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A management system is the governing framework that guides the process, procedures and operation of an organization as they seek to fulfill the firm's mission, visions and main operational objectives. Within this system there are some basic components that works together for the efficient and effective operation of the organizations overall management.
Such components are, planning; control and feedback which are all inter-linked, and helps managers implement and monitor performance management.
Planning is the process of establishing goals and communicating such goals to the employees of the organization. These plans are made formal through the creation of budgets, which are a series of reports used to quantify an organizations plan for the future. Budgets are responsible for ensuring operations progressed within a given timeframe and securing beforehand the resources needed for smooth progress. The budget income statement shows projected plans for the businesses future, while a capital budget shows the long-term investments planned for the future.
Control is the function within the framework that test the plans implemented, managers use this component to evaluate the effectiveness of the budgets and plans introduced in the planning stage. At this stage there is comparison of results against the original plans (or budgets) that in turn helps to measure employees and individual department performance. This stage also sees recommendations for future/ immediate improvements in keeping with the organizations goals.
Feedback is the tool used by managers after they have planned and evaluated those plans to see how much they are on track to fulfilling company's objectives. This tool helps to correct shortcomings or deviation from the original plan (budget) and gives insight on future plans or improvements needed. Managers use feedbacks also to implement internal controls on departmental basis to ensure the firm's objectives are adhered to and in line with all plans.
Under a management system a master budget is created using more individualized budgets like sales, production, manufacturing, research and development, marketing etc. These budgets are being tested by monitors like sales performance reports, production reports and even against each other. For example the marketing budget can be tested against the sales performance to analyze if the marketing for a particular product was effective. Feedback is then used to further analyze the performance and spot more direct solutions or reasoning for an occurring trend or problem. Since managers can use the sales performance or production reports for various seasons and determine if the weather condition or season has impacted the demand for a particular product and also if bad weather conditions interfered with workers showing up and meeting targets.