Mehrzad Manuel Ferdows’ Speech on Management Control System and Performance Measurement

Rohan Mathew

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Mehrzad Manuel Ferdows, a leading entrepreneur, advisor, investor, and industrial Engineering graduate from the University of Southern California has given a speech at a conference held in Dubai on the management control system and performance management. Mehrzad Manuel Ferdows stated that management control is important for organizations because failures in management control can lead to large financial losses, reputation damage, and possibly even organizational failure. Management critics have argued that adding controls does not always lead to better control and that the management control systems in common will cause managers to be excessively short-term oriented or are prone to stifle creativity and initiative. To focus on management control, managers must distinguish the concept of objective setting and strategy formation. Mehrzad Ferdows stated that objectives do not have to be quantified and financial. Individuals need to have some understanding of the organization’s goals and strategy formation deals with how organizations should use their resources to meet their objectives. 

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Basic Functions Control Systems Should Have

Mehrzad Ferdows pointed out that control systems must have two basic functions. The first function is strategic control which is the process of monitoring the various adopted strategies and that these strategies are in line to help the organization’s internal environment match with the external environment. It works on external focus i.e. to evaluate a company’s program from a long-term perspective. The second function dealing with the internal focus is management control which includes processes for planning, organizing, directing, and controlling program operations.

Management controls also termed as behavioral orientation are necessary to guard against possibilities that people will do something the organization does not want them to do or fail to do something they should do.

Key Components of Performance Measurement and Control System

Mehrzad Ferdows stated that setting realistic expectations that are measurable is highly significant. In addition, setting realistic and measurable expectations is another key component of performance measurement and control systems. Mehrzad Manuel Ferdows added that it is crucial to think through how to continuously capture measuring information and develop strategies and tactics to obtain clearly defined expected outcomes. Moreover, monitoring feedback from actual results and taking corrective action is of importance when a deviation between actual and predicted results occurs. 

Causes of Management Control Problems

Mehrzad Ferdows pointed out that management control problems can be originated from a lack of direction. This problem can occur when information as regards what the employee is to do and whether the message is conveyed to the employee. It can be resulted from employees having no idea what the organization wants from them or may have motivational problems. Lack of motivation may result in manager’s practices of creative accounting or distortion of figures to make their performance look decent and earn an undeserved bonus at the expense of the shareholders. The most extreme instances of motivational problems are fraud and theft which result from a lack of effective management control systems. Personal limitations also add to the causes of management control problems. There are times when employees are unable to perform well although they are highly motivated due to certain personal limitations which are certain and vary from one employee to the other. A lack of requisite intelligence training, experience, or knowledge may cause those limitations. Mehrzad Manuel Ferdows pointed out that the severity of these limitations can be reduced by training. Measures can be taken by efficiently matching jobs to employees based on their technical abilities and grasp of the task ahead.

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What is a Good Management Control System?

Mehrzad Manuel Ferdows stated that a good management control system must be future-oriented and objective-driven. The first characteristic may sound impossible since the adequacy of management control must be measured against a hard-to-predict future but despite all, setting up a good management system is essential to ensure an organization’s success. Because out of control describes the situation where there is a high probability of poor performance. Complete assurance is required for perfect control which means all physical control systems are foolproof and all individuals always act in the best way possible. Mehrzad Ferdows pointed out that the lack of a perfect control system ends in control loss. Optimal control can be achieved if the control losses are expected to be smaller than the cost of implementing more controls. Assessing whether good control has been achieved must be future-oriented no unpleasant surprises in the future and objectives are driven because the goals represent what the organization wants. But it is yet subjective to determine control as ‘good’.

Mehrzad Manuel Ferdows concluded that there are some requirements for tight management control in terms of the results control system. Congruence is the first requirement which means the dimensions of the results must be congruent with true organizational objectives. The second point is that the performance targets must be specific. Moreover, the desired results must be effectively communicated and internalized. Completeness conveys the message that these measures need to be complete only if good control is affected exclusively through results controls. 

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