Management Control Systems: Review, Reform & Balanced Scorecard
This paper examines the evaluation and reform of management control systems (MCS) within an organizational context, drawing on the framework established by Merchant and Van der Stede. It outlines a structured approach to regular MCS reviews using key performance indicators, discusses the limitations of existing control instruments, and proposes practical improvements for a case organization — Easyway Bubble Tea, Hurstville. Specific recommendations include the adoption of a balanced scorecard integrating financial and non-financial measures across four dimensions, and the implementation of a Total Quality Management (TQM) approach to better align operational practices with client needs and strategic objectives.
- Introduction to MCS Evaluation: Rationale for regular company-wide MCS reviews
- Key Indicators for MCS Reviews: Customizing KPIs to strategic and financial objectives
- Observations from the MCS Review: Cost findings and logistical problem detection
- Proposed Changes to the MCS: Recommending cheaper, more flexible control tools
- Balanced Scorecard Configuration: Four-level scorecard integrating financial and non-financial measures
- Total Quality Management Approach: TQM implementation through client research methods
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What makes this paper effective
- Moves logically from diagnosis to prescription — it first identifies gaps in the existing MCS before proposing concrete remedies, giving the argument a clear cause-and-effect structure.
- Grounds abstract control theory in a specific case organization (Easyway Bubble Tea, Hurstville), making the recommendations tangible and context-sensitive.
- Balances financial and non-financial perspectives, reflecting the Merchant & Van der Stede framework's emphasis on holistic control rather than purely quantitative metrics.
Key academic technique demonstrated
The paper demonstrates applied framework analysis: it takes an established theoretical model (Merchant & Van der Stede's MCS taxonomy) and systematically applies it to evaluate a real organization's control environment. Rather than summarizing theory, the writer uses it as a diagnostic lens — identifying where the current system falls short and deriving specific tool recommendations (balanced scorecard, TQM) from those gaps.
Structure breakdown
The paper is organized in two broad movements. The first half (roughly three paragraphs) establishes the review methodology and reports findings — including cost observations and the detection of high logistical costs. The second half shifts to prescription, proposing a balanced scorecard with four strategic dimensions and a TQM program built around client research. This two-part structure (assess → recommend) is a standard professional-report format appropriate for applied management coursework.
Introduction to MCS Evaluation
In order to properly evaluate an established management control system (MCS), it is important to organize regular reviews that can be implemented company-wide every three or six months. These reviews evaluate the MCS instruments based on several key indicators: the degree to which the control system was able to discover a potential problem in the organization in due time; the direct cost savings the control system was able to create; the direct financial gains the system generated; and whether the MCS that has been implemented is aligned with the company's strategic objectives.
Key Indicators for MCS Reviews
For each of the MCS instruments that have been implemented, the indicators can be customized to reflect the specific area of activity. For example, financial indicators can be tailored to show the way revenue has varied over a given period. However, the indicators should also be flexible enough to remain aligned with the company's strategic objectives. If the company's goal is to increase its market share, then the fluctuation of revenues for a given period of time may be irrelevant as a standalone measure.
Observations from the MCS Review
The reviews underscored several key observations. First, the costs that the MCS incurs are significant, and there are several reasons for this — including the fact that this is a global organization and that the system is holistic, involving a large number of human and financial resources.
Second, the role of the MCS is to identify potential problems in time and to allow for their remediation. In this case, one of the instruments used revealed that the logistical costs of the company were too high, which led to a corrective change in that area. Overall, however, the management control system can also fail from time to time, underscoring the need for ongoing improvement.
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