The Nature of Management

Control system

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Part I Introduction

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 Management Control System (MCS): Definition

“A system designed for executives or management to

plan and control the firm’s performance”

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 Task Control

“Mechanism to monitor an Individual in terms of

performing a clerical duty or task properly”

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 Elements of MCS

Strategic Resources Performance Responsibility Transfer

Budgeting measurement
Evaluation Reward center
Planning allocation Pricing

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 Management Control System: Issues

 Management control is a must in any organization that practices

decentralization
 MCS must fit the firm’s strategy
 MCS can affect the development of strategies

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Part II Basic Concept

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 Control: Definition

Directing situation, person or activity in order to

achieve desired objectives

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 Elements of Control System

A detector • A device that measures what is actually happening

• A device that determines the significance of what is

An assessor actually happening

• A device that alters behavior if the assessor indicates the

An effector need to do so

A communication • Device that transmit information between the detector

network and the assessor and between assessor and the effector

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 Elements of the Control Process

Control Device Assessor

Comparison with standard

Detector
Information about what Effector
is happening Behavior alteration, if needed

Entity being controlled

 Management : Terminology

Field of study:
Group of executives people
Study to manage
in organization
organization

CEO + Functional Managers

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 Management Control Process

The process by which managers at all levels ensure that

the people they supervise implement their intended
strategies

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 Management Control Vs Simpler Control

Management Control Simpler Control

Standard Preset in Planning Not Preset

Process Detection Not Automatic Automatic
Involvement Coordination among individual Single individual
Action May not be clear Clear
initiative Self control regulation

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 System

“A prescribed and usually repetitious way of

carrying out an activity or set of activities”

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Part III Boundaries of Management Control

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 Strategy Formulation, Task Control and Management Control

Strategy Formulation Task Control Management

Control
Systematically least systematic the most systematic in between

Certainty Approximations of the Current accurate in between

future data
Focus Planning Process Control process Planning and Control

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 Management Control

“Management control is the process by which managers

influence other members of the organization to implement
the organization strategies”

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Relationships among Planning and Control Functions

Strategy
Formulation Goals, Strategies, Policies

Management
Control Implementation of strategies

Efficient and Effective

Task Control performance of individual task

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 Management Control activities

Planning

Coordinating

Communicating

Evaluating

Deciding

Influencing

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 MCS and Goal Congruence

• Goal Congruence is synergy between personal goals and

organization’s goal
• MCS should be designed and operated with principle of goal
congruence in mind

Faculty of Economics and Business – Undergraduate Program

 MCS and Strategy Implementation

• Management control focuses primarily on strategy execution

• Management controls are only one of the tools managers use
in implementing desired strategies

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 Framework for Strategy Implementation

Implementation Mechanism
Organizational Structure:
the roles, reporting relationships,
division of responsibilities

Human
Management
Resources Human Resources Management:
Controls
Management
The selection, training,
evaluation, promotion,
Strategy Performance
termination

Organization
Culture
Structure Culture:
Set of common beliefs,
attitudes and norms

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 MCS and Development of New Strategies

• The primary role management control is to ensure that the execution of

chosen strategies are working properly
• If MC is already done properly, but strategies are not working, it takes
implication for developing new strategies
• MC that drives development of new strategies called as Interactive Control

Interactive Control

Tomorrow’s
Today’s controls
strategy

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 Strategy Formulation

• Strategy formulation is the process of deciding on the goals of the

organization and the strategies for attaining these goals
• Strategy is big plan or important plan
• Strategy describes the direction in which senior management wants
to the organization to move
• The need for formulating strategies usually arises in response to
perceived threat or opportunity

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 Strategy Formulation Vs Management Control

Strategy formulation Management Control

Process Process of deciding on Process of implementing

new strategies strategies

Nature Unsystematic Systematic

Strategic Analysis much judgment and a series of steps and
rough estimates reliable estimates
Involvement of people Few people Relatively many people

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 Task Control

• Task control is the process of ensuring that specified tasks are

carried out effectively and efficiently
• Task control is transaction oriented ( clerical), it involves the
performance of individual tasks

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 Task Control Vs Management Control

Task Control Management Control

Procedure Scientific Art

Focus Specific task Organizational units
Action to perform Little or no judgment Mostly Judgement
Involvement of people Only supervisor with task or Interacting with other
duty’s results managers

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 Internet and Management Control

• The internet provides infrastructure, making the process of

information easier and faster
• Managers can collect huge of data, store that data, analyze it in
different forms and send it to anyone in the organization
• The internet facilitates coordination and control through the
efficient and effective processing of information

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 Questions
• Explain, distinction between Management Control Systems (MCS) and Task
Control / Simple Control ?
• Why is MCS so important for decentralized organization?
• What is the essence of MCS must be fitted with organization’s strategy?
• What is relationship between strategy formulation, management control
and task control?
• Explain, what is the meaning “ today’s control is tomorrow’s strategy?
• Explain, how does framework for strategy implementation work?

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