wk 6 discussion

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Management Control Systems and Corporate Alignment of Strategy and Structure Just wanted to add to your initial inputs regarding the importance of management control systems as a key element that helps align corporate strategy and the organizational structure of firms which include its environmental context to help them manage their operational performance and achieve competitive advantage. In general, management control systems (MCS) and corporate strategy play important roles in helping organizations achieve their overall objectives and it is for this reason that an alignment is imperative so strategies and MCS concepts are integrated into firms’ business models (Masunda et al., 2019). In fact, a positive relationship exists between MCS, corporate strategy variables and firm performance variables in that organizations now realize the importance of matching their strategies with their MCS to help them attain superior operational performance (Masunda et al., 2019). With regard to MCS, managers generally view its ultimate purpose in terms of supporting the organization’s corporate strategy, aligning the firm’s strategy with the organizational structure using the systems of management control to improve how a company performs, build consensus among business unit leaders and using the MCS to identify growth opportunities and formulate corporate strategies (Inamdar, 2012; Masunda et al., 2019). In fact, many organizations utilize a Balanced Scorecard (BSC) framework, which is an advanced MCS tool, to align corporate and business unit strategies, and to encourage business units to develop strategies that contribute to corporate level objectives while also addressing their local competitive environments (Inamdar, 2012; Masunda et al., 2019). In sum, the BSC acts as both a communication and control device (Inamdar, 2012; Masunda et al., 2019). Another use that many organizations have found with using balance scorecards is to use it as a strategic MCS tool to align various organizational structures to corporate strategy without having to resort to expensive restructuring devices to realign authority, responsibility and decision rights (Inamdar, 2012). As it can be impractical to expend a vast amount of financial resources to continually restructure organizations just to align with changes in strategies and environmental conditions, executives have found that an approach that involves choosing an organizational structure that can work but without major conflicts and re- designing the MCS to align the chosen structure with strategy can be an equally effective solution (Inamdar, 2012). In general, management employ MCS to ensure that subordinates participate in activities that contribute to maximizing the organization’s value and reinforce the corporate center’s strategic direction, specifically by making employees aware of company expectations that the firm expects employees to align their personal interests with and achieve based on set organizational objectives (Masunda et al., 2019).

Standard MCS cover management rules, strategies, information-based practices and processes, and planning methods and have been designed to describe corporate work ethics, management systems and corporate organizational culture for the purpose of realizing higher organizational results (Masunda et al., 2019). For instance, if the organization is interested in seeing if the firm has achieved its predetermined goals, it compares actual results of the underlying bases of a firm’s strategy against predetermined standards which the organization either compensates for the realization of targets using rewards from incentives or takes corrective action to ensure that the performance aligns with corporate objectives (Ajagbe et al., 2016; Masunda et al., 2019). Corrective action by MCS can include raising or lowering the performance objectives of individual business units, redefining the business, modifying strategies and executions (Ajagbe et al., 2016). The Portfolio Analysis Metrics and Scoring Reports are examples of these corporate dashboards of measures with set targets and benchmarks for monitoring performance in key areas such as financial strength, market share and customer satisfaction (Inamdar, 2012). Organization alignment is that explicit objective of the management process that illustrates how the various company business units synchronize with the activities of the organization to achieve synergic benefits (Inamdar, 2012). In a study done by Inamdar (2012) regarding the use of control systems for corporate alignment, its results showed that the design and use of an MCS to align corporate structure with strategy is actually dependent on the extent of centralization/decentralization between the corporate center and its business units. In sum, organizations with different organizational structures use their MCS differently to achieve a strategic fit (Inamdar, 2012). Structure, as represented by the extent of decision-making autonomy and not strategy, plays a major role in the design and use of MCS and these differences have theoretical implications regarding how companies align strategy and structure using MCS to achieve a strategic fit (Inamdar, 2012). In a decentralized structure, MCS is designed mainly to manage geographically dispersed units with a high level of decision-making autonomy and separate overhead functions although this can also be a barrier for MCS’ effective use due to a lack of agreement regarding mutually acceptable corporate level measures arising from serving different markets (Inamdar, 2012). In contrast, an MCS in a centralized structure is designed to manage proximate business units with a lower level of decision making autonomy and characterized by common overhead functions although this set-up is also susceptible to internal competition among competing business units (Inamdar, 2012). Conclusion This discussion underscores the role MCS plays in aligning strategy with varying elements of organizational structure although structure represents the determining factor that influences how MCS is designed and ultimately used by organizations. In

terms of purpose, MCS contributes to supporting corporate strategy and corporate alignment, identifying growth opportunities and developing corporate strategies. References Ajagbe, M., Bih, J., Olujobi, J., & Udo, E. (2016). Which precedes the other? Organizational Strategy or Organizational Structure. International Journal of Economics and Business Management, 2 (6), 50-66.. Inamdar, S. (2012). Alignment of strategy with structure using control systems. Strategic Management Review, 6 (1). https://doi.org/10.4128/1930- 4560-6.1.1 Sabo, A., Masunda, T. & Usman, A. (2019). The review of Management Control Systems, Corporate Strategy and Firm Performance. iRASD Journal of Management, 1 (1), 13- 20. DOI: 10.52131/jom.2019.0101.0002

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