marketing and sales actions
  • Learning and growth: Establish non-monetary incentives that contribute to improving the work environment and motivation of employees, increasing productivity by 30% per department.
  • Learning and growth indicator: Percentage of productivity by department after having implemented incentives and actions to improve the work environment.

All the goals indicated contribute to the company performing better and consequently, at the end of the period it will have a greater share of the market share.

The importance of quantitative indicators in management control

Finally, the indicators, like the goals, must be quantitative, because they will be the available tool to monitor and correct actions.

A traffic light can be included to distinguish when the goal is on the right track (green), when it is on a risky road (yellow) and when it is in high risk danger (red).

Management control also allows you to redesign the strategy and have a global vision of the business.

It is essential that all the functional areas of the organization: commercial, operations, finance, human resources, communications, administration, etc., know why the fulfillment of their departmental goals is so important.

Likewise, if the company establishes incentives and motivational actions, the possibility that its objectives will be met increases. Since, productivity will not only be given by monetary incentives, which, by the way, are individual. Collective incentives promote teamwork and continuous improvement of the work environment.

In short, management control is a tool that connects planning with strategy and where all areas of a company intervene. Therefore, its design must be one of collective participation in order to establish realistic and achievable objectives.

Strategic control

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