MCS Case Study

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C.
Hoque (2006) has described MCS as “an analytical and calculative process to make decisions to accomplish the organization’s objectives”. A MCS is formulated by some interdependent components: strategy, accountability structure, responsibility accounting, performance measurement, direction, motivation and incentives. Thus, it can be seen that MAS is one of the components that comprising MCS. Any changes in the environment must be responded by change in MCS. After investigating and evaluating HD thoroughly, it can be determined that HD does not have an effective Management Control System (MCS) and Management Accounting System (MAS). In this section of the case study, the current MCS and MAS and the impacts of rapid growth and strategy on the
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An accountant is needed to deal with the firm’s day- to- day financial recording and set up some management accounting system. Also, currently HD relies solely on financial information to evaluate performance. Thus, broader- scope of information, i.e non-financial information, should be used in performance measurement to create a better overview of the firm’s situation. In addition, employee motivation should be considered in order to have an effective MCS. Employees will be motivated to work harder if they have some sort of rewards as return. Control tools such as hire more administers, managers to have direct supervision of production process or rewards/incentive system can be implied. In particular, HD can give bonus for workers who applied more than X numbers of batches of smoothies a day without affecting the products’ quality and production process. Automation and detailed human resources strategy should also be increased in order to avoid human errors and behavioural mistakes. Besides, “seasonal products” should also be expanded to take advantage of the fresh and cheap ingredients. Moreover, in order to be successful in future, HD needs to expand their products into supermarkets, the main retailers of drinks. The firm can contract with a professional in drinks’ hygiene and production process and try to find a way to increase the products’ shelf life. If they are success in this, supermarkets are more likely to stock their products and therefore, it can lead to a raise in the company’s market share. Other suggestions will be discussed further in part D and E below. In general, any improvements that HD implement should be formalised in writing and apply as rules of the organisation. However, the creation of more control mechanisms and tools may generate the need for more investments. Hence, the downsides of these

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