Summary by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
Controllership Main Page | Strategy Related Main Page
The purpose of this paper is to suggest a classification for the various components (topics, species or subsystems) of planning and control systems and to suggest the characteristics of each component. According to Anthony these components or topics include the following:
Management Control: "...the process of assuring that resources are obtained and used effectively and efficiently in the accomplishment of the organization's objectives."
Strategic Planning: "...the process of deciding on changes in the objectives of the organization, in the resources that are to be used in attaining these objectives, and in the policies that are to govern the acquisition and use of these resources."
Technical Control: "...the process of assuring the efficient acquisition and use of resources, with respect to activities for which the optimum relationship between outputs and resources can be approximately determined."
Anthony compares strategic planning and management control in a table reproduced below.
| Category | Strategic Planning | Management Control |
| Person primarily involved | Staff and top management | Line and top management |
| Number of persons | Small | Large |
| Mental activity | Creative; analytical | Administrative; persuasive |
| Variables | Complex; much judgment | Less complex |
| Time period | Tends to be long | Tends to be short |
| Periodicity | Irregular, no set schedule | rhythmic; set timetable |
| Procedures | Unstructured; each problem different | Prescribed procedure, regularly followed |
| Focus | Tends to focus on one aspect at a time | All encompassing |
| Source of information | Relies more on external and future | Relies more on internal and historical |
| Product | Intangible; precedent setting | More tangible; action within precedent |
| Communication problem | Relatively simple | Crucial and difficult |
| Appraisal of soundness | Extremely difficult | Much less difficult |
Anthony defines "managed costs" in making a distinction between management control and technical control. Managed costs involve resources for which an objective decision as to the optimum quantity needed cannot be made, e.g., legal services. (Note: Managed costs are also referred to as discretionary costs in the accounting literature.)
Management control involves the whole organization and includes those parts of the organization where managed costs are significant. Technical control, on the other hand, involves only activities where there are no significant managed costs. Management control covers the whole organization, where technical control relates to subunits, or activities of subunits. Psychological considerations are dominant in management control systems, while logical rules apply to technical control systems. According to Anthony, a technical control system is analogous to a thermostat, while a management control system is highly dependent on the human behavior. Technical control can be programmed based on a set of objective rules. Management control requires subjective judgment. Therefore, failing to make the distinction between management control and technical control can create many problems within an organization. For example, attempts to substitute technical control (e.g., computers) for management control does not work.
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Related summaries:
Blake, R. R. and J. S. Moulton. 1962. The managerial grid. Advanced Management Office Executive 1(9). (The Grid).
Chenhall, R. H. 2003. Management control system design within its organizational context: Findings from contingency-based research and directions for the future. Accounting, Organizations and Society 28(2-3): 127-168. (Summary).
Chow, C. W., Y. Kato and K. A. Merchant. 1996. The use of organizational controls and their effects on data manipulation and management myopia: A Japan vs. U.S. comparison. Accounting, Organizations and Society 21(2-3): 175-192. (Summary).
Cooper, R. and R. Slagmulder. 2003. Interorganizational costing, Part 1. Cost Management (September/October): 14-21. (Summary).
Cooper, R. and R. Slagmulder. 2003. Interorganizational costing, Part 2. Cost Management (November/December): 12-24. (Summary).
Ferreira, A. and D. Otley. 2009. The design and use of performance management systems: An extended framework for analysis. Management Accounting Research (December): 263-282. (Summary).
Fonvielle, W. and L. P. Carr. 2001. Gaining strategic alignment: Making scorecards work. Management Accounting Quarterly (Fall): 4-14. (Summary).
Kalagnanam, S. S. and R. M. Lindsay. 1998. The use of organic models of control in JIT firms: Generalising Woodward's findings to modern manufacturing practices. Accounting, Organizations and Society 24(1): 1-30. (Summary).
Langfield-Smith, K. 1997. Management control systems and strategy: A critical review. Accounting, Organizations and Society 22(2): 207-232. (Summary).
Neimark, M. and T. Tinker. 1986. The social construction of management control systems. Accounting, Organizations and Society 11(4-5): 369-395. (Summary).
O'Clock, P. and K. Devine. 2003. The role of strategy and culture in the performance evaluation of international strategic business units. Management Accounting Quarterly (Winter): 18-26. (Summary).
Ouchi, W. G. 1979. A conceptual framework for the design of organizational control mechanisms. Management Science (September): 833-848. (Summary and Comparison of the Control Mechanisms).
Ouchi, W. G. and A. M. Jaeger. 1978. Type Z organization: stability in the midst of mobility. Academy of Management Review (April): 305-314. (Summary).
Parker, L. D. 1984. Control in organizational life: The contribution of Mary Parker Follett. The Academy of Management Review 9(4): 736-745. (Note).
Porter, M. E. 1996. What is a strategy? Harvard Business Review (November-December): 61-78. (Summary).
Roehm, H. A., L. Weinstein, and J. F. Castellano. 2000. Management control systems: How SPC enhances budgeting and standard costing. Management Accounting Quarterly (Fall): 34-40. (Summary).
Shields, M. D., F. J. Deng and Y. Kato. 2000. The design and effects of control systems: Tests of direct- and indirect-effects. Accounting, Organizations and Society 25(2): 185-202. (Summary).
Simons, R. 1995. Control in an age of empowerment. Harvard Business Review (March-April): 80-88. (Summary and related Note).
Spekle, R. F. 2001. Explaining management control structure variety: A transaction cost economics perspective. Accounting, Organizations and Society 26(4-5): 419-441. (Summary).
Sunder, S. 2002. Management control, expectations, common knowledge, and culture. Journal of Management Accounting Research (14): 173-187. (Summary).
Tiessen, P. and J. H. Waterhouse. 1983. Towards a descriptive theory of management accounting. Accounting, Organizations and Society 8(2-3): 251-267. (Summary).
Towry, K. L. 2003. Control in a teamwork environment: The impact of social ties on the effectiveness of mutual monitoring contracts. The Accounting Review (October): 1069-1095. (Towry discusses Social Identity Theory and how it can be applied to vertical and horizontal incentive systems). (Summary).
White, L. R., A. Van der Merwe, B. D. Clinton, G. Cokins, C. Thomas, K. Templin and J. Huntzinger. 2012. Conceptual Framework for Managerial Costing: Draft Report of the IMA Managerial Costing Conceptual Framework Task Force. IMA. (Summary).
Wing, K. T. 2000. Using enhanced cost models in variance analysis for better control and decision making. Management Accounting Quarterly (Winter): 27-35. (Summary).