The Use of Management Control System of a Creative Agency During Financial Distress
Keywords:
Management control system, Levers of control, Flexible budget, CreativityAbstract
Management control system is the integration of various control systems created to enable business to achieve its objectives. According to Simons (1995), the control systems consist of Beliefs Systems, Boundary Systems, Diagnostic Control Systems and Interactive Control Systems. The case in this study is an advertising agency that balances positive and negative control systems to foster creativity yet satisfy business needs. The results indicate that during pandemic COVID-19, the company puts more emphasis on budgeting which is one of diagnostic control systems to survive financial crisis. Specifically, flexible budgets with different target profits are used. At the beginning of the fiscal year, the budget with the lowest profit target was used to set the spending limits and those limits would be loosened if quarterly revenue results are improved. Since most of its expenditures are not unit-based as in manufacturing firms, flexible budgets were prepared based on prioritization of activities and postponed recreational activities before other necessary obligations.
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