Management control system

In the 1995 HBR article "Control in the age of empowerment" - Simons argues that management control systems are broadly classified into 4 categories and all these categories need to work in work to ensure organization's growth. These categories are Belief systems, Boundary Systems, Diagnostic systems and Interactive systems.

Belief systems explain organizational values. For example, integrity, customer service etc. One implementation of belief system is where upon joining a company an employee is given training on organizational values and failing to hold those values will result in dire consequences.

Boundary Systems explains organizational boundary. For example, not dealing with money laundering etc. Essentially, these systems cover what an organization would not do. This ensures that such message has been explained to everyone in the organization and people are expected to behave accordingly. One example is Enron where boundary systems collapsed miserly. In the movie "The smartest guys in the room" - it was explained that Enron wanted to make money at any cost. Hence, people were behaving in irrational manner such as bringing California power grid down in the middle of the day resulting in many people being stuck in lifts etc.

Diagnostic systems are essentially the performance management systems and more metric driven. These systems help track how organization is tracking on its set objectives. Balanced Scorecard, management dashboard are all example of diagnostic systems.

Interactive systems are concerned with ongoing improvement i.e. ensuring that strategy remains relevant in continuously changing world.