MANAGEMENT CONTROL SYSTEM AND PERFORMANCE OF SMALL AND MEDIUM MANUFACTURING ENTERPRISES IN LAGOS, NIGERIA

Abstract

Management control system (MCS) constitutes one of the critical functions of management in organizations. However, little or no attention has been given to design and use of this very important function of management. Many mechanisms or techniques acknowledged to be in use to carry out management control function are limited to accounting-based control techniques which have been criticized to have behavioral dysfunctional consequences such as lack of direction, efforts aversion and other self-interested behaviors. In response to the limitations of accounting control system, the need to broaden the scope of MCS and humanize its role becomes imperative. In view of the foregoing, the study investigated how Small and Medium Manufacturing Enterprises engage in the practice of MCS and its effect on performance. The study employs quantitative method to obtain survey data from randomly selected 262 of small and Medium Manufacturing Enterprises in Lagos State respectively. The obtained quantitative data was subjected Partial Least Squares (PLS-SEM) analysis. The findings of the study revealed that variation in performance of Small and Medium Manufacturing Enterprises (SMMEs) was attributed to four management control mechanisms: compensation (β=0.225,P<0.05) and Planning (β=0.332,P<0.05) significantly impact on performance while Policies and procedures(β=0.206,P<0.05) and socio-cultural control(β=0.436,P<0.05)also have significant effect on performance. The study concluded that managers of Small and Medium Manufacturing Enterprises employ some accounting and non-accounting control mechanisms to achieve goal congruence among their subordinates and to a greater extent, the practices impact positively on performance. Therefore, the study recommended that SMMEs should integrate both accounting and non-accounting control mechanisms into the design of their control system architecture.