According to market research firm IDC, inefficiencies cost companies up to 30% of revenues each year. Many businesses have siloed, complex or badly defined processes. This is compounded by the fact that companies lack the tools and methods to ensure that their processes are performing as expected. At Renoir, we call these tools and methods the Management Control System (MCS).
Today, it is more important than ever for a company to have a well-designed MCS. An MCS will improve a company’s productivity and efficiency. A well-defined MCS that is understood by everyone in the organisation can ensure that resources, be it cash, workers or raw materials, are used in an optimal way.
A digitised one will give companies a competitive edge in an ever-shifting marketplace. As processes are digitised, there is still a need for human intelligence to understand why there are gaps in performance and implement actions accordingly. These required routines are prescribed by the MCS.
Defining an MCS
A good way of describing an MCS is that it is the dashboard for a process. The MCS incorporates the various methods used to set the expectations for performance, describes the way things should be done, monitors how well things are being executed, measures results, analyses gaps, and improves future performance.
Every process has an MCS. Unfortunately, many of them are informal or not well thought out. MCSs are rarely consciously created. Instead, they are informally evolved by individuals in isolation of other functions and levels of hierarchy, and this may not align with the company’s goals and strategy.
As a result, there are many inefficiencies. And because they are informal, the controls may end up disappearing when an individual leaves only to be replaced by another management system based on the new individual’s personal history and preferences.
What can MCSs bring to a business?
In a world where disruptions can force a business to pivot quickly, the ability to understand performance and quickly react to change is crucial to remain relevant. Organisations that have well-defined MCSs stand to gain a competitive edge in the market. Here is what they bring:
- Connecting strategy to reality
A key component of MCS deployment is to cascade company goals throughout the organisation in terms of performance metrics and planning activities.
- A structured and deliberate approach to management
Managers can focus on where they’re going to get the biggest business improvements, with full transparency on the assets and resources at their disposal.
- Promote seamless knowledge sharing
Data is not siloed but streamlined, ensuring that information flows freely and smoothly to stakeholders. The MCS provides management with the right data and information at the right time to make the right decisions.
Setting up your MCS for success
Digitising management control systems is the new frontier. However, it’s often a complex, multi-layered process. Clients who want to digitise their MCSs might not have a clearly defined roadmap.
We often find clients hastily implementing digital transformations, only to end up with tools that do not meet their business needs. Often, these digital solutions are slapped over inefficient processes – many of which lack an MCS. The company may end up spending millions to customise the digital solution to fit their broken processes.
Here are our best practices in ensuring that the digitisation efforts bring results:
- Step 1: Understand your data needs now and in the future
Too often, companies collect a slew of data which fails to drive significant change. Digitising KPIs that aren’t well designed will cause problems and confuse employees. Therefore, it’s important to understand how you will leverage data to improve your business. Be clear on the result you hope to obtain and what it means to employees.
- Step 2: Set up your MCS
Make sure that the MCS you plan to implement and integrate into your existing process can bring value to your shareholders and help meet your leadership’s objectives and goals.
- Step 3: Make sure the MCS is running well
Implement using behavioural change management methods, such as Situational Leadership, to ensure full adoption by the workforce. Once your MCS is working smoothly and delivers the right results, your MCS is ready to be digitised. When effective processes and MCSs are digitised, they are more likely to be sustained.
Make sure your MCS brings in the right results
MCSs are essential for all companies and are especially important for organisations that have a large geographical spread or have a large customer base and diverse product offerings. Companies with well-designed, digitised MCSs can ensure that the employees are aligned with the company’s goals, be that increasing revenue, improving efficiency or reducing costs.
However, the right implementation approach is crucial. Successful digitisation initiatives must first consider whether the processes are fit for purpose and if supporting MCSs are in place. This need to correctly configure the procedural environment before digitisation can’t be understated. Second, when it comes to going live, the human factor is placed centre stage – all users are extensively coached through the learning curve.
If you’re ready for the next step, connect with us for more information.