Management Control Systems

Management Control Systems in Multinational Corporations

Exploratory Study on Italian Business Groups

The purpose of the research paper is to highlight the management control systems of large companies and their stories on success and failures. The paper is been based on the previous research conducted. The management control systems had the study on the following parameters

A way manager can document their organization's objectives

A way manager can document their organizational strategies or policies

A way to assess the performance of internal corporate processes

A way to show performance in relation to declared objectives and policies.

The role that performance measurement plays in helping firms achieve and sustain their competitive

Literature Review

The growing awareness of organisations of the need to have information systems for management purposes is related to their own need to coexist in a permanently changing environment, not only physically but also technologically, socially and financially. There are just three works in the first category, because their main topic is the development of the organizational structure in multinational corporations, so they do not strictly deal with the design of management control.

From the literature on accounting and business performance management we have basically drawn a systemic approach to performance measurement. According to this standpoint, in the design of a PMS a first fundamental step consists in clearly identifying the measurement objectives, i.e. the specific aims for which the system is designed and implemented. Once the objectives have been designed, it is possible to define the dimensions of performance to be monitored and the operative techniques to be used in order to measure the performance selected for a specified control object. The most relevant seem to be:

• Motivating personnel

• Enhancing communication and coordination

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Furthermore, given that economic-financial indicators are often questionable since it is very difficult to give a monetary evaluation of uncertain and intangible elements they are often integrated by non-financial indicators, whose measurement is usually easier. As far as the measurement process is concerned, a first critical issue is represented by the reference standards against which measured performance should be compared. Again, defining standards in R&D is a really challenging issue, because of the uniqueness of each R&D project and its degree of uncertainty. In our exploratory cases, only a few companies operating in the aerospace sector were able to compare their development performance with industry benchmarks, whereas using internal past projects’ performance was a relatively more diffused alternative among firms in chemical, cosmetic and pharmaceutical industries. Another critical process element is the measurement frequency. In this respect, literature underlines that it is not possible to define a single, optimal frequency but that it should be adapted to the PMS objectives, to each dimension of performance and to different control objects. However, some general rules emerge from pieces of empirical research reported in the literature: the measurement of technical performance tends to be linked to