Management accounting R11

Private organisations tend to have smoother management control process whereas public organisations experience more turbulence, conflicts and interruptions. Many scholars attribute these differences to the roles and purpose of private and public organisations in the society. Private organisations produce and sell products to consumers in the markets with objective of creating shareholders’ wealth. On the other hand, public organisations, such as state health centers and public schools undertake their operations for public interests. The distinct roles mean that there are diverse kinds of expectations and accountability that may can call for distinctive management control and decision-making processes (Ring amp. Perry. 1985). The problem of exercising management control in private sector versus public sector The contextual influence in the exercise of management control arises from the role of an organisation in the society. Whereas private organisations are means for creating shareholders’ wealth, public organisations are instruments of public policy. The functions of each sector dictate the governance and leadership arrangements that are necessary to exercise management control for different diverse types of owners and shareholders. The approach to governance adopted in each sector subject general managers in each sector to different demands and expectations, which have far-reaching impact on exercise of management control. The role of each sector dictate ways of dealing with clients and users of services or goods offered in different ways, and this may also influence how management control is exercised. Public organisations are constrained in ways that limit how they exercise their management control and strategic choices being made. In most cases, discussions of how management control should be pursued in public organisations are subject to public disclosure. The government passes legislative mandates which tend t affect budgets and budgeting process in a public organisation. As cited by Ring and Perry (1985), managers or leaders of public organisations are required to conform to budgets and legislative mandates passed by the state. As such, this is likely to limit the amount of money available for research on how to exercise management effectively. These mandates may even limit managers of public corporations from spending money on data collection and research thus influencing decision making process negatively. Management team of most public corporations must report to oversight committees, whose occupants are often political appointees, who are prone to leaking organisation’s undertakings and progress. This influences planning and management process in a negative way. These influences make management control problematic in public corporations than in for-profit organisations (Nutt, 2005). The external environment influences any organisation. Some of the attributes of external environment include cooperation, competition, political influence, cooperation and data availability. Private organisations can assess market situations through consumer buying behavior thereby enabling them to effectively manage their actions. Public organisations lack markets which can be source of revenue. As such, they depend on funds from oversight bodies that have tendency of setting reimbursement rules for the products or services offered by a public organisa

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