Management Control Systems: Performance Measurement, Evaluation and Incentives

Melvin Roush and Baber Shareef Mohammed (Pittsburg State University, Pittsburg, Kansas, USA)

Journal of Accounting & Organizational Change

ISSN: 1832-5912

Article publication date: 6 June 2008



Roush, M. and Shareef Mohammed, B. (2008), "Management Control Systems: Performance Measurement, Evaluation and Incentives", Journal of Accounting & Organizational Change, Vol. 4 No. 2, pp. 204-206.



Emerald Group Publishing Limited

Copyright © 2008, Emerald Group Publishing Limited

The second edition of Management Control Systems: Performance Measurement, Evaluation and Incentives includes 17 well‐researched and succinctly written chapters on management control systems (MCS) and the implementation of such systems in various settings. The book is supported by case studies collected from highly respected sources such as the Harvard Business School cases. Most of the cases were prepared partially or entirely by the authors of the book. However, many cases have also benefited from the contributions of various co‐authors.

This book differs from the first edition in important ways. For example, this second edition of the book includes a new chapter titled, “Corporate Governance and Boards of Directors.” This is a valuable addition to the book as it presents the control perspective from a higher and more analytical level, i.e. control of top management. The authors have also restructured the chapters on measurement issues and strengthened the chapter on ethics.

The book starts with a preface from the authors. This gives a useful overview of the chapters. Here, the authors explain how the chapters are interrelated and that the book covers MCS in a broad perspective. It also covers various management control alternatives in detail and includes chapters on performance measurement issues, corporate governance issues and ethics.

The authors divide the book into six sections. The first section is an introduction to the control function of management. This section describes the causes of management control problems, the characteristics of a good MCS. It also includes a chapter on how to avoid control problems, and discusses control alternatives. The second section of the book examines the various management control alternatives such as results controls, action, personal and cultural controls. This section is divided into sub‐sections and then into individual chapters dealing with each aspect in detail. The ending sub‐sections provide information about the control system tightness, costs, and about designing and evaluating the MCS systems. Section 2 is large as it covers the most important aspects of the MCS. It is supported by well‐written and up‐to‐date cases that reflect recent business problems.

The main topic of Section 3 of the book is the financial results control systems. This section is also divided into sub‐sections, which discuss and explain the problems and potential solutions to challenges in the areas of financial responsibility centers, planning and budgeting, and incentive compensation systems. The cases used to illustrate these issues are interesting, but they are similar to each other, and some readers may find them slightly repetitive. Section 4 deals with performance management issues and their effects. Chapters 10 and 11 explore financial performance measures and their effects, and the remedies to management myopia (short sightedness) problems. Chapter 11 also looks at combinations of performance measures as a possible solution to the myopia problem. This section is crisp and informative, and the real‐life cases reflecting recent issues are aptly suitable for MBA students.

Section 5 is divided into three chapters. The authors examine corporate governance issues, the role of the board of directors and their fiduciary responsibilities. This section also examines the Sarbanes Oxley Act in detail; including the roles and responsibilities of auditors, CEOs and the board of directors. The authors finish this section with an interesting analytical approach to MCS ethical issues. Finally, the authors end the book with a section examining the effects of various situational influences on MCS, such as environmental uncertainty, organizational strategy and how the MCS may differ in international settings. The concluding chapter also discusses how the MCS may differ in a non‐profit setting, although the basic principles and guidelines remain the same.

The authors do a good job of condensing the broad topic of MCS into a book designed for future managers. This book gives future managers a taste of the challenges they are likely to face in real life business situations. Even though the book focuses on practical issues, research into MCS issues is also covered or referenced to a sufficient level so that a user, who was so inclined, could use the book as a starting point to pursue academic research into the topic areas.

Faculty who adopt this book will find that, it contains a solid collection of cases that can be used to explore MCS issues. There are long cases, short cases, international cases, difficult cases and more basic ones. Most cases are recent, and most are based on real companies. The international‐based cases are especially valuable for US MBA students who otherwise may not have much exposure to international issues in their personal experience or in their academic study. There are 66 cases used in the book. About 19 of those cases are new to this edition. The extensive number of diverse cases in this book provides the faculty adopter of the book with great flexibility in how they choose to present the material to students. There are cases on small and large organizations, the ubiquitous and interesting manufacturing cases, but also cases on service businesses and non‐profit organizations. Knowledge gained by studying MCS issues in these varied contexts will provide a solid base that students can use to make decisions.

Cases are probably the main strength of this book. The authors have a long and extensive history of high‐quality case preparation. However, the book does not consist only of cases. The non‐case writing that forms part of each chapter provides a useful introduction to and explanation of the material that is the focus of that part of the book. Some other books on MCS issues tend to emphasize cases over noncase writing, or vice versa. This book has a good balance between the cases and the associated noncase writing. This balanced approach to MCS requires space. The book uses over 800 pages as it attempts to provide as complete coverage as it can of MCS topics.

It seems likely that students will enjoy and benefit from the use of this book. In an informal survey of about 20 MBA students at our university, who used this book in a course in MCS last semester, almost 90 percent of them found the book to be simple to read and the concepts easy to understand. This latter observation is evidence of the authors' skills in presenting complex material in ways that enable students to readily assimilate the material into their thought processes.

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