Chapter 1: Introduction

1.1 Background of the Study

Management Control and performance measurement in enterprises is not new as it has evolved from financial and non-financial aspects to more complex structures, based on a set of measures that seek to align with the organization’s growth strategy. They serve as a support or performance mechanism to majors, small and medium size enterprises. The growth of every enterprise is sustained by the system of management control implemented in the organization and effective follow up to ensure its full application by the workers of the enterprise.

The Different forms of controls examined in the scorecard of most enterprises today are; management control, internal control, external control, internal audit and external audit (David Norton and Kaplan, 1996). These controls exist to protect the finance of the enterprises and ensure the compliance in finance management policies put in place by the executives and its consulting organs, to keep track of the goals of the enterprise and prevent money laundry since owners are not the ones often involved in direct management.

The first area of this study seeks to identify the internal control challenges faced in drafting management control policies and some contingence variables that could affect enterprises compliance in finance control policies. Since in numerous studies it is the contingency variables that are primarily responsible for the results (Lawrence & Lorsch, 1967), I will make my analysis based on the interactions previously raised looking at the medium and small size enterprises in Cameroon.

The second area of this study looks at organizational performance and growth, related to the need of external control to guarantee a more comprehensive approach to forms of MCS and its impact on growth.  As explained by Otley (2014, 2016), organizations believe that MCS can help in the task to deliver value, others such as Henri (2006), claim that the specific relationship between MCS and performance is ambiguous and that there is insufficient evidence to suggest a direct relationship between MCS and organizational performance. This concept is explained on figure 1.1 below which segments the management controls of an enterprise into the external and internal management control practices.

Regarding figure 1.1 above, management control embodies the internal control which stems from the reinforcement of the internal audits and the internal controller’s department of the enterprises and the external control which comes in through the external auditors or consultants. The formulation of policies to enable a strategic start is the basic responsibility of directors, the implementation of the control policies is carried out by the operational workers of the enterprises. The implementation of the policies is supervised by the various arms of control in the enterprise, that’s the MCS through the internal auditors, internal controllers, external auditors. The quality of the control therefore affects the performance of the organization and consequently its growth.  This is observed through the system control exhibited by the Global Consulting Associate through the organizations audited and given consultancy services.

The scope of the work embodies two broad categories of controls exercise in enterprises, internal control and external control which all are to ensure better management practices and secure performance in all forms in enterprises not directly manage by the owners. The study therefore relies on possible effective management control policies in a cross section of enterprises rendered consultancy services or audited by the Global Consulting Associate (GCA) in the vicinity of Yaoundé, the challenges they face in internal management control policies and compliance by the workers. The main enterprises here are; hospitals, finance houses, schools and transport agencies.

However, successful enterprises in world today and Cameroon in particular are much more minded in the development and continuous growth which this work will access the level of dependence on quality and continuous improvements in management controls put in place in the enterprises. These control systems are tailored explicitly to support the strategic planning. This project will analyze the effect of internal and external management control strategies on the intended goals for growth and success of enterprises to realize their intended strategies with hypotheses tested using survey data from extended enterprises consulted by Global Consulting Associates (GCA). This enable the brief understanding of the role played by the MCS uses in relation to organization’s performance effectiveness, as well as assist in analyzing how the context of organizations can influence the relations created.

1.2 Problem Statement

Most small and medium size enterprises operate with little or no major external control through external auditors for several years as well as no effective internal control systems (internal auditors, control environment, control activities) to enforce their internal control and compliance with finance policies. This controls are needed in all types of enterprises controlled by stakeholders whether big or small so as to enforce the rules and regulations of the organization thereby effecting its growth. Control exercised at all level of enterprises ensures effective performance strategies and the compliance with the finance management policies of the enterprises unlike the case where the manager is in charge of all forms of control which easily leads to theft, money laundry, misappropriation amongst other shortcomings of inappropriate control.

Absence of effective or major controls in enterprises is due to the fact that enterprises considers internal control services, internal auditors or the hiring of the services of external auditors for the follow up of their operations or certification of their statements at the end of a financial year or during their period of operations to be expensive and lost site on the benefits they bring to their enterprises.

However, organization performance effectiveness is the major goal of any enterprise. Management needs a frame work to direct, analyze and control its organization performances (Grabner & Moers, 2013). Also, (Grabber and Moers, 2013) claims that organization performance should depend on an effective MCS that will enable controllers to make sure organization resources are used in an effective and efficient ways to attain the growth objectives of the company.

Despite the increase demand for the implementation of effective management control strategies in enterprises due to its great importance and the role it plays in their growth and Performance, there are challenges faced as to drafting, implementing and follow up organs of the control system as it is the case with some enterprises examine in Cameroon. Some of these challenges in management control in enterprises are; non detection of errors in financial accounts committed by employees, failure to uncover fraud actions perpetrated by employees, lack of sufficient internal control strategies to prevent fraud, the collapse of enterprises due to misinformation and non-compliance in their policies.

In general, lack of dynamic management control policies in the form of; ineffective control Environment, ineffective monitoring of activities and no effective circulation of information and communication; and little or no risk assessment systems in most small and medium size enterprises in Cameroon has led to inadequate management of resources, non-detection of errors in accounts on time, non-detection of frauds committed and mislead decisions amongst others. Amongst the enterprises audited or provided consultancy services by the Global Consulting Associate, most relied only on their managers for overall control, follow up of strategies and had paid no attention to the external audit control as well as effective internal control practices. All exposed them to limited growth as a result, low rate of performance.

1.3 Research Questions

To obtained the necessary material for the research work, questions were designed into; the general research question and subdivided into the specific research questions;

1.3.1 General Research Question

Does management control effectiveness in enterprises ameliorates performance of the enterprises?

1.3.2 Specific Research Questions

• Can effective internal control systems ameliorate the enterprises compliance in finance control policies?
• Does the use of external control in enterprises increases control effectiveness and growth of the enterprises?

1.4 Objectives of the Study

These area is used to define the purpose for the research study regarding the effectiveness of management control systems on the growth of enterprises. They are divided into two folds; the general objectives and the specific objectives.

1.4.1 General Research Objective

Examine the extent to which management control effectiveness ameliorates the growth and performance of enterprises.

1.4.2 Specific Research Objectives

• Ascertain how internal control effectiveness ameliorates the enterprises compliance in finance control policies.
• Examine the impact of external control system on growth and performance effectiveness of the enterprises.

1.5 Hypothesis of the Study

These are tentative untested statements and assertive claims based on the effectiveness of Management Control Practices and the performance of enterprises which are proven from the facts from the research data. They are in two fold; the general and specific hypothesis.

1.5.1 General Research Hypothesis

Management control effectiveness in enterprises ameliorates growth and performance of the enterprises at all level.

1.5.2 Specific Research Hypothesis

• Effective internal control systems ameliorate the enterprises compliance in finance control policies.
• The use of external control in enterprises increases performance effectiveness of the enterprises?