Abstract

This study aims to present a simple theory - the Theory of Control Systems - which is able to describe, interpret and explain the logic of Management control . I have presented the logic of control systems without recourse to formal mathematics, preferring desctiptive which can be considered prototypes of elementary, though general, systems which operate in any organizational environment. The logical structure of a control system includes the control lever, X, the controlled variable, Y, the objective to achieve, Y*, and the “error” E = Y* - Y, with regard to the objective (time references were omitted). The technical structure is composed of four mechanisms, the effector the detector and the regulator mechanisms, together with the information transmission system , which develop the processes that produce the variations in the variables X, Y and S. I have also introduced two important generalizations: multilever Control Systems, and multi-objective systems which are fundamental to understand the concepts of control strategy and control policy . I have applied these concept to demonstrate that control is the essence of the activity by which firms achieve their objectives of economic efficiency and profit while respecting the constraints imposed by the organization and the market. The macro, or strategic, control views the firm as the Control System by which the stakeholders , which form of governance , seek to achieve their institutional goals. The maximum strategic level variable the firm must control in order to survive is profitability – which is indicated by return on equity , or roe , and return on assets, or roi – since, broadly speaking, the production of value for shareholders depends on these variables. The micro , or operational control of management instead concerns the various functions (supply, production, sales, logistics, personnel, finance, etc.) and the various areas (plants, divisions, departments, individual facilities and/or workers, etc.) and operates by activating first- or second-level operational levers.

Full Text
Published version (Free)

Talk to us

Join us for a 30 min session where you can share your feedback and ask us any queries you have

Schedule a call