Management Control System

Management Control System
Management :It is a group of managers. Who performs the various tasks of planning, organizing, directing & controlling. And gets work done through & with people.
Ms. Mitali Y Shah (NLSIMCS)
Control
The power to influence or direct people's behavior or the course of events. Synonyms : Check Supervision Command Inspection Manage.
System
A set of connected things or parts forming a complex whole, in particular. A set of things working together as parts of a mechanism or an interconnecting network.
Management Control System

A set of interrelated communication structures. Facilitating the process of information. To assist managers in coordinating & Attaining the purpose of org. on continuous basis.
What does Management need to Control?

1. Costs. 2. Performance. 3. Output. 4. Complaints. 5. Grievances. 6. Attrition. 7. Behavior 8. Suppliers 9. Competitors 10.Customers 11. Resources. 12. Government, etc.
Does management needs to be controlled?

Managerial Opportunism.
Managers pursue activities that enhance their interests rather than that of the shareholders.
Companies such as Tyco, Global Crossing, WorldCom, Enron & Satyam collapsed because of lapse in controls. Reason :- Compensation Tied up with stock options. Companies such as 3 M Corporation, Nucor Corporation, Dell Computer, Wal-mart, South West Airlines, Cisco Systems, Washington Industries did not just develop because of their strategies but they have designed systems & processes that energize their employees to execute those strategies.
A system for management to control. & A system to control the management.
Two School Of Thoughts

1. Strategy is developed first. The strategy then dictates the management systems. Practiced at firms which faces a predictable environment. 2. Strategies emerge through experimentation, which are influenced by firms management system. Practiced at firms which faces a rapidly changing environment.
Elements of Control Process (Simple)

Control Device 2. Assessor: Comparison with standard.
1. Detector: Info. abt.
what is happening
3. Effector: Behavior alteration , if needed.
Entity Being Controlled
1. A detector or sensor: Measures what is actually happening. 2. An Accessor : Compares Actual with Standards. 3. An Effector : Alters behavior. 4. A communication network : Transmits information.
Example: Automobile Driver

Control system acts as follows:(1)Eyes (Sensors) (2)Your Brain (Assessor) (3) Foot (Effector) (4) Nerves (communication system)
Management Control Processes in contrast with Simpler Control Process.

1. The standard is not present management decides the plans which are used for comparing. 2. Management control is not automatic manager performs the assessor function (mechanically & manual) decides if corrective actions are needed. 3. Management control requires coordination each part must work in the harmony with others.
4. Black box operation - there is no clear solution there can be no prediction as to actions of manager & the reactions of others. 5. Management control is self control managers use their own judgments what they feel is best for them as well as for the organization.
Boundaries of Management control.

Management Control is different from Strategy formulation & task control. It is the process by which managers influence other members of the organization to implement the organization's strategies. Management control involves anticipating future conditions to ensure that the
organization's objectives are attained.

Relationship among Planning & Controlling Functions

Activity
Strategy formulation Management control
Nature of End product

Goals, strategies & policies
Implementation of strategies
Task Control
Efficient & effective performance of individual tasks.

1. 2. 3. 4. 5. 6.
MCS involves activities such as Planning what the organisation should do. Coordinating the activities Communicating information. Evaluating information. Deciding actions to be taken. Influencing people to change their behavior.
Goal Congruence It means as far as possible the goal of an organization should be consistent with the goals of the organization itself. The central control problem is to induce the individuals to act in pursuit of their personal goals in ways that will attain the organization's goal. The management control system should be designed & operated by incorporating the principle of goal congruence.
Tool for implementing strategy.
MC focuses primarily on strategy execution. Strategies are also implemented through the organization structure specifies roles, reporting relationships & division of responsibilities, its management of human resources, & its particular culture.
Human resource management develops the knowledge & skill required to execute organizational strategy. Culture Set of common beliefs, attitudes & norms that guide managerial actions.
Financial & Non Financial emphasis The MCS encompasses both financial & non financial performance. The financial dimensions focuses on monetary bottom line net income, return on equity, etc. Non financial dimension such as product quality, market share, customer satisfaction, on-time delivery & employee morale.
Aid in developing new strategies.
Todays controls
Tomorrows strategy
This function is referred to as interactive control. The interactive control calls for management attention both positive (opening up of new Market) & negative (loss of market share, customer complaints, etc.)
Strategy Formulation
It is process of deciding on the goals of the org. & the strategies for attaining these goals. In strategy formulation process, the goals of the org. are usually taken as given, although on occasion strategic thinking can focus on the goals themselves. Complete responsibility of strategy formulation should never be assigned to a particular person or organizational unit. The need for formulating strategies arise in response to a perceived threat or opportunity. Changes in strategies occur when new CEO takes over.
Distinction between strategy formulation & management control. Strategy formulation is essentially unsystematic. Strategic analysis involves much judgment while management control processes involves series of steps that occur in predictable sequence. Analysis of proposed strategy involves relatively few people. By contrast, the management control process involves managers & staffs at all the levels.
Task Control
It is the process of ensuring that specified tasks are carried effectively & efficiently. Task control is transaction oriented it involves performance of individual tasks according to the rules established in the MC process. Task control uses mechanical devices, it uses human only when it is less expensive or more reliable. Task control activities are scientific & predictable.
Distinction between Task Control & Management control. Task control systems are scientific, whereas MC can never be reduced to science MC involves behavior of managers, & it cannot be expressed by equations. In MC the focus is on organizational units & in task control the focus is on specific tasks performed by these organizational unit.
Examples of Decisions in Planning & Control Function
Strategy Formulation
Management control
Task control
1.Acquire an unrelated business 2. Entre a new business 3. Add direct mailing selling 4. Change debt/equity ratio. 5. Devise inventory speculation policy. 6. Decide magnitude & direction of research.
1. Introduce new product or brand within product line. 2. Expand a plant. 3. Determine advertising budget. 4. Issue new debt. 5. Decide inventory levels. 6. Control research organization.
1. Coordinate order entry. 2. Schedule production. 3. Book TV commercials. 4. Manage cash flows. 5. Record an item. 6. Run individual research project.
Impact of the Internet on Management Control

1.Instant access to huge amounts of information. 2. Multi-targeted communication. 3. Costless communication. 4. Ability to display images. 5. Shifting power & control to individual.

Management Control System

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Management Control System

Ms. Mitali Y Shah (NLSIMCS)

Ms. Mitali Y Shah (NLSIMCS)

Ms. Mitali Y Shah (NLSIMCS)