Feed Forward Control and Management Control Systems Guide
Justyna Wachulka-Chan
- March 24, 2026
- 2 minutes read
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PDF Summary
Management control systems help organizations align their activities with strategic goals through financial and non-financial measures. They encompass performance appraisal, risk management, and control frameworks like Balanced Scorecard and EVA. Modern approaches emphasize Lean systems, JIT, and TQM for efficiency and quality. Transfer pricing plays a role in global optimization, influencing taxation and internal trading decisions.
Core Concepts
Organizations function as systems, requiring controls to achieve objectives.
Systems Theory distinguishes between closed and open systems, with businesses being open systems that interact with their environment.
Types of Controls: Feedback (corrective) vs. feed-forward (preventative).
Management Control in Organizations
Purpose: Steering companies through changing environments to ensure success.
Performance Targets: Must balance financial and non-financial factors.
Control Systems: Designed based on organizational structure (functional, divisional, matrix, network).
Key Approaches
Responsibility Accounting: Managers are accountable only for areas they control.
Traditional Management Accounting: Includes budgeting, variance analysis, and cost appraisal (NPV, IRR, ROI).
Limitations of Traditional Methods: Often inflexible, short-term focused, and ineffective in dynamic business environments.
Modern Control Strategies
Beyond Budgeting: Budgets may limit flexibility and discourage innovation.
JIT & TQM: Reduce waste, improve efficiency, and enhance quality.
Lean Accounting & Strategic Management Accounting: Emphasize cost reduction and external business environment analysis.
Performance Measurement
Balanced Scorecard: Evaluates performance from financial, customer, internal process, and learning perspectives.
Economic Value Added (EVA): Measures value created for shareholders.
Transfer Pricing: Used in intra-company transactions, affecting taxation and global financial optimization.
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About the Author
Justyna Wachulka-Chan
Justyna Wachulka-Chan is a CIMA-qualified finance professional with over 20 years of experience in accounting and finance, including roles at KPMG. She founded Practice Tests Academy in 2016, helping 35,000+ CIMA and ACCA students pass their exams through structured practice questions and mock exam resources.
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