Management Control

Systems
 What is Control ?
 Controlling is the measurement and
correction of performance of activities in
order to ensure that the planned objectives
are accomplished.
 Control, centres on the prevention and
correction of deviations in a system’s
behaviour from those of standards that
have been specified at a given time.
Control
 An organization must be controlled by
placing all its elements in its appropriate
position to ensure that its strategic
intentions are achieved.
 Controlling organization is very
complicated
Feedback
 Key element for control procedure is
feedback.
 Comparison of output values is made with
the standards and information concerning
the degree of deviation is fed back to the
other elements in the system’s structure so
that preplanned activities may be changed
if necessary.
 A feedback system is driven by two signals:
Input Signal & Feedback Signal.
 It gives the system capability to act as a self-
correcting mechanism.
 It decreases the effects of disturbance and
noise signals in the forward path of the
feedback loop.
 Systems: Closed/Open
 Closed Systems: Information tight control
 Open Systems: No information tight control
Management Control System
 Is the process of evaluating, monitoring and
controlling the various sub-units of the
organization so that there is effective and
efficient allocation and utilization of
resources in achieving the predetermined
goals.
Elements Of A Control System
Assessor

Detector Effectors

Communication
Network
Characteristics of Control
System In Organization
 Involvement of people
 Information about the actual state of the
organization is compiled by people.
 It is compared by people.
 With the desired state decided by people.
 For significant difference, a course of
action is recommended by people
 Action taken by people
 The management decides the desired
state or standards against which
performance is compared.
 It decides what the organization plans to
achieve in a given time framework which
is known as Planning Process.
 Actual Performance is compared to
Planned Performance in control, so
planning and controlling are interlinked
and are known as P&C systems
 Measurement
 Co-ordinating
 Multivariable Control System
3-Level Management

 Corporate Management: Responsible for

the performance of the organization as a
whole.
 Divisional Management: Responsible for
total performance of particular regions
or product divisions.
 Operating Management: Management of
unit operations, responsible for the
accomplishment of specific operational
tasks.
3-Levels of Decision Making
 The institutional level for strategic thinking and
planning.
 The managerial level focuses on gathering, co-
ordinating and allocating resources for the
organization.
 The technical level involving the acquisition and
utilization of technical knowledge for operational
controls.
 Types Of Control

Organizational Informal Group Individual Level

Controls Controls Controls
Organizational Control
 Consists of formal rules and standard
operating procedures plus the informal
procedures that are also communicated
throughout the organization.
Informal Group Control
 Based on the principle of mutual controls,
which envisage checks and balances on each
other’s activities as a result of the mutual
commitments of the members of the group
to each other.
The Individual Level Control

 Is the result of control exercised by the

individual on himself or herself with a view
to achieving personal goals and aspirations.
Internal Control
 Based on Internal check and mutual
control.
 Encompasses every type of accounting
technique and can be extended beyond the
internal audit to encompass management
audit.
Insidious Control
 Dangerous and powerful due to deceptive
nature.
 Various Kinds:
 Control through indicating intentions.

 Pleasures & Displeasures

 Through informal controls

 By imposing time discipline

 Through dominant coalition
 Through employees’ loyalty
 By keeping insiders at key strategic
positions
 By constantly reminding employees of
their dependence on org.
 By not allowing individuals to become
bigger than org.
 By rewarding loyal employees
 Punishing vocal employees
 Informal dinner
 Business meetings
 Distorting facts & information
 Spouse’s tales