ch-1nature of mcs

8/8/2019 Ch-1Nature of MCS

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Ch-1

Nature of Management Control System


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Concept :

Ev ery organization exists to achie v e certainobjecti v es. it has limited resources at itscommand and operates quite often in a dynamicen v ironment. In order to achie v e its objecti v es,managers, therefore require a system by whichthey can regularly monitor process, identify the

bottlenecks and take timely actions to set thingsrights. This is the function of control.


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Meaning

F irst we understand meaning of Management, Control and system.

ManagementManagement refers to the team of people at the helm of affairs of anorganization which is responsible for running and guiding the destiny of theenterprise.


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Meaning

ControlControl means making e v ents conform toplans.

System A system is defined as a prescribed manner of carrying out repetati v es. It in v olv es

coordination.


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Meaning

Management control is a type of planningand control acti v ity that is done in an

organization. It is the process by whichManagement influences other members of the organization to implement theorganizations strategies effecti v ely andefficiently.


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Meaning

A number of acti v ity inv olv ed in Managementcontrol namely planning, coordination,communication, e v olution, decision making

and influencing others behav

ior.Control is the system of ensuring that theactual state of action is in line with thedesired state of action.


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M eaning

Management Control is a systematic method

used by management to exercise control ov

er the implementation of strategires.


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D efinition

Management control is the process whichmanagers assure that resources are obtainedand used effecti v ely and efficiently in theaccomplishment of the organizationsobjecti v es.

- Robert N Anthony.


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D efinition

Managerial Control implies the measurementof accomplishment against the standards andthe correction of de v iations to assureattainment of objecti v es according to plans.

- Koontz.


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S cope Of M anagement Control:

A management control system refers to theframework by which managers can ensurecontrol o v er their subordinates as well as

control o v er the organization as a whole.E lements:- Setting performance standards

- Reporting operating results- Analyzing performance- Taking correcti v e action


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Components Of Control Process

1 .Detector Communication

Network

3. E ffector .

2.Assessor


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Components Of Control Process

Detector: Information about what is happening

Assessor: Comparison with standard.

Effecter: Beha

vior alteration, if needed.


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B oundaries Of M anagement Control:

Management control lies between strategyformulation and task control.Therefore strategic planning andoperational/task control are the boundaries of management control system.


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StrategyF ormulation

ManagementControl

TaskControl

Goals, Strategies and policies

Implementation of strategies

E fficient & effecti v e performance of indiv idual tasks.


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Strategicplanning

ManagementControl

TaskControl

Least systematic, focuses onLong run, based on rough

approximation

Most systematic, short termoperating acti v ity, use current

Accurate data.


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Str at egic planning

Strategic planning process used by firms for deciding on the goals of the organization andstrategies to be used for achie v ing the goals.Strategic planning is the process of decidingon the objecti v es of the organizations onchanges in these objecti v es on the resourcesused to attai8n these objecti v es & on the

policies that are to go v ern the acquisition useand disposition of these resources.


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Str at egic planning

In short Its focuses is on a single aspect of thecompany at a time.Strategic planning is essentially irregular.It is neutral and impersonal.It is mainly concerned with unstructured or unprogrammed decisions.It is depends largely on external information.


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Co nt inue

It is in v olv es estimates o v er a rather long timeperiod exceeding one year.The degree of uncertainty in v olv ed in strategicplanning is higher than in management control.Strategic planning is an analytical and creati v eacti v ity.

It's communication is much simpler andinv olv es relati v ely few persons.


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O per at io nal/ t ask co ntr o l

O perational/task control is the process of assuring that specific tasks are carried outeffecti v ely and efficiently.F ocus of O perational/task control is onindiv idual tasks or operations.It is concerned with scheduling and

controlling indi v idual jobs.


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O per at io nal/ t ask co ntr o l

In short Its focus is limited to a single task or operation.O perational control occurs within a set of well

defined procedures and rules deriv

ed frommanagement control.It is a rational system because the action to betaken is decided by a set of logical rules.Time horizon of operational control tends to beday to day.


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Characteristics Of M anagement Control

Continuous processGoal congruenceUniv ersalityTotal SystemCo-coordinating agencyGoal orientationF inancial structureRhythmic


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D esign Of The Control Process:

Setting targets which will lead to achie v ementof the organizations objecti v es to beachie v ed in a gi v en time period.Ev aluation of performance by comparing itwith the targets &Taking correcti v e action.


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D esign Of The Control Process:

Actual State(Performance)

Remedial ActionComparison(Gap)

Desired State(Targets)


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Str uct ur al f o undat io n o f managemen t

co

ntr o

l syst

emThe key pre-requisite to effecti v e design of the MCS is to recognize the main features of the v arious sub units in an organization.

An organization con v erts inputs into desiredoutput.The manager exercises control or authority

ov er the inputs and process is responsible for generating the desired output.


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Co nt inue

Process

Output-Profit

In put-MoneyRaw material

-Humanefforts


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Co nt inue..

A firm is di v ided into simpler, morehomogenous, subunits or functions or departments. E ach of these can be v iewed asa process of con v erting input into output.The most important quality of each subunit or department is whether its outputs can be

quantified and measured.


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Co nt inue..

The second major distinguishing feature of v arious types of departments are whether theprocess they use are well defined andunderstand.


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Co nt inue..

Process K n ow Process U nkn ow n

M easurable

outputs

F ocus on input-output relationshipefficiency. (MostManufacturing dept.)

F ocus on output

( some staff depts.Namely legal somemaarketing dept.)

N o n measurableoutputs

F ocus on process,procedure andpractices. (somestaff dept. such aspersonnel.)

F ocus on inputs resources allocatio9n.(some R & D dept.)

ch-1nature of mcs

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